Charles Lee: Case Study

On March 4, 2011, Ms. Charles Lee was removed from the Postal Service. The Notice of Removal stated:

You pled guilty to Count 1 of the information charging you with a violation of Title 18 USC 371, Conspiracy to Commit an Offense or to Defraud the United States.

In August 9, 2010 plea agreement which you signed, you engaged in a conspiracy to acquire financing for two quadruplex homes located at 8416 and 8418 Camden Street, Miami, Florida. You lacked the necessary financial assets to qualify for these loans. The elements of the conspiracy follow:

You employed the service of Paldo Corporation to purchase the quadruplexes for $100,000.00 each. You signed contracts in which you agreed to purchase the same properties from Paldo for $169,000.00 each. As part of the conspiracy, falsedatawere provided to an appraiser to justify the inflatedsalesprices for properties, and in reliance of the fraudulent information, a lending institution extended loans in amounts substantially in excess of the true values of these properties.

In order to qualify for the mortgage financing, you submitted two mortgage loan applications. In each application, you falsely stated you had made a $19,000.00 down payment to Paldo Corporation. In reality, you had agreed with Bert Muscat, Realtor, to accept a "rebate" on your down payment in the amount of $19,000.00 from his commission. This was accomplished through an exchange of checks. The purported down payment was thus a sham transaction. The net effect of this scheme was that you were able to purchase this property with "no money down" on your part. You received an additional $10,000.00 rebate after the closing, thereby reducing the actual purchase price of the properties. You agreed with the loan broker and others not to disclose any of this rebate scheme to the financial institution.

In addition, you also failed to disclose on the loan application, tow other mortgage loans on which you were obligated.

Your plea of guilty to Count 1 of the information was accepted by the United States District Court for the Southern District of Florida on September 21, 2010. U.S. District Judge William S. Casta sentenced you to serve six months house arrest, two years probation and ordered you to make restitution in the amount of $136,398.64 to the lending institution you had defrauded.

Section 2635.101(a) of the Standards of Ethical Conduct for Employees of the Executive Branch states, in pertinent part:

Public service is a publictrust. Each employee has a responsibility to the United States Government and its citizens to place loyalty to the Constitution, laws and ethical principles above private gain.

Section 661.53 of the Employee andLabor RelationsManual states:

Unacceptable Conduct. No employee will engage in criminal dishonest, notoriously disgraceful or immoral conduct, or other conduct prejudicial to the Postal Service, in addition to any other by or pursuant to statute.

Your misconduct of conspiring to defraud the United States is in direct conflict with the basic obligation s of public service. As a postal employee, you hold a position that requires honesty and trustworthiness.

You have the right to file a grievance within fourteen (14) days of your receipt of this notice of removal.

On March 16, 2011, a step 1 meeting was held and the following written grievance was filed:

Background: On March 4, 2011, Mr. Lee received written notification that he would be removed form the Postal Service for violation of the standards of eithical conduct and unacceptable conduct. He pled guilty to violation of Title 18 U.S.C 371, Conspiring to Commit an Offense or Defraud the United States .

Management's Position: Mr. Lee was removed from the Postal Service for his unacceptable conduct. He had an obligation as a postal employee to demonstrate honesty and trustworthiness. He broke this trust when he pled guilty to defrauding the United States.

Union's Position: Management did not show just cause when it issued a notice of removal to Mr. Lee. Further, Management employed another employee, Scotty hall, a convicted felon and did not remove him.

The grievance was denied and was appealed. The step 2 grievance was completed by David Toover, union steward, who stated:

Violation: Including but not limited to National (Art. Sect.) 16.1, 16.6, 16.7, 19.

Other Grounds: ELM 661.53, previous arbitration cases.

Facts and Union Contentions: Date, Time, Location: 5 Feb. 94, GMF Miami, Fla.

What Happened: Grievant was issued Notice of Removal dated March 4, 2010. Reason for removal was sited as: you pled guilty to Count 1 of the information, charging you with a violation of Title 18, U.S.C. & 371, Conspiracy to Commit an Offense or to Defraud the United States. Grievant and Union contend that removal is without just cause.

Corrective Action Requested: That Grievant be returned to his job immediately and that he be made whole in all respects.

Mr. R.H. Gooche, Manager of Distribution Operations (MDO), Tour 3, provided management's step 2 answer. He wrote:

On March 16, 2011, a Step 2 meeting was held to discuss the subject grievance.

Union Position: Union Contends:

1) The removal is without just cause.

2) Grievant did not knowingly commit a criminal offense.

3) Grievant was misled and he trusted other people, and therefore unwittingly became involved in a wrongful act.

4) The Postal service has not presented an nexus between the grievant's workplace and the criminal activity.

5) During the investigative interview, management stated that conviction of a felony is a removable offense. However there is no provision to automatically remove an employee from the postal service based simply on the fact that they have been convicted of a felony.

6) The Postal Service infers that being convicted of a criminal office automatically means that an employee is no longer loyal and trustworthy and destroys the faith and trust in him by the U.S. Postal Service and public.

Management responded to each of the union's contentions:

1) The grievant was removed from the Postal Service for his unacceptable conduct. He had an obligation as a postal employee to demonstrate honesty and trustworthiness. Be broke this trust when he pled guilty to defrauding the United States.

2) The grievant voluntarily pled guilty. Case No. 92-234-CR-T-15 (A) Plea Agreement Page 6. Paragraph 5. Second element for the crime: That the defendant willingly became a member of such conspiracy. Page 9, paragraph 13 states that the grievant will plead guilty because he is in fact guilty of the charge contained in Count One of the Information.

3) The grievant was part of a conspiracy to defraud financial institutions using the U.S. Mails. Appraisal on all properties were inflated which resulted in the subject receiving kickbacks from the original mortgage company holding the mortgage. The grievant was involved in a wrongful act for three years. It is reasonable to believe that the grievant had enough knowledge of the conspiracy to know what he was doing was illegal.

4) The grievant and two others conspired in a scheme to defraud financial institutions using the U.S. Mails.

5) The grievant conspired in a scheme to defraud financial institutions using the U.S. Mails. By doing so he violated his obligation as a Postal Employee to demonstrate honesty and trustworthiness. However he was not automatically removed. An investigation into the grievant's conduct was conducted. An investigative interview was held by the grievant's supervisor, William Smith, resulting in the grievant being removed from the Postal Service on March 4, 2011. All actions taken were after a complete investigation, hardly an automatic removal.

6) The grievant was found guilty of a crime for which a sentence of imprisonment can be imposed. The grievant pled guilty to Conspiracy to Defraud the United States. A complete investigation of all facts was conducted; the facts of this case bring into question the loyalty and trustworthiness of the grievant. The grievant conspired to defraud financial institutions using the U.S. Mails, compromising the faith and trust in him by the Postal Service.

Based on the facts the grievant was properly removed from the Postal Service.

The grievance is denied.

Mr. John E. Hand, Jr., union steward, provided the union's third step appeal. He wrote:

The Union contends that management has violated the Labor Agreement by: Removing Grievant from his employment with the Postal Service without just cause. The Grievant was removed from the Postal Service for mailfraudwhich the Grievant was not charged with as is shown in the attached evidence. Mail fraud was not mentioned until it was brought up in a letter from the Postal Service.

Management based its decision solely on the facts presented by the Postal Inspectors and not the charges in the case.

The fact that Mr. Lee was removed from the Postal Service based on mail fraud and Management stated he could not be trusted because he was charged with mail fraud and works for the Postal Service.

Since Lee's removal was based on mail fraud this makes the removal procedurally incorrect and Mr. Lee should be returned to his employment with full back pay and benefits with interest paid on back pay.

We requested that Mr. Lee be returned to the Postal Service with full benefits to include all leave, retirement, all back pay to include night and Sunday premiums, and all action removed from Lee's files.

Mr. Charles Ishell, labor relations specialist, provided management's third step decision:

After considering all available evidence in the record and that offered by the Union, it is my decision to deny the grievance.

The Grievant was removed for conspiracy to commit an offense to defraud the United States.

Specifically, the Grievant pled guilty to count 1 of an indictment charging him with Conspiracy to Acquire Financing for Two Quadruplexes by providing fraudulent information to a lending institution. The Grievant's activities were sham transactions with respect to providing false information concerning a down payment triggering an additional rebate in the amount of $10,000.00, even though the down payment was a sham.

Being that the Grievant pled guilty and was sentenced to serve six months house arrest, two years probation, and ordered to make restitution in the amount of $136,398.64 to the lending institution, just cause existed for removal.

The grievance was appealed to arbitration.

ISSUE

Was the removal of Charles Lee for just cause?

If not, what shall be the proper remedy?

Article 16

RELEVANT PROVISIONS OF THE EMPLOYEE AND LABOR RELATIONS MANUAL

661.11 This Code of Ethical Conduct was designed to instruct and guide employees entering the Postal Service, and to remind all employees of the conduct expected and required of them in performing their official duties and in their general conduct.

661.3 Standards of Conduct

Employees must avoid any action, whether or not specifically prohibited by this Code, which might result in or create the appearance of:

a) Using Postal Service office for private gain.

b) Giving preferential treatment to any person.

c) Impeding Postal Service efficiency or economy.

d) Losing complete independence or impartiality.

e) Making a Postal Service decision outside official channels.

f) Affecting adversely the confidence of the public in the integrity of the Postal Service.

661.5 Other Prohibited Conduct

661.53 Unacceptable Conduct. No employee will engage in criminal, dishonest, notoriously disgraceful or immoral conduct, or other conduct prejudicial to the Postal Service. Conviction of a violation of any criminal statute may be grounds for disciplinary action by the Postal Service, I addition to any other penalty by or pursuant to statute.

POSITIONS OF THE PARTIES

MANAGEMENT:

Management stated that it is a fact that Mr. Lee pled guilty to "conspiracy to defraud the United States" and therefore the Postal Service does not have to prove that he was guilty. Management claimed that Mr. Lee violated that standard of ethical conduct, that the Postal Service and the public had lost trust in Mr. Lee as a postal employee, and he was not loyal to the Constitution and the laws of the United States. Therefore, he actions were in violation of several provisions of the Employee and Labor Relations Manual, and there was an obvious "nexus" between his crime and his employment.

Management argued that the burden is on the union to prove that there is disparate treatment of Mr. Lee. There was no disparate treatment of Mr. Lee because Ms. Edwards, the other postal employee named by the union as a comparison, was not "similarly situated," was not in the same department , was not found guilty. In the other comparison case, the union failed in its effort to show disparate treatment by addressing Scotty Hall's employment because his case was a hiring decision, not a removal decision. Moreover, Mr. Hall's civil rights had been restored prior to the date of his employment by the Postal Service.

Mr. Lee was afforded the same opportunity as other employees who were judged guilty, that is, either to resign or to be removed. Mr. Lee chose not to resign; therefore, he was removed from the Postal Service. Management argued that even though the investigation mentioned that Mr. Lee was involved in a conspiracy to defraud the financial institution using the U.S. Mails as reason for his removal, the union is not justified in using this information to support its claim.

Management explained that it considered the investigation, the plea of guilty, and the seriousness of the crime. Management conducted its own investigation and gave Mr. Lee an opportunity to present his side of the case. After its investigation, management found no merit to Mr. Lee's explanation and concluded that the removal was justified.

Management argued that the postal employees knew that Mr. Lee had been convicted of a crime. Management stated: "...our employees knew. It doesn't take a 'rocket scientist' to figure it out. Everyone was aware." Management submitted a decision by an appeals referee of the Florida Department of Labor for unemploymentcompensation. Management noted the following excerpt:

Consideration was given to the claimant's contention that he was treated more harshly than other postal employees who were involved in the same criminal activity. In support of that position, the claimant provided information that another postal employee was not disciplined. Further information provided by the claimant including that adjudication was withheld by the court on the other employee. Since the legal disposition was different in that case, the employer's failure to discipline with the same degree of severity is not viewed as disparate treatment. The claimant's contention is rejected.

At the hearing, the parties agreed that there is a possibility that the claimant will be reinstated in his job. The notice of removal, however, specifically terminated the claimant from his position and is viewed as a discharge. The discharge was for misconduct connected with the work and the claimant was properly disqualified from receiving benefits.

The Postal Service stated that postal employees must be honest and reliable and have good character. Further, Mr. Lee's actions were willful and deliberate and were against the interests of the U.S. government of which the Postal Service is a part. Guidelines for Postal employees are published in the Employee and Labor Relations Manual to guide employee behavior.

Management responded to the union's claim that Mr. Lee was an "ideal," "long-term" employee with no record of discipline. Management questioned this claim because no evidence was presented. Mr. Lee was a "good employee" and the decision to remove Mr. Lee was "difficult." However, management felt "compelled to take removal action." His actions were no different from theft, and Mr. Lee had stolen money from the same institution that employed him. Management then asked: "If he will steal, how can we trust him? He will have many opportunities to steal."

Management objected to the introduction, any consideration, and any comparison to Ms. Edwards' employment. The union did not mention any comparison between Mr. Lee and Ms. Edwards in the processing of Mr. Lee's grievance. Therefore, the union was estopped from arguing any comparison at the hearing when disparate treatment had not been mentioned earlier.

Management concluded that a finding that Mr. Lee was removed from the Postal Service for just cause and that his grievance should be denied.

THE UNION

The union argued that the Postal Service made its decision to remove Mr. Lee solely on the basis of his conviction. The union claimed that the Postal Service failed to establish any connection (nexus) between the crime and Mr. Lee's ability to perform as a productive employee. The Postal Service must show a nexus between the crime and the efficiency of the Postal Service and how the Postal Service was adversely affected, and management failed to do so. The Postal Service claimed that the public trust was broken, but there was no evidence that anyone in the public knew of Mr. Lee's conviction. In fact, there was no evidence that any other employees complained about working with Mr. Lee.

The union presented numerous arbitration decisions to show that a postal employee may not be removed from employment based solely on the commitment of a crime. The first arbitrator wrote: "As many arbitrators have recognized, the Postal Service, among other things, must establish a nexus between the employees conduct and the employmentrelationship. It must seek to determine, for example, whether the occurrences of the off-duty misconduct has destroyed the basis for continued employment because of adverse impacts on the efficiency, operations, property or personnel of the Postal Service. To put it another way, the Postal Service must show some harm to it, to the public, or to fellow employees if the employee continues his employment."

In a second arbitration case, the grievant was charged wit murder and later found guilty of first degree manslaughter. The grievant shot his wife in the head with a 32-caliber pistol. The arbitrator wrote in his decision that, "The Grievant's conviction of first degree manslaughter, his sentencing and his subsequent placement on probation did not involve an on-the-job action. Neither did it involve a job related matter with an adverse impact on employee or public relations, efficiency, etc., or pose a threat to Postal operations, property or personnel."

In a third case, the grievant was charged with aggravated sexual assault and criminal sexual conduct. The grievant pled guilty to one count of criminal sexual conduct. The arbitrator interpreted the Civil Service Reform Act, 5 U.S.C. 2303 (b)(10), as prohibiting the termination of a Postal Service employee for off-duty misconduct absent a showing that such conduct would affect the efficiency of the service. The Court held that this requirement of a nexus cannot be satisfied by "unsupported general assertions" or internal regulations prohibiting certain kinds of "immoral" or disgraceful" conduct period." The arbitrator wrote: "The Court read the Civil Service Reform Act as an expression of congressional intent with respect to termination for off-duty misconduct. Clearly, an arbitrator operating under a just cause standard in a Postal Service contract should give great weight to such clearly expressed Congressional intent."

In the fourth case, the grievant was charged with knowingly receiving child pornography through the mails, a violation of 18 U.S.C. 2252 (a)(2). The grievant was found guilty of knowingly receiving child pornography through the mails and was sentenced to a ten-year suspended sentence, five-year probation, and a fine of $50. The arbitrator wrote: "Under this contract, employees may only be discharged or disciplined for just cause. Arbitrators and courts have interpreted this requirement and similar statutory standards, as prohibiting this discharge of a Postal Service employee for off-duty, off-premises, misconduct unrelated to the employee's job. In such cases, the Postal Service must show that the retention of the employee will have some adverse impact on the employee relationship. This principle has often been interpreted as requiring a showing of a nexus between the off-duty misconduct and the ability of the employee to function in his job."

In a fifth case, the arbitrator wrote: "Ms. Nichole's conviction on charges associated with her fraudulent application for housing subsidy funds in unrelated to employment. Her conduct was not prejudicial to the Postal Service. (661.53 E&LM). There is no showing of an adverse impact on the employer or its employees. For these reasons this removal is not for just cause."

In a sixth case, the arbitrator wrote in his opinion: "The weight of arbitral authority requires that a nexus be shown before an employee may be discharged for off-duty, off-premises misconduct." See for example, Elkouri and Elkouri, How Arbitration Works, Fourth Edition, pages 656-658 and cases cited.

The union argued that Mr. Lee was an excellent employee for 13 years with the Postal Service. During these 13 years, Mr. Lee had no discipline issues and continued to perform effectively for several months even after his conviction. Since the Postal Service was not adversely affected during this time, the return of Mr. Lee to his former job had not and would not adversely affect the performance and efficiency of the Postal Service. Management claimed that its trust of Mr. Lee was broken, but offered no evidence.

The union claimed that the Postal Service failed to take any action against another employee who was charged with the same crime and who continues to be employed as a postal employee. Other employees who ere involved in the "scheme" were offered to resign or told they would be fired. However, no evidence was presented.

In regard to the charge and conviction, the union contended that the management incorrectly used the postal inspector's memos wherein Mr. Hindred indicated that Mr. Lee had conspired to "defraud financial institutions using the U.S. Mails." The fact is Mr. Lee was not charged with misuse of the U.S. Mails. The Postal Service falsely charged him and this charge contaminated the cause for removal.

The union addressed two arguments made by management: (1) unemployment compensation claim and (2) knowledge about continued employment of Ms. Edwards. First, the unemployment compensation decision referred to "misconduct connected with work, " and the arbitrator is not bound by this decision. Second, the union did not find out that Ms. Edwards's employment had been continued even though she was involved in the same financial scheme as Mr. Lee and that she had been charged with the same crime until after Mr. Lee had filed an EEO claim, just before the date of the arbitration hearing. During the processing of this EEO claim, the grievant and the union were made aware of the fact that Ms. Edwards remained on the payrolls as a postal employee.

The union contended that the burden of proof rests with the Postal Service and it has failed to prove just case for the removal of Mr. Lee. As a result, the union requested that Mr. Lee be returned to his former position, that his back pay and benefits including overtime and interest be restored, and that all references to this removal be expunged.

QUESTIONS:

1) What are the rules for discharge for off-duty conduct?

2) Explain the term nexus as used in labor arbitration.

3) Does equal treatment have any bearing on the outcome of this decision?

4) What is the rule concerning use of the employer's submission of the unemployment compensation claim in the labor arbitration proceedings?

5) How much weight should be give to Mr. Lee's job performance after his conviction?

6) Should the arbitrator consider the union's submission of evidence of the continued employment of Ms. Edwards? Give your reasoning.

7) How much weight should be given to previous arbitrators' decisions? Explain.

8) What will the arbitrator decide? Why?