Fed workers can’t sue government for late payment due to shutdown

The United States Court of Appeals for the Third Circuit is located in Philadelphia, Pennsylvania. REUTERS/Andrew Kelly

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  • “Employees missed the rise in the markets,” Circuit Judge Stephanos Bibas wrote.
  • Right to sue for ‘benefits’ does not include lost profits, 3rd Circuit panel says, reversing lower court

(Reuters) – Federal employees cannot sue the United States for profits they allegedly lost when a 34-day government shutdown forced agencies to temporarily suspend employer contributions to their savings accounts -retirement, an appeals court said tenuous Monday.

The 3rd U.S. Circuit Court of Appeals overturned a Philadelphia lower-court judge’s decision last year that allowed four FBI investigators ‘John and Jane Doe’ to file a class action lawsuit potential on behalf of all management employees who participated in the survey. government’s $500 billion Thrift Savings (TSP) scheme at the time of the December 2018 shutdown.

The FBI caught up on its contributions to plaintiffs’ TSP accounts when the shutdown ended. However, the plaintiffs say they lost the chance to share in the market’s extraordinary gains that month, including a 10% gain in the TSP’s most popular investment options.

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“The government’s late pension payments caused its employees to miss rising markets,” wrote Circuit Judge Stephanos Bibas, joined by Circuit Judges Paul Matey and Peter Phipps. “But because Congress has not waived the government’s immunity from suit for these losses, employees cannot sue to recover their lost profits.”

Appeals attorneys for Fegan Scott employees did not immediately respond to requests for comment. The US Department of Justice, which represented the government, declined to comment.

According to the 3rd Circuit, plaintiffs relied on various sections of the Federal Employees Retirement System Act of 1986 (FERSA), which created the TSP to provide federal workers with a defined contribution plan similar to 401(k) plans ( (k) offered by private employers. .

The law requires federal agencies to pay the employer’s share to the plans within 12 days of each pay period. Another section allows participants to bring an action “to recover benefits”.

The plaintiffs argued that these sections, taken together, gave them the right to sue for loss of profits if the employer’s contribution was late.

The government argued that it waived sovereign immunity from suit only for “benefits” – the employer’s contribution – and not for consequential damages like lost profits.

Senior U.S. District Judge Jan DuBois denied the government’s motion to dismiss but certified his decision for immediate appeal.

The 3rd Circuit said the most natural reading of “benefits” includes only government contributions, not revenue lost on deferred contributions. Even if the text was ambiguous, the court said, waivers of sovereign immunity must be strictly construed in favor of the government.

The case is John Doe et al. vs. United States of America, 3rd US Circuit Court of Appeals, No. 21-2140.

For John Doe 1-3 and Jane Doe: Jonathan Lindenfeld and Elizabeth Fegan by Fegan Scott

For the United States: Bradley Hinshelwood of the United States Department of Justice

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