In the 1987 case of Loeffler v. Frank, the U.S. Supreme Court ruled that federal agencies are subject to state laws regarding interest on wrongfully withheld pay unless Congress has explicitly exempted them from such laws. The case arose when a group of postal workers sued their employer, the United States Postal Service (USPS), for back pay they claimed was owed to them under California law after USPS had improperly calculated their wages over several years. USPS argued it should not have to pay interest on this amount because as a federal entity, it was immune from state regulations about interest payments. However, in an unanimous decision written by Justice Thurgood Marshall, the court held that USPS's argument contradicted its own enabling legislation which stated that it could "sue and be sued" like any other business and therefore must comply with all relevant state laws unless specifically exempted by Congress.

In the dissenting opinion for Loeffler v. Frank, Justice Scalia argued that the majority's decision to allow federal employees to sue their employer under state antidiscrimination laws was a departure from established precedent. He contended that Congress did not intend for such suits when it waived sovereign immunity in Title VII of the Civil Rights Act of 1964 and therefore, this waiver should not be extended beyond its explicit terms. Furthermore, he believed that allowing these lawsuits would disrupt the uniformity of federal employment law by subjecting federal employers to varying state laws and regulations. This could potentially lead to inconsistent obligations and protections for federal employees across different states which is contrary to Congress' intent in creating a comprehensive nationwide system through Title VII.