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Appeals judges deny request for locality pay

By Alex M. Parker aparker@govexec.com November 13, 2009

An appeals court on Thursday upheld a lower court's ruling that federal employees outside the contiguous United States are not entitled to locality pay.

A three-judge panel on the U.S. Court of Appeals for the 9th Circuit affirmed that the government has the right to make disparate pay arrangements based on where employees are located. Currently, federal employees outside the contiguous United States receive cost-of-living adjustments rather than the locality pay the 1990 Federal Employees Pay Comparability Act grants most civil servants in the contiguous states as part of their annual raise. Cost-of-living payments don't count toward retirement annuities but locality payments do, creating a potentially significant disparity between the two types of raises.

The ruling comes in response to a 2005 class action lawsuit brought by 15 employees living in Hawaii and Alaska, or interested in transferring there. The employees argued the differences in pay created an illegal barrier to travel between states, and asked the court not only to order the government to provide locality pay nationwide, but also to grant them back pay and allow them to count locality raises when calculating their retirement annuities.

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The appeals court, however, agreed with the U.S. District Court for the District of Hawaii that the geographic disparity did not violate the Constitution, which guarantees citizens the right to enter a state without barriers, punishment or discrimination.

"Not everything that deters travel burdens the fundamental right to travel," chief appeals judge Alex Kozinski wrote in the decision. "States and the federal government would otherwise find it quite hard to tax airports, hotels, moving companies or anything else involved in interstate movement."

Kozinski also noted that Congress often passes laws that affect geographic regions differently, and said limiting that power would "undermine our constitutional scheme."

Greg McGillivary, attorney for the employees, said he was disappointed in the ruling and that his clients were considering their options. They could request a larger panel of judges from the appeals court, or ask the Supreme Court to hear the case.

In the meantime, the employees could get some relief from the 2010 Defense Authorization Act, which requires the government to phase in full locality pay to federal workers in Alaska, Hawaii and other areas outside the contiguous United States by 2012.

But the law will not help those who already have retired and are receiving a lower annuity due to the lack of locality pay, McGillivary noted. He said if the class action lawsuit prevails, employees who have retired within the past decade might get their annuities boosted to reflect the locality pay they were denied.

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  • James, So are you willing to also quantify the savings you received because you did not pay those taxes? Are you willing to now pay several decades worth of income, social security, and medicare taxes? FEDEUP-FIRE, As for the overtime dollars - even on leave - what the heck - you get money for nothing all these years and are now complaining that the "overtime" is not paid in retirement? Come on and be serious Taxpayer Posted November 18, 2009 1:14 PM
  • To "Fed" and "Taxpayer" - relocation is seldom an option and yes, COLA used to be a "huge" benefit when evryone in the federal gov't was averaging a 4.2% annual pay increase (from 1945 thru 1993). But unfortunately, because of a faulty and unfair application of the Locality Pay Act of 1990, virtually everyone in the federal government received a pay increase in 1994 ranging from 3.09% to almost 8% (total average was about 4.2%) except Non-Foreign COLA employees - we received no pay increase - nada. from 1995 to present Congress/President shaved off 1% so that the 48 states could receive their various locality increases which they richly deserved. However, the roughly 4% pay increase we were denied in 1994 and the subsequent annual 1% reduction resulted in 19% to 20% reduction in our base pay so only those areas that are receiving over 20% COLA are really in the "positive" and the others are in a negative mode. Those of us currently receiving 25% COLA are, in reality, receiving 4-5% COLA when compared to where we were in 1993. Don't believe me? Look at the pay tables at OPM.gov from 1945 on and you will grasp/understand where we're coming from. That's why I was so strongly in favor of going to a Locality-based system - even though I will probably retire in 4-6 years hence. James Myers Posted November 17, 2009 11:25 AM
  • This issue should have been resolved years ago. The basic formula for benefits is taken from an employee's total regular pay. For example a Federal Firefighter receives COLA and thirty-eight (38) hours of scheduled overtime each pay period for twenty-six (26) pay periods. The FireFighters receive the COLA and 38 hours of scheduled overtime even on annual leave, sick leave, C.O.P., disability, worker's compensation and TDY. At retirement the Firefighter is allowed to use the straight time of the 38 hours O.T. but none of the COLA (25% in Hawaii) in the computataion! I thought that the law requires that an employee's total regular pay is to be used as the base pay to compute benefits. The COLA is not tax free. The state of Hawaii has always taxed our COLA! The Federal Firefighter is forced to retire at age 57. For those that were forced to retire, they will on average lose $1,000.00 per month. Big loss in hard times or not! FEDUP-FIRE Posted November 16, 2009 3:48 PM
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