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BACKGROUND INFORMATION ABOUT THE SPECIAL RATES LAWSUIT
- Origin of the Case
- Initial Decision Holding OPM's Rule to Be Illegal
- Appeals Court Affirms District Court's Holding That OPM's 1982 Rule Was Illegal, Rejects Its Conversion Rule, and Remands to District Court for Further Consideration of Proper Conversion Rules
- District Court Adopts Unfavorable Conversion Rules
- Appeals Court Adopts NTEU's Alternative Argument, Partially Reversing District Court's Unfavorable Decision on Conversion Rules, and Remands for Application of Alignment Rule to the Class
- Summary of the Alignment Rule
1. Origin of the Case
The special rates litigation had its origin in 1982 when OPM issued a rule governing how special rate employee pay raises would be calculated. That rule provided that the annual statutory adjustment made to the general schedule would have no effect upon special rate schedules. The rule brought to a halt the government's longstanding practice of passing on the entire annual general schedule increase to special rate employees. Because special rate increases were no longer triggered by the general schedule increases, the only increases provided to special rate schedules between fiscal years 1982 and 1988 were those OPM determined were necessary to recruit and retain qualified employees. Many special rate employees received no salary increases at all during this period, or received only very modest ones. Some, however, received the full increase required by law.
The National Treasury Employees Union ("NTEU") brought a suit challenging the OPM regulation in 1983, shortly after it went into effect. The case was ultimately certified as a class action covering all federal employees who had been paid special salary rates during the years the OPM regulation was in force. The regulation governed special rate increases from fiscal years 1982 through 1988. The case, now known as NTEU v. James, No. 83-0270 (D.D.C.), has also been called NTEU v. Lachance, NTEU v. Devine, NTEU v. Horner, NTEU v. Newman, and NTEU v. King, to reflect the different directors OPM has had during the pendency of the litigation.
2. Initial Decision Holding OPM's Rule to Be Illegal
On March 12, 1987, Judge Penn of the U.S. District Court for the District of Columbia ("district court") issued a decision holding that the OPM rule was illegal. NTEU v. Horner, No. 83-0279 (D.D.C.). The government filed an appeal of that decision.
3. Appeals Court Affirms District Court's Holding That OPM's 1982 Rule Was Illegal, Rejects Its Conversion Rule, and Remands to District Court for Further Consideration of Proper Conversion Rules
On April 24, 1989, the U.S. Court of Appeals for the Federal Circuit ("court of appeals") affirmed the district court's decision that the OPM rule was illegal to the extent that it provided that an adjustment in the general schedule would have no effect upon special salary schedules. NTEU v. Horner, 869 F.2d 571 (Fed. Cir.). But the court rejected the district court's formulation of the rules by which special salary rate schedules should be adjusted ("conversion rules") and remanded the case to the district court for further consideration of the appropriate conversion rules and for an appropriate remedy.
4. District Court Adopts Unfavorable Conversion Rules
After several rounds of briefing and argument, the district court issued a decision on May 5, 1995, approving a conversion rule proposed by OPM under which only a small handful of the class members would receive a nominal amount of back pay. NTEU v. King, No. 83-0279 (D.D.C.) NTEU appealed the final judgment, entered by the district court on March 15, 1996. In its appeal, NTEU argued that the conversion rule approved was invalid or, in the alternative, that back pay should be determined on the basis of the conversion rule in effect before 1982.
5. Appeals Court Adopts NTEU's Alternative Argument, Partially Reversing District Court's Unfavorable Decision on Conversion Rules, and Remands for Application of Alignment Rule to the Class
On January 5, 1998, the court of appeals issued a decision on NTEU's appeal. NTEU v. King, 132 F.3d 736 (Fed. Cir.) The court agreed with NTEU's alternative argument that the district court used the wrong formula when it determined that virtually none of the members of the class were entitled to back pay. It found that the pre-1982 conversion rule (the "alignment rule") was a valid one and that it should be used as the measure of back pay.
6. Summary of the Alignment Rule
Class member recoveries will be based largely on application of the court-approved alignment rule. The mechanics of the pre-1982 rule--which provided for an "alignment adjustment" between GS and special rate schedules--are complex. Some basic concepts follow:
- Special salary schedules were traditionally pegged to the GS schedule. For example, the pay of a grade 5, step 1 special rate employee might have been set to correspond to the pay of a grade 5, step 10 general schedule employee.
- At the time of the annual GS increase, schedules would become unaligned if no adjustment were made in the special rate schedule. For example, the grade 5, step 1 special rate employee would receive less pay than the grade 5, step 10 general schedule employee received, because the grade 5, step 10 employee's rate increased while the grade 5, step 1 special rate employee was paid at the same rate.
- Under the pre-1982 rule, which will now be used as the measure of back pay, OPM provided an adjustment to realign the schedules: the grade 5, step 1 special rate would receive an increase to be brought in line with the closest step on the grade 5 general schedule that did not result in a decrease. This would not necessarily be the same step as previously used. Thereafter, the other steps on the special rate schedule would be increased to align with new rates in the general schedule.
- Application of the pre-1982 rule would typically require an increase to special rate schedules at the time of the statutory adjustment provided to the general schedule. The rule, however, would generally provide special rate employees with a lower percentage salary increase than the increases provided to general schedule employees.
- The remedy that eligible class members will ultimately receive will be based in part on OPM's failure to provide these adjustments during the affected years (1982-1988). That is, the difference between the properly aligned rate and the actual rate paid will drive the computation of class member payout amounts. There are, however, many other factors that will influence final class member recoveries.