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• 9TH CIRCUIT COURT

RODNEY MCLEAN,
Plaintiff-Appellant,
No. 99-35237
v.
D.C. No.
MARVIN T. RUNYON, in his official
CV-97-00418-JAR
capacity as Postmaster General of
OPINION
the United States,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Oregon
James A. Redden, District Judge, Presiding

Argued and Submitted
March 10, 2000--Portland, Oregon

Filed August 25, 2000

Before: John T. Noonan, Susan P. Graber and
Raymond C. Fisher, Circuit Judges.

Opinion by Judge Fisher

_________________________________________________________________

COUNSEL

Michael R. Dehner, Portland, Oregon, for the plaintiff-
appellant.

Herbert C. Sundby, Assistant United States Attorney, Port-
land, Oregon, for the defendant-appellee.

_________________________________________________________________
OPINION

FISHER, Circuit Judge:

Rodney McLean worked for the United States Postal Ser-
vice ("USPS") for nine-and-a-half years as a Mark-Up Clerk
until his disabilities prevented him from performing the duties
of that position, even after USPS tried to modify the position
to accommodate him. Taking the initiative to find a compara-
ble, vacant position to which he could be reassigned, McLean
identified over 40 positions he claimed would be suitable, but
USPS disagreed and refused to reassign him or accommodate
him any further. Although McLean wanted to continue work-
ing with USPS, he abandoned hope and opted for disability
retirement in August 1996 to preserve his medical and life
insurance benefits accumulated during 15 years of govern-
ment service.

McLean filed suit in district court for violation of the Reha-
bilitation Act of 1973, 29 U.S.C. S 701 et seq., and its imple-
menting regulations, particularly 29 C.F.R. S 1614.203(g),
seeking front and back pay. After a bifurcated trial, a jury
found that USPS unlawfully discriminated against McLean by
failing to accommodate his disabilities and awarded him
$130,000 in front pay. The district court initially awarded
McLean $126,307 in back pay but then reduced that award to
$55,411 when it determined the front and back pay awards
should be offset by McLean's workers' compensation benefits
under the Federal Employees Compensation Act ("FECA").1
A week later, the court granted USPS's renewed motion for
judgment as a matter of law, concluding that McLean had not
shown USPS could have reassigned him to a vacant position
at the same grade or level as McLean's current position --
"same grade or level" being the relevant, specified condition
for reassignment of disabled employees under 29 C.F.R.
S 1614.203(g). USPS argued, and the district court agreed,
that it was bound to offer only a position that met USPS's
internal classification of grades or levels, and relied solely on
the testimony of its personnel specialist that all of the vacan-
cies McLean identified were not at an equivalent grade or
level to his clerk's position.

On appeal, McLean argues "grade or level" means a posi-
tion with equivalent pay, and thus that a jury could properly
find there was at least one vacancy for which he was qualified
because it was at his pay level. He also contends the district
court erred in offsetting his FECA workers' compensation
benefits against his front and back pay damages awards. We
agree with McLean on the first issue, but disagree on the issue
of offset. Accordingly, we reverse the district court's grant of
USPS's motion for judgment as a matter of law and remand
to the district court to award damages offset by FECA bene-
fits.

FACTUAL and PROCEDURAL BACKGROUND

The facts in this case are largely undisputed. McLean was
employed by USPS as a nonprobationary Mark-up Clerk in
the Computerized Forwarding Service unit from February 14,
1987, until August 21, 1996. In late 1994, McLean notified
USPS that he was unable to perform the essential functions of
the Mark-up Clerk position due to his disability, left work and
requested reassignment to a position requiring light physical
duty. McLean reported back to work at a Mark-up Clerk posi-
tion modified to suit his disability on October 16, 1995, but
immediately began experiencing discomfort in his neck and
shoulder as well as cramping and numbness in his hands and
left work that day -- which turned out to be his last day of
active duty. McLean informed USPS he was unable to per-
form the duties of the modified Mark-up Clerk position and
again requested a position requiring only light physical exer-
tion. USPS denied McLean's request, asserting it had no obli-
gation to accommodate his disability any further.

On March 6, 1996, McLean initiated a complaint with the
USPS Equal Employment Office regarding USPS's failure to
reassign him to an equivalent, less strenuous position. At the
time of McLean's separation from USPS in August 1996, his
Mark-Up Clerk position was classified as a "Postal Service"
craft, level 4 (PS-4) position and his salary was $34,473. In
March 1997, McLean filed suit and, at trial, submitted over 40
vacancy announcements regarding positions within the execu-
tive appointment scheduled ("EAS") classification USPS
posted while he was awaiting reassignment. McLean testified
that he was qualified for each of these positions.

Of the 40 potential vacancies, eight had salary ranges that
included McLean's salary at the time he was separated. One
of these was an EAS level 11 position located in Salem, Ore-
gon, roughly 50 miles -- a 60-minute commute -- from
McLean's original workplace.2 This position had a salary
range from $29,630 to $36,390, and specifically called for
applications from all career employees working "within the
Portland District" where McLean had worked as a Mark-up
Clerk. Although McLean had previously requested reassign-
ment to this type of position, USPS did not offer the position
to McLean when it became vacant, but instead posted it as
available to all employees on May 6, 1996, and not even then
did it offer the position to McLean.3
DISCUSSION

I. USPS's Duty to Reassign McLean to a Vacant
Position at the Same or Lower Grade or Level 

We review de novo a district court's grant of a renewed
motion for judgment as a matter of law. See Marcy v. Delta
Airlines, 166 F.3d 1279, 1282 (9th Cir. 1999). A judgment as
a matter of law is proper if the evidence, construed in the light
most favorable to the nonmoving party, permits only a con-
clusion contrary to the jury's verdict. See Gilbrook v. City of
Westminster, 177 F.3d 839, 864 (9th Cir. 1999).

[1] The nub of this controversy is whether any of the
vacancies submitted by McLean was at the "same grade or
level" as McLean's PS-4 Mark-up Clerk position within the
meaning of 29 C.F.R. S 1614.203(g). McLean argues "same
grade or level" in S 1614.203(g) means a position with an
equivalent pay level. McLean contends the district court
therefore erred in reversing the jury's verdict because he pre-
sented evidence of at least one EAS-11 vacancy offering the
same salary as his current position. Absent evidence of a sig-
nificant objective difference between the two positions, such
as status or benefits, we agree.

[2] The Rehabilitation Act requires that government agen-
cies reasonably accommodate an employee's disability. See
29 U.S.C. S 794; Mustafa v. Clark County Sch. Dist., 157
F.3d 1169, 1176 (9th Cir. 1998). The regulations implement-
ing the Rehabilitation Act also provide, "[t]he Federal Gov-
ernment shall become a model employer of individuals with
handicaps." 29 C.F.R. S 1614.203(b) (2000). In determining
whether a federal agency has violated the Rehabilitation Act,
the standards under Title I of the Americans with Disabilities
Act ("ADA") apply. See 29 U.S.C. SS 791(g), 794(d); New-
land v. Dalton, 81 F.3d 904, 906 (9th Cir. 1995). Under Title
I of the ADA, a reasonable accommodation includes reassign-
ment to a vacant position. 42 U.S.C. S 12111(9)(B). Similarly,
the regulations implementing the Rehabilitation Act provide
that an agency's duty of reasonable accommodation includes,
in certain circumstances, the duty to reassign an employee to
a vacant position:

       (g) Reassignment. When a nonprobationary
       employee becomes unable to perform the essential
       functions of his or her position even with reasonable
       accommodation due to a handicap, an agency shall
       offer to reassign the individual to a funded vacant
       position located in the same commuting area and ser-
       viced by the same appointing authority, and at the
       same grade or level, the essential functions of which
       the individual would be able to perform with reason-
       able accommodation if necessary unless the agency
       can demonstrate that the reassignment would impose
       an undue hardship on the operation of its program.
       In the absence of a position at the same grade or
       level, an offer of reassignment to a vacant position
       at the highest available grade or level below the
       employee's current grade or level shall be required.

29 C.F.R. S 1614.203(g) (emphasis added).

[3] It is undisputed that McLean was a nonprobationary
employee, was disabled and could no longer perform the
essential functions of his current job even with reasonable
accommodation. Furthermore, as the district court acknowl-
edged, McLean testified that he could perform the essential
functions of the vacant EAS positions during the time he
requested to be reassigned.

Neither the text of S 1614.203(g), its administrative history,
see Federal Sector Equal Employment Opportunity, 57 Fed.
Reg. 12,634, 12,637-38 (1992), nor any decision of this court
defines the meaning of "same grade or level." The Third Cir-
cuit, however, has held that "grade or level" means an "equiv-
alent level or position . . . of seniority and pay. " Shiring v.

Runyon, 90 F.3d 827, 832 (3d Cir. 1996). We find this inter-
pretation persuasive.4 Not only is pay the ordinary basis for
distinctions in grade or level, but in numerous federal statutes
and regulations "level" is frequently defined as level of pay
and "grade" represents a class of varying jobs with a level of
duties and responsibilities intended to reflect a specific pay
range. See, e.g., 5 U.S.C. S 5102 (defining "grade" as a "class
of positions which, although different with respect to kind or
subject-matter of work, are sufficiently equivalent as to . . .
level of difficulty and responsibility . . . to warrant their
inclusion within one range of rates of basic pay") (emphasis
added); U.S. OFFICE OF PERSONNEL  MANAGEMENT, INTRODUCTION
TO THE FEDERAL WAGE SYSTEM JOB GRADING SYSTEM 15
(same); see also 5 U.S.C. S 6333 (providing that applications
to receive donations of leave must include the "grade or pay
level" of the proposed leave recipient); id.  S 8451 (providing
that "an employee shall not be considered for disability retire-
ment . . . if the employee has declined a reasonable offer of
reassignment to a vacant position . . . at the same grade (or
pay level) as the employee's most recent grade (or pay level)
or higher"); 4 C.F.R. S 4.3 (characterizing the "level" classifi-
cation for General Accounting Office employees as a pay
classification and providing for situations where the GAO
may reduce an employee's "grade/pay level"). For example,
the grading manual of the United States Office of Personnel
Management provides that the grade classification of all non-
supervisory employees determines their pay category. INTRO-
DUCTION TO THE FEDERAL WAGE SYSTEM JOB GRADING SYSTEM
14; see also id. at 4 ("[T]here shall be equal pay for substan-
tially equal work, and pay distinctions shall be maintained in
keeping with work.").5
[4] The question whether a vacant position is at the "same
grade or level" as an employee's current position must turn on
objective differences between the two positions, such as pay
or benefits, not merely on an employer's bare assertion that
the positions are not "equivalent." Otherwise, the regulation
would allow employers covered by the Rehabilitation Act to
avoid their reassignment obligation under S 1614.203(g) by
merely asserting an employee's current position is at a differ-
ent "grade or level" regardless of the similarities between the
current position and a vacant one. In addition, such an inter-
pretation would provide employers with an incentive to
reduce their reassignment obligation by arbitrarily creating as
many grade and level classifications as possible and denying
that any one classification is the equivalent "grade or level"
as another. For these reasons, we conclude that absent a sig-
nificant difference in relevant factors such as status or bene-
fits, a "vacant position . . . at the same grade or level" in 29
C.F.R. S 1614.203(g) includes a vacant position with an
equivalent level of pay as an employee's current position.

This case presents a clear example of the peril of relying on
an employer's mere assertion that an employee's current posi-
tion and a vacant position are not equivalent. The district
court adopted the assertion of USPS's personnel specialist
that McLean's PS-4 classification was equivalent to an EAS
level 10 position. The personnel specialist did not, however,
identify any difference in pay or status between McLean's
current position and the EAS level 11 position and, indeed,
subsequently acknowledged that the only difference between
levels (e.g., 10 vs. 11) is salary. Her testimony supports
McLean's argument that the Salem, Oregon, EAS-11 position
was at the same "grade or level" as his current position
because McLean established that it offered the same salary.
USPS did not offer any other evidence that McLean's current
position was equivalent only to an EAS-10 position. Accord-
ingly, we hold that the jury was entitled to find the EAS-11
position was at the same grade or level as McLean's current
position under 29 C.F.R. S 1614.203(g). We therefore reverse
the district court's decision and direct it to reinstate the jury's
verdict.

II. Offset of Front and Back Pay Damages for
FECA Workers' Compensation Benefits

We next turn to the district court's decision to offset
McLean's front and back pay damages awards by the amount
of his FECA workers' compensation benefits.6 See Los Ange-
les Mem'l Coliseum Comm'n v. National Football League,
791 F.2d 1356, 1359-60 (9th Cir. 1986) (" `An appeal from
the final judgment draws in question all earlier non-final
orders.' ") (quoting Munoz v. Small Bus. Admin., 644 F.2d
1361, 1364 (9th Cir. 1981)); see also Sheet Metal Workers
Int'l Ass'n Local Union No. 359 v. Madison Indust., Inc., 84
F.3d 1186, 1193 n.7 (9th Cir. 1993) (same). We review a dis-
trict court's award of damages under the Rehabilitation Act
for abuse of discretion. See 29 U.S.C. S 794a (incorporating
remedial provisions of Title VII); Albemarle Paper Co. v.
Moody, 422 U.S. 405, 422  (1975) (Title VII damages award);
Odima v. Westin Tucson Hotel, 53 F.3d 1484, 1495 (9th Cir.
1995).

[5] A district court's damages award under the Rehabilita-
tion Act, which has incorporated the remedial provisions for
Title VII, see 29 U.S.C. S 794a, must comport with Title VII's
"central statutory purposes of eradicating discrimination
throughout the economy and making persons whole for inju-
ries suffered through past discrimination." Albemarle, 422
U.S. at 421. McLean invokes the collateral source rule to
argue that his FECA benefits should not offset his damages
award. Under the collateral source rule, "benefits received by
the plaintiff from a source collateral to the defendant may not
be used to reduce that defendant's liability for damages." 1
DAN B. DOBBS, LAW OF REMEDIES S 3.8(1) at 372-73 (2d ed.
1993); accord Kauffman v. Sidereal Corp., 695 F.2d 343,
346-47 (9th Cir. 1983). The primary justifications for the col-
lateral source rule are that the defendant should not get a
windfall for collateral benefits received by the plaintiff and
that the defendant should not profit from benefits that the
plaintiff has paid for himself.7See, e.g., Siverson v. United
States, 710 F.2d 557, 560 (9th Cir. 1983); Gypsum Carrier,
Inc. v. Handlesman, 307 F.2d 525, 534 (9th Cir. 1962) ("As
between the injured person and the tortfeasor, the former's
claim is the better . . . . The tortfeasor bears only the single
burden for his wrong. That burden is imposed by society . . .
to deter" wrongful conduct); see generally  2 DOBBS S 8.6(3)
at 493-98.

[6] We conclude the collateral source rule does not apply
in this case. Workers' compensation benefits under FECA are
ultimately paid entirely by USPS and thus are not derived
from a collateral source. See 1 DOBBS , LAW OF REMEDIES
S 3.8(2) (concluding that the collateral source rule does not
apply when the benefit is derived from the defendant him-
self); cf. Olivas v. United States, 506 F.2d 1158, 1163-64 (9th
Cir. 1974) (holding, under Arizona law, that collateral source
rule does not preclude defendant from obtaining offset of
damages for premiums it paid for workers' compensation ben-
efits received by the plaintiff). FECA workers' compensation
benefits are paid from an Employees' Compensation Fund
(ECF), which is ultimately reimbursed entirely by the appro-
priate federal agency or instrumentality for each payment
made for an injury to one of its employees. See 5 U.S.C.
S 8147. There is no windfall to USPS if McLean's FECA ben-
efits are offset from his damages award because USPS pays
both the damages award and the workers' compensation bene-
fits.8

[7] The district court's damages award does not frustrate
the purposes behind Title VII. First, the award makes McLean
whole because the damages awarded, together with the FECA
workers' compensation benefits, give McLean a full recovery
for lost wages. Second, the reduced damages award serves the
purpose of eradicating discrimination, although less so than
an award not offset by workers' compensation benefits, by
imposing a substantial burden upon USPS for breaching its
duty of reasonable accommodation.9 See Albemarle, 422 U.S.
at 421. Accordingly, we hold the district court did not abuse
its discretion in deducting McLean's FECA workers' com-
pensation benefits from his damages award.
CONCLUSION

We hold the district court erred in overturning the jury's
verdict in favor of McLean, because he presented sufficient
evidence to lead a reasonable jury to conclude USPS could
have reassigned him to a vacant position at the same grade or
level as his current position. We further hold the district court
did not abuse its discretion by reducing McLean's damages
for lost back and front pay by the amount of his FECA work-
ers' compensation benefits. We therefore reverse and remand
to the district court with directions to reinstate the jury's ver-
dict and to award damages in accordance with this opinion.

REVERSED and REMANDED.
_______________________________________________________________

FOOTNOTES

1 The district court had not yet decided the amount it would subtract
from the front pay award when it granted USPS's renewed motion for
judgment as a matter of law.
2 Although McLean submitted evidence of eight vacancies offering the
same salary as his current position, only the Salem, Oregon, position was
within a reasonable distance from his house and current workplace, a pre-
requisite under 29 C.F.R. S 1614.203(g) ("[A]n agency shall offer to reas-
sign the individual to a funded vacant position located in the same
commuting area.").
3 The USPS personnel office is aware of all vacancies before they are
posted as available to all employees.
4 We need not address the issue of seniority. USPS did not argue that the
vacant positions classified as EAS-11 and above were positions of greater
status or seniority than McLean's PS-4 Mark-up Clerk position.
5 Any uncertainty over the meaning of "same grade or level" could in the
future be avoided if the EEOC defined this term in the regulation. In this
regard, our interpretation of "at the same grade or level" is consistent withthe EEOC's proposed amendment to 29 C.F.R. S 1614.203(g) stating that
"reasonable accommodation may include reassignment to a vacant posi-
tion." Federal Sector Equal Employment Opportunity, 65 Fed. Reg.
11,019, 11,023 (to be codified at 29 C.F.R. S 1614.203(b)(2)) (proposed
Mar. 1, 2000). The EEOC has stated that, under an employer's reassign-
ment obligation, the employer "should search for vacant positions that are
equivalent to the current position in terms of pay, status, and other relevant
factors (e.g., geographical location or benefits). " Id. at 11,022.
6 The parties agreed, and the district court requested, that if this court
reversed the district court's judgment as a matter of law, the interests of
judicial economy would best be served were this court to address the legal
issue of offset for workers' compensation benefits.
7 Our precedent is not absolutely clear as to whether a district court has
discretion to deduct collateral benefits from a damages award under Title
VII. Compare Kauffman v. Sidereal, 695 F.2d 343, 347 (9th Cir. 1983)
("We . . . hold that unemployment benefits received by a successful plain-
tiff in an employment discrimination action are not offsets against a [Title
VII] back pay award."), with Naton v. Bank of California, 649 F.2d 691,
700 (9th Cir. 1981) (holding that district court had discretion to deduct
collateral benefits from an ADEA back pay award); see also Lussier v.
Runyon, 50 F.3d 1103, 1109 (1st Cir. 1995) (concluding that Kauffman
and Naton reflect "an internal division " in this circuit on the issue whether
district courts have discretion to deduct collateral benefits from damages
awards under anti-discrimination statutes). Other circuits are split on the
issue whether district courts have discretion to deduct collateral benefits
from damages awards under Title VII, the ADEA and the ADA. Compare
Dailey v. Societe Generale, 108 F.3d 451, 460 (2d Cir. 1997) ("[T]he deci-
sion whether or not to deduct unemployment benefits from a Title VII
back pay award rests in the sound discretion of the district court."), Lus-
sier v. Runyon, 50 F.3d at 1108-09 (same for front pay award under the
Rehabilitation Act and Title VII), EEOC v. Grady , 857 F.2d 383, 389 (7th
Cir. 1988) (ADEA back pay award), Johnson v. Chapel Hill Indep. Sch.
Dist., 853 F.2d 375, 382 (5th Cir. 1988) (Title VII and ADEA back and
front pay awards), and EEOC v. Wyoming Retirement Sys., 771 F.2d 1425,
1431 (10th Cir. 1985) (ADEA back pay award), with Hamlin v. Charter
Township of Flint, 165 F.2d 426, 433-34 (6th Cir. 1999) (holding that col-lateral source benefits may not be deducted from damages awards under
Americans with Disabilities Act), Gaworski v. ITT Commercial Fin.
Corp., 17 F.3d 1104, 1114 (8th Cir. 1994) (holding that "unemployment
benefits should not be deducted from back pay award under the ADEA"),
Craig v. Y & Y Snacks, Inc., 721 F.2d 77, 82-84 (3d Cir. 1983) (Title VII
back pay award), Brown v. A.J. Gerrard Mfg. Co. , 715 F.2d 1549, 1550-
51 (11th Cir. 1983) (Title VII back pay award), and EEOC v. Ford Motor
Co., 688 F.2d 951, 952 (4th Cir. 1982) (Title VII back pay award). We
need not reach this issue, nor address whatever tension may exist between
Naton and Kauffman, because in this case we conclude the collateral
source rule does not apply.
8 McLean's FECA benefits do not qualify as collateral source benefits
even under this court's rule that benefits received from a special govern-
ment fund supplied in part by contributions from the beneficiary -- as
opposed to benefits payable from unfunded general revenues -- do not
offset damages paid from a government agency or other government
source. See Siverson v. United States, 710 F.2d 557, 559-60 (9th Cir.
1983) (holding that medicare benefits could not offset damages paid by
Veterans Administration under Federal Torts Claims Act ("FTCA")
because plaintiff contributed in part to the Medicare fund through Social
Security payments); United States v. Hayashi, 282 F.2d 599, 603 (9th Cir.
1960) (holding that "mother's insurance benefits " paid from Federal Old-
Age and Survivors Insurance Trust Fund could not offset damages
awarded for wrongful death under FTCA). Unlike the plaintiff in Siverson
and the husband of the plaintiff in Hayashi, McLean did not contribute
any money to the fund at issue. See 8 U.S.C.S 8147; Hayashi, 282 F.2d
at 603; see also Phillips v. Western Co. of N. Am., 953 F.2d 923, 931
("[T]he courts will apply the special defendant-as-tortfeasor exception to
the collateral source rule only when it is clear that the government paid for
the entire benefit.").
9 We are not here faced with an offset of collateral benefits that reduces
the damages award to such a negligible amount that it would frustrate Title
VII's purpose of deterring future discrimination. McLean's FECA benefits
constituted only two-thirds of his monthly pay. See 8 U.S.C. S 8105.