For more than three decades, every U.S. President has used a little-known provision of the Federal Employees Pay Comparability Act (FEPCA) to bypass the law’s automatic pay-adjustment formula, prompting some federal employees to question whether that practice could be challenged in court.

What is FEPCA?

Congress enacted FEPCA in 1990 in an effort to address concerns that federal employees were falling behind their private-sector counterparts in compensation. Prior to FEPCA, policymakers and employee organizations had long argued that federal salaries were not keeping pace with comparable nonfederal wages, making it more difficult for agencies to recruit and retain qualified workers. The law was designed to create a more systematic and predictable approach to federal pay adjustments while reducing disparities between federal and private-sector compensation.

At its core, FEPCA established a framework intended to provide federal employees with annual pay increases based on objective economic data rather than solely on the political or budgetary priorities of a particular administration. Congress sought to move toward a compensation system that would better reflect labor market conditions and help ensure that federal agencies remained competitive employers in a changing economy.

How the FEPCA Formula Is Supposed to Work

FEPCA created a two-part system for adjusting General Schedule (GS) employee pay. First, federal employees would receive an annual across-the-board pay increase tied to changes in private-sector wages as measured by the Employment Cost Index. Second, employees would receive locality pay adjustments designed to address differences in labor markets across geographic regions. The locality component was intended to narrow pay gaps between federal and nonfederal workers performing comparable work in specific areas of the country.

To determine the size of those locality adjustments, the law relies on statistical comparisons between federal and nonfederal salaries conducted through a process involving the Bureau of Labor Statistics and the Federal Salary Council. The goal was to identify areas where federal compensation lagged behind prevailing wages and gradually reduce those differences over time.

Importantly, Congress envisioned the FEPCA framework as a largely automatic system. Rather than requiring lawmakers or agency officials to negotiate pay adjustments each year, the statute established formulas that would generate annual increases based on objective economic indicators and pay-comparability data. However, Congress also included a provision allowing the President to implement an alternative pay plan under certain circumstances, a feature that has played a central role in the law’s history and has prevented the statutory formula from ever being fully implemented as originally envisioned.

The Exception: The Alternative Pay Plan Provision

While FEPCA established a formula intended to produce annual pay adjustments based on private-sector wage growth and locality pay data, Congress also included an exception that gives presidents discretion to depart from that formula. Under the law, if the President determines that a national emergency or serious economic conditions affecting the general welfare make the statutory adjustment inappropriate, the President may propose an alternative pay plan that provides different pay increases than those called for under FEPCA’s automatic formula.

To exercise that authority, the President must submit an alternative pay plan to Congress explaining the reasons for the determination and specifying the alternative pay adjustment that will take effect. As a result, although FEPCA created a framework designed to move federal pay closer to nonfederal compensation levels over time, it also provided presidents with a mechanism to override the formula when economic, fiscal, or other national considerations are deemed to warrant a different approach.

What makes the alternative pay plan provision particularly notable is not merely that it exists, but how frequently it has been used. Since FEPCA became law in 1990, every administration, Republican and Democratic alike, has relied on the alternative pay plan authority rather than allowing the statute’s full pay-comparability formula to take effect. In practice, the exception has become a regular feature of the federal pay-setting process.

As a result, the automatic pay adjustments envisioned by FEPCA have never been fully implemented as originally prescribed by the statute. Presidents have routinely cited budgetary concerns, economic conditions, fiscal policy objectives, or broader considerations affecting the general welfare when proposing alternative increases. This long-standing practice has led some observers to question whether the law’s exception has effectively become the rule, raising broader questions about whether Congress’s original goal of achieving pay comparability through an automatic formula has ever been realized.

Can Federal Employees File Suit?

Federal employees may wonder: If FEPCA was intended to ensure pay comparability with the private sector, why has its automatic pay-adjustment formula never been fully used? Given decades of alternative pay plans, could federal workers bring a class-action lawsuit challenging the practice, or does the law give Presidents broad discretion to depart from the statutory formula?

Federal employees could probably identify a financial difference between the pay they received and the amount that would have resulted from FEPCA’s default formula. Whether that difference would be sufficient to establish standing and support a viable legal claim, however, is far less certain. Even if standing could be established, plaintiffs would still face substantial obstacles on the merits.

Beyond standing, federal employees pursuing such a challenge could encounter additional legal obstacles. Questions may arise regarding sovereign immunity, whether FEPCA creates an enforceable entitlement to higher pay, and whether a President’s decision to invoke the alternative-pay-plan authority is subject to meaningful judicial review. Any one of these issues could significantly complicate a lawsuit before a court reaches the underlying question of whether the alternative pay plan was lawful.

The statute expressly grants a President’s discretion to issue alternative pay plans, and courts are generally reluctant to second-guess such determinations when Congress has delegated that authority. Even if a challenge were successful, questions would remain about what remedy a court could provide, given the budgetary and separation-of-powers issues involved.

Even if federal employees could establish standing by showing they received smaller pay increases than those contemplated by FEPCA’s automatic formula, a court would still have to determine an appropriate remedy. Congress expressly gave the President authority to submit an alternative pay plan when certain conditions exist, meaning a court would first have to find that the President acted unlawfully in invoking that authority.

Even then, the remedy is far from obvious. A court generally does not set federal pay rates or appropriate federal funds. Rather than ordering immediate implementation of the full FEPCA formula and awarding back pay to millions of employees, a court might be more likely to issue declaratory relief or require the government to reconsider its decision under the proper legal standard. Such relief would not necessarily guarantee larger pay increases. In addition, any order requiring substantial retroactive payments could raise significant budgetary and separation-of-powers concerns because federal compensation ultimately depends on statutory authority and appropriated funds.

For that reason, the strongest argument against a class-action challenge may not be whether federal employees can show harm, but whether a court could provide a practical remedy without effectively taking over a policy decision that Congress expressly entrusted to the political branches. Congress, not the judiciary, remains the body with the clearest authority to change or eliminate FEPCA’s alternative-pay-plan mechanism if it believes the provision has been used too frequently.

Should Congress Revisit FEPCA?

Some would argue Congress has effectively accepted how the current system operates, while others would argue Congress has tolerated a practice inconsistent with FEPCA’s original purpose. Ultimately, if lawmakers believe the alternative-pay-plan authority has been overused, Congress has the power to amend FEPCA, but so far it has chosen to leave that framework in place.

If you have questions about your rights as a federal employee, Tully Rinckey’s team of dedicated federal employment attorneys is available to assist. Please call 8885294543 to schedule a consultation, or schedule a consultation online.

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