Appeals judges deny request for locality pay

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.

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.