The courts may not provide relief to employees if the federal government reneges on the deferred resignation program.
Editor’s note: This piece has been updated in light of an Office of Personnel Management memo issued in the afternoon of Feb. 4, 2025.
Editor’s Note: Listen to Nick Bednar discuss this article on Lawfare Daily.
The federal government recently announced its “deferred resignation program,” which offers over two million employees the opportunity to announce their future resignation effective Sept. 30, 2025. In exchange, the program promises continued pay and benefits, administrative leave, and the opportunity to find work in the private sector. Employees must announce their resignation by Feb. 6. The program appears to violate existing law, raising questions for employees considering the offer. As the Feb. 6 deadline approaches, the Office of Personnel Management (OPM) has become more emphatic that the program is lawful and less equivocal about its benefits. Agencies have sent an email stating that the offer is “valid, lawful, and will be honored by” the agency.
Despite rhetoric to the contrary, one clear risk is that the federal government will not uphold its end of the bargain. This risk seems plausible in light of the program’s origins. The offer is remarkably similar to one offered by Elon Musk to Twitter employees—down to the subject line of the email announcing it. Some Twitter employees who took the offer did not receive the promised severance payment. Federal employees may reasonably fear the same outcome.
Employees who accept the offer may be operating on a faulty assumption about their remedy if the Trump Administration does not uphold its end of the bargain. In the private sector, these sorts of claims raise mundane issues of contract law. It goes something like this: An employer and an employee enter a severance agreement. The employee agrees to leave their position in exchange for temporary pay and continued benefits. If the employer refuses to pay the benefits owed to the employee, then the employee may bring a breach of contract claim against the employer.
Courts will not approach a lawsuit that seeks to enforce the terms of the deferred resignation program through the ordinary lens of contract law. Instead, they will be guided by the law that governs estoppel in cases involving federal agencies. To understand whether federal employees have a remedy in such a situation, we need to ask two questions: First, do federal agencies have the legal authority to agree to the payment of a future salary? No. The Anti-Deficiency Act prohibits agencies from obligating funds that have not yet been appropriated. Second, if the agencies lack this authority, can a court still order the federal government to pay the amount owed to the employees based on their misrepresentation of the program’s legality? Probably not. The Supreme Court has refused to recognize estoppel in cases involving federal employees who receive erroneous information about the law surrounding their pay and benefits.
Legal Authority
As I have written elsewhere on Lawfare, the legality of the deferred resignation program is uncertain at best. Although federal agencies have sought to reassure employees of the program’s legality, “trust me” is not a satisfactory explanation for most lawyers.
To the extent OPM has addressed this question, it has focused on the effect of a government shutdown on employees who participate in the program. OPM has sought to assuage employees that they would receive back pay in the event of a government shutdown. This much is likely true. Under 31 U.S.C. § 1341(c)(2), furloughed employees “shall be paid for the lapse in appropriations.” Yet this authority is quite limited. It covers pay for furloughed employees during a shutdown. It does not cover situations where Congress fails to authorize sufficient funding for agencies to maintain the size of their current workforce.
Regardless of whether the government experiences a shutdown, the promise to pay employees beyond Mar. 14 is unauthorized. The Anti-Deficiency Act prohibits an agency from entering a contract “before any appropriation is made unless authorized by law.” The deferred resignation program offers employees pay that is not currently appropriated. Current appropriations will expire on Mar. 14th and, therefore, agencies currently lack the legal authority to agree to pay employees beyond this date. The ability to pay furloughed employees under 31 U.S.C. § 1341(c)(2) does not change that analysis. Any contract obligating federal agencies to pay employee salaries in the future is unauthorized and, in fact, criminal.
Perhaps Congress will appropriate sufficient funds to cover the pay and benefits of employees who participate in the deferred resignation program. Perhaps the federal government will uphold its end of the bargain, and the violation of the Anti-Deficiency Act will go unnoticed and unchallenged. Nevertheless, one can imagine several worst-case scenarios where this program unravels.
Consider what happens if Congress fails to appropriate sufficient funds to sustain an agency’s current workforce. The lack of appropriations will require the agency to reduce the size of its workforce. Subject to certain legal requirements, a reduction in force could lead agencies to remove some employees who choose to participate in the deferred resignation program before Sept. 30. For many employees, the severance package from involuntary separation would be lower than the amount promised by the deferred resignation program.
The contract for the deferred resignation program seeks to reassure employees that they will “not be subject to furlough, termination, reduction-in-force, or layoff.” Again, an agency cannot make this guarantee. Depending on the number of people who choose to participate in the program, Congress could defund an agency to such a level that a reduction in force necessarily requires involuntarily separating employees who decided to resign through the deferred resignation program. Moreover, the order of retention for a reduction in force is guided by statutory law, and the contract appears contrary to those provisions. An employee who is involuntarily separated but chooses not to resign may be able to challenge the deferred resignation program because they were higher on the order of retention than some employees who resigned through the program. Whether such a challenge would succeed is uncertain.
The federal government cannot guarantee that employees who accepted deferred resignation will remain employed until Sept. 30. These now-terminated employees may sue, seeking to enforce the terms of the agreement. Would a court require the federal government to pay the remainder of the funds even though agencies lacked legal authority to enter into this agreement in the first place?
Estoppel
The argument that the federal government should uphold its obligation under the deferred resignation program is an argument of equitable estoppel. Equitable estoppel prevents a party from asserting a claim or right that contradicts a prior statement. In this case, employees are relying on OPM’s assertion that the program is lawful. In a relevant suit, the federal government may claim that the agreement was unlawful under the Anti-Deficiency Act and, therefore, it cannot be held accountable for a violation of the agreement. The question is whether a court would estop the federal government from asserting the illegality of the program as a defense to its refusal to honor the agreement.
The most pertinent Supreme Court case is Office of Personnel Management v. Richmond. In that case, a Navy employee received erroneous information about his continued eligibility for disability retirement. In providing advice to the employee about how much he could earn before having these benefits revoked, the Navy relied on a repealed statute. Subsequently, OPM discontinued the benefits for the employee after he exceeded the actual statute’s limit on the amount of pay that a former employee can earn before having their benefits revoked.
The employee argued that the federal government should be estopped from finding him ineligible for benefits under the statute based on the erroneous information provided by the Navy. The Supreme Court began its analysis by stating, “From our earliest cases, we have recognized that equitable estoppel will not lie against the Government as it lies against private litigants.” The Court emphasized, “[I]t is enough to say that the United States is neither bound nor estopped by acts of its officers or agents in entering into an arrangement or agreement to do or cause to be done what the law does not sanction or permit.” Although the Court refused to hold that estoppel will never lie against the government it said, “A narrower ground of decision is sufficient to address the type of suit presented here, a claim for payment of money from the Public Treasury contrary to a statutory appropriation.”
Much of the Court’s analysis rests on the Appropriations Clause, which provides that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” According to the Court, the “judicial use of the equitable doctrine of estoppel cannot grant a money remedy that Congress has not authorized.” Estoppel against the government could render the Appropriations Clause a “nullity”:
If agents of the Executive were able, by their unauthorized oral or written statements to citizens, to obligate the Treasury for the payment of funds, the control over public funds that the Clause reposes in Congress in effect could be transferred to the Executive. If, for example, the President or Executive Branch officials were displeased with a new restriction on benefits imposed by Congress to ease burdens on the fisc (such as the restriction imposed by the statutory change in this case) and sought to evade them, agency officials could advise citizens that the restrictions were inapplicable. Estoppel would give this advice the practical force of law, in violation of the Constitution.
The Court went on to suggest that “it would be most anomalous for a judicial order to require a Government official, such as the officers of OPM to make extrastatutory payment of federal funds”—especially in light of the Anti-Deficiency Act.
The analysis in Richmond applies to the current situation. Neither the president nor OPM has the authority to obligate funds for the deferred resignation program. The president cannot advise employees that the forthcoming appropriations process will have no impact on employees who participate in the program. Indeed, estoppel would obligate funds without congressional approval, allowing presidents to use the judicial process to fund whatever programs they deem desirable. Most troubling, employees do not have a mechanism to enforce this agreement. As the employee in Richmond discovered, an employee cannot use the federal government’s erroneous information about the lawfulness of its personnel programs against it.
The only hope for these employees would stem from the fact that Richmond declined to resolve whether estoppel could be asserted in cases of serious affirmative misconduct—that is, the federal government must misbehave through its own actions and not its own inaction. This argument has succeeded in at least one case. In Beacom v. EEOC, the district court found that the Equal Employment Opportunity Commission had engaged in affirmative misconduct when it instructed a newly hired attorney to wind down his 16-year law practice despite a federal hiring freeze. To determine misconduct, the court examined (1) the Government’s justification for its alleged misbehavior, (2) the magnitude of injury, and (3) the harm to the public from permitting estoppel. In analyzing the harm to the public, the court stated that this is not a case “where estoppel will tolerate the Government’s participation in a clearly illegal contract” because the Commission had the authority to hire 75 additional persons. By contrast, the hypothetical situation surrounding the deferred resignation program involves a case where (1) the executive branch is prohibited by law from authorizing this spending and (2) Congress has responded in such a manner as to prevent the agency from retaining its existing workforce.
Beacom was decided ten years before the Supreme Court’s decision in Richmond. Whether the current Supreme Court would recognize an exception for affirmative misconduct remains uncertain.
This analysis does not consider that the agreement purports to release the federal government from all claims. Paragraph 12 of the agreement states:
“Employee forever waives, and will not pursue through any judicial, administrative, or other process, any action against [AGENCY] that is based on, arising from, or related to Employee’s employment at [AGENCY] or the deferred resignation offer, including any and all claims that were or could have been brought concerning said matters. Employee unconditionally releases [AGENCY] and its present and former employees, officers, agents, representatives, and all persons acting by, through, or in concert with any of those individuals, either in their official or individual capacities, from any and all liability based on, arising from, or relating to the matters that Employee may have against them, including any and all claims that were or could have been brought. Consistent with applicable law, Employee similarly waives any claim that could be brought on Employee’s behalf by another entity, including Employee’s labor union.”
In some respects, this release of claims is even unnecessary in light of Richmond. Yet it presents an additional hurdle to litigants hoping to challenge any non-payment.
To be clear, I have outlined the worst-case scenario. Perhaps Congress will ensure the federal government has the resources it needs to honor the bargain and the program—legal or not—will function as stated. But if the executive branch reneges on the deferred resignation program, the courts may not offer any remedy. Congress may offer the only true remedy. As Richmond acknowledged, “Congress may always exercise its power to expand recoveries for those who rely on mistaken advice should it choose to do so.” The question that employees should ask themselves is whether they trust Congress to act in the event that the program is not implemented as promised.
Update: Following the publication of this article, OPM issued a memo and an updated agreement addressing the legality of the deferred resignation program. The memo does little to address the concerns presented here. The memo states, “In addition, to assuage any concerns about enforceability, OPM has circulated a template contract to agencies that can be used to document employee resignations and formalize the government’s agreement to abide by the terms of the deferred resignation program.” It is curious that OPM believes the contract assuages concerns about enforceability since the contract itself prohibits an employee from bringing a judicial or administrative action against the agency. Moreover, the memo does not address the underlying problem that appropriations expire on March 14th and, therefore, employees may be forced to resign in the event of a shortfall. The discussion of temporary furloughs is short-sighted.
A federal employee must voluntarily resign in order for a resignation to be effective. But as courts have noted, “The fact that an employee is faced with an inherently unpleasant situation or that his choice is limited to two unpleasant alternatives does not make an employee’s decision any less voluntary.” OPM argues that rescission provides a remedy for the employee if “the resignation or retirement was the product of misinformation or deception by the agency.” Yet a court would need to find that the agency negligently misled employees by failing to mention the possibility of a funding shortfall. Moreover, it is unclear how this would interact with the potential situation in which there is insufficient funding to rehire employees who have resigned.”
– Nicholas Bednar is an associate professor of law at the University of Minnesota Law School. He writes in the areas of executive politics, administrative law, and immigration. He holds a PhD in political science from Vanderbilt University and a JD from the University of Minnesota Law School. Published courtesy of Lawfare.
