Payroll: Damage Payments for Services Performed Before Loyalty
Oath is Signed
UC Accounting Manual
VII. Payroll Operations
P-196-21 (TL 55, 3/1/90)
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PAYROLL: DAMAGE PAYMENTS FOR SERVICES PERFORMED
BEFORE LOYALTY OATH IS SIGNED
"Exemption from mistake is not the
privilege of mortals; but when our
mistakes are involuntary, we owe each
other every candid consideration; and
the man who, on discovering his errors,
acknowledges and corrects them, is
scarcely less entitled to our esteem
than if he had not erred."
--J. Pye Smith
I. INTRODUCTION
It is the policy of the University to make payment in the
form of damages to a University employee who, without
knowledge of State loyalty oath requirements, performs
services for the University prior to signing the oath. A
damage payment constitutes settlement of a claim by an
employee based upon University negligence, and is not
compensation for services rendered.
This chapter provides the accounting and payroll procedures
for processing damage payments to University employees.
II. PROCEDURES
A. CRITERIA FOR CLAIM
Damages may be claimed where all of the following
conditions are met:
1) The employee entered into University employment in
good faith, with no knowledge of the oath
requirement.
2) He or she would have executed the oath prior to
commencing University employment had the University
advised him or her of the requirement to sign it.
3) He or she did, in fact, sign the oath upon learning
of the requirement.
B. PROCESSING CLAIMS FOR PAYMENT
The following procedures are to be followed before a
claim for damage payment can be settled:
Responsibility Action
1) Employee Submit claim for damage payment to
employing department.
2) Department Complete Damage Payment Report (Exhibit
I) and Check Request (nonpayroll) for
the gross amount to which the employee
would have been entitled if he or she
had been on the payroll in employment
status.
The Check Request must charge the fund
source to which charges for the
appointee's salary would have been
charged. The subbudget for Supplies and
Expense (sub 3) must be charged;
however, the department involved may
request transfer of salary funds to
cover the payment. The Damage Payment
Report and the Check Request are sent to
the Chancellor or appropriate
administrative officer for review and
approval. (Claims covering a period of
120 days or more must be approved by the
Chancellor.)
No sick leave, vacation, or other
benefits are accrued prior to signing
the oath; prior to signing the oath, the
appointee was technically not employed
by the University.
3) Chancellor's Forward both forms to the campus
Office accounting office after review and
approval.
4) Accounting Review claim. (Claims covering a period
Office of 120 days or more must be approved by
the Chancellor.) After final review,
process the Check Request for payment.
No deductions should be made for income
or FICA/Medicare taxes, retirement, or
any miscellaneous benefits; the payment
is not subject to workers' compensation
insurance or unemployment insurance.
The payment should be tax coded 2 and,
accordingly, should be reported for
income tax purposes on Form 1099-MISC.
Obtain a completed Loyalty Oath-Damage
Payment Release form (Exhibit II) from
the employee prior to releasing the
damage payment. Retain this form as
well as the Damage Payment Report in the
employee's personnel file within the
accounting office.
III. REFERENCE
President Kerr, Letter to the Chancellors and University-
wide officers explaining the necessity of signing the
loyalty oath, November 16, 1965.
___________________
Historical note: Materials in this chapter were formerly
published in Business and Finance Bulletin A-45. Accounting
Manual chapter first published 1/1/75. Revised 7/1/80 and
3/1/90; analyst--Margo Dowen and Nancy Partovi.
EXHIBIT I
DAMAGE PAYMENT REPORT OF SERVICES PERFORMED
BEFORE SIGNING LOYALTY OATH
(form not available on gopher)
EXHIBIT II
LOYALTY OATH - DAMAGE PAYMENT RELEASE
(To be signed by recipient of damage payment)
I, _____________________________________, hereby accept in
complete satisfaction of any and all claims I may have against
The Regents of the University of California on account of
services performed by me during the period from
______________________________ through ________________________
the sum of $ .
I understand that this damage payment is subject to Federal and
State income taxes, although no deductions for income tax have
been withheld.
Dated:______________________ Signed:_____________________
WITNESS:
________________________________________
Title
Copy 1: Employee's personnel file
Copy 2: Employee
Retention: See Records Disposition Schedules
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