[Claims for Backpay for Panama Canal Commission Employees]

A GAO decision was requested on the question of whether backpay claims should be paid to certain Panama Canal Commission employees. The claims involved: (1) non-U.S. citizen employees who claimed that they were underpaid between 1958 and October 1, 1979, because their tax allowance was improperly computed; (2) non-U.S. citizen employees who claimed that they were underpaid between October 1, 1979, and October 5, 1980, because the tax allowance should have been eliminated on October 1, 1979; and (3) U.S. citizen employees who claimed that they were underpaid after October 5, 1980, because the tax allowance was improperly discontinued at that date. Prior to 1979, the Canal Zone Code provided that U.S. citizen employees of the Panama Canal were authorized payment of a tax allowance and overseas differential pay. Non-U.S. citizen employees claimed that inclusion of the tropical differential in the calculation of the tax allowance reduced the basic wage for positions in the Canal Zone. GAO found that the method of computing the tax allowance was consistent with provisions of treaty and statute and must be sustained in the absence of any showing of error. Accordingly, GAO disallowed the backpay claims submitted covering pay periods prior to October 1, 1979. The non-U.S. citizen employee claimants who claimed backpay for pay periods between October 1979 and October 1980 suggested that the tax allowance should have been completely eliminated effective October 1, 1979. They also contended that continuation of the tax allowance after that date for U.S. citizens employed prior to that date constituted unlawful discrimination under the provisions of treaty and statute, resulting in the depression of their basic wages. GAO concluded that the President had discretionary authority to continue payment of the tax allowance as a retention differential after October 1, 1979, since there was no indication that the allowance with the tropical differential exceeded the amount allowed by statute or treaty. Accordingly, GAO disallowed the backpay claims submitted covering the pay periods from October 1, 1979, to October 5, 1980. Finally, GAO found that the termination of the tax allowance on October 5, 1980, did not contravene either treaty or statute since the allowance was not actually a part of the employee's basic salary or wages. Accordingly, GAO disallowed all of the claims submitted in this matter.