[Claims Under Panama Area Wage Base]

A claim was filed on behalf of 61 Department of Defense (DOD) employees who work in Panama, contending that these employees are entitled to compensation based on General Schedule rates rather than the Panama Area Wage Base which is a much lower rate of pay for equivalent positions. It was contended that DOD unilaterally decided to adopt the Panama Area Wage Base, which affects compensation as well as insurance, leave, within-grade increases, and retirement benefits. It was also argued that, since the Panama Area Wage Base was not ratified or approved by Congress, it cannot be substituted for the General Schedule rates of pay. DOD reported that: (1) it elected to participate in the Panama Canal Employment System and, therefore, all employees in Panama are excluded from Federal regulations applying to the General Schedule; (2) any grandfather provisions were limited and do not extend to employees who had previously been hired at higher U.S. rates; and (3) the Panama Area Wage Base simply extends a practice begun in 1955 to pay local rates for positions which can be filled without recruiting in the United States. GAO concluded that the action was clearly authorized by the Panama Canal Act of 1979. Therefore, it found no entitlement for U.S. citizens employed in Panama by Federal agencies to compensation based upon the General Schedule rates of pay. In addition, GAO was unable to conclude that the adoption of the Panama Area Wage Base discriminated against these employees. Accordingly, GAO determined that the employees are not entitled to higher pay based on the General Schedule.