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$641 million: The price of disgruntled employees

Oct. 23, 2011 - 11:23AM   |  
By SEAN REILLY   |   Comments
Besides paying tens of billions of dollars each year in compensation, operations and overhead costs, the financially strapped U.S. Postal Service has another huge annual expense: hundreds of millions of dollars in settlements to disgruntled employees and former employees.
Besides paying tens of billions of dollars each year in compensation, operations and overhead costs, the financially strapped U.S. Postal Service has another huge annual expense: hundreds of millions of dollars in settlements to disgruntled employees and former employees. (File photo / Getty Images)

Besides paying tens of billions of dollars each year in compensation, operations and overhead costs, the financially strapped U.S. Postal Service has another huge annual expense: hundreds of millions of dollars in settlements to disgruntled employees and former employees.

This year, the Postal Service more than doubled its projections of "probable" liabilities related to employee grievances and lawsuits: $641 million, according to the agency's latest quarterly financial report. The mail carrier booked another $88 million for possible payouts stemming from environmental, contract and tort claims.

Grievance payouts alone cost the mail carrier $250 million in 2008 and $179 million in 2009, according to an inspector general's report last year. The mail carrier is the focus of thousands of grievances each year from members of its four unions over alleged contract violations. Postal officials did not respond to a Federal Times request for an accounting of the amounts spent in recent years to settle lawsuits and grievances.

Moreover, it is unclear whether millions paid out in grievance settlements are even legitimate.

Postal auditors found that the agency often failed to adequately document grievance payments. As a result, "there is no assurance that at least $27.8 million in grievance settlement payments were justified or warranted," the report said.

Union officials sometimes received disproportionately large shares of class-action grievance settlements; in one case, a local union president received up to 35 percent of the money, while some other payees received less than 1 percent, the report said. Neither the president nor the union was identified.

Underlying such episodes, the IG said, was the Postal Service's failure to establish procedures for ensuring that settlement recipients identified by the union were in fact part of a class action. Just last week, former Texas postal worker John Woods pleaded guilty to a misdemeanor charge of unlawful compensation over allegations that he used his union post to pocket money from class-action settlements.

The plea agreement came as Woods, a one-time branch president of the National Postal Mail Handlers Union in Fort Worth, was set to go to trial on federal wire fraud charges for allegedly orchestrating a scheme in 2006-2007 to defraud union members at a local processing plant. According to the February indictment, Woods or his chief shop stewards filed grievances over purported contract violations, but then kept more than $225,000 in settlement money for themselves.

Under the original charges, Woods could have faced years in prison. Assuming that a judge approves last week's plea agreement, he instead will have to pay $95,732 in restitution and spend some time on probation. Woods could not be reached for comment; officials at the Washington headquarters of the National Postal Mail Handlers Union did not return phone calls.

Doug Tulino, the Postal Service's vice president for labor relations, disputed many of the IG's findings. Half of the cases reviewed by the IG involved informal pay adjustments that did not require the same level of documentation as formal grievances, Tulino said in a written reply to the report.

While settlements must be reviewed to ensure that the money is going to the right people, he added, "ignoring the reality that [a] union official or member is harmed in a dispute" could be seen as a violation of federal protections for union activity.

Under a separate law, however, the Postal Service was implementing new controls that would help managers track grievance payout activity and high-dollar amounts, he said. The Postal Service has since addressed the recommendations in the report, a spokeswoman for the inspector general's office said last week.

Huge class-action lawsuit

A considerable portion of the liabilities the Postal Service has accounted for stems from one of the largest class-action discrimination cases ever considered by the Equal Employment Opportunity Commission.

The case, dating back to 2006, charges that the Postal Service violated federal disability law under a now-ended program known as the National Reassessment Process that forced some employees out of the USPS workforce because no limited-duty assignments could be found for them after they were hurt on the job.

Although the Postal Service described the size of the class only as "very large," an attorney for the plaintiffs, Jeremy Wright of Washington, put the figure at 130,000 past and present postal workers.

The reassessment program ended in January. The Postal Service said it had concluded the reassessment of all employees working in modified assignments.

In its latest quarterly financial report, for the three-month period ending in June, the Postal Service increased the amount of money booked for "probable losses from claims and suits" from $314 million last fall to $729 million. Asked about the reason for the jump, a USPS spokesman cited the EEOC case, which was certified as a class action last year. If the plaintiffs win, the impact on the Postal Service could be "material," the financial report said, adding that the Postal Service "intends to vigorously contest the matter."

Lawyers expect to keep collecting information through the legal discovery process for another year, Wright said, adding that he did not know why the Postal Service opted to note the case as a possible liability this year.

USPS spokesman Dave Partenheimer declined comment on the grounds that the matter is covered by attorney-client privilege.

The complaint began with Sandra McConnell, a former mail carrier from Rochester, N.Y., who suffered a permanent back injury in 1997 after slipping on stairs while delivering mail.

After returning to work, McConnell was given a job with modified duties that included customer assistance, warming up vehicles in winter and delivering mis-sent Priority Mail, according to a filing in her case.

That ended in May 2006, when she was pushed out of her position by the National Reassessment Process, the filing said.

Among other allegations, McConnell charged that the reassessment program targeted employees with disabilities and created a hostile work environment. While she and other plaintiffs have not put a dollar figure on the total amount of damages sought, possible relief would include reinstatement with back pay and compensatory damages, Wright said.

Postal Service spokesman Mark Saunders said in a statement that the agency makes every attempt to find "necessary work" for employees who have physical limitations because of on-the-job injuries. Doing so, however, presents a growing challenge, Saunders said, because of both declining workload and increased automation.

Launched in 2006, the National Reassessment Process reviewed assignments for tens of thousands of injured workers to make sure they still met the Postal Service's operating needs.

When work was available that an individual employee with physical restrictions could perform, the Postal Service offered such options as a return to full duty with slight modification or part-time modified assignments, the statement said. If no job was available, employees were told of their right to file for workers' compensation from the Labor Department.

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