The Supreme Court ruled yesterday that the Equal Employment Opportunity Commission may award compensatory damages in bias cases involving federal employees, overturning an appeals court decision that had imperiled that authority.

The high court's 5-4 decision allows EEOC to continue its practice of ordering federal agencies to pay compensatory damages in employment discrimination cases when it deems them warranted.

"Really, what this decision is most notable for is what it doesn't do," said Ellen J. Vargyas, EEOC's legal counsel. "At bottom, it basically affirms our current practice."

EEOC's practice was called into question by the U.S. Court of Appeals for the Seventh Circuit, which had ruled that only the courts could award compensatory damages in discrimination cases brought by federal employees. That ruling contradicted a separate Fifth Circuit appeals court ruling that said EEOC has the right to award compensatory damages.

The case before the Supreme Court involved Michael Gibson, a Department of Veterans Affairs accountant who filed a sex discrimination complaint after being denied a promotion that went to a less experienced woman.

The VA found no illegal conduct. Gibson appealed to the EEOC, which found that the department had discriminated against him and ordered that he be given a promotion and back pay. When the VA was slow to comply with that order, Gibson sued in federal court seeking enforcement of the EEOC order as well as compensatory damages for emotional distress, mental anguish and humiliation.

But while the case was pending, the VA complied with the EEOC order but continued to oppose Gibson's claim for compensatory damages. Consequently, the federal district court dismissed Gibson's claims for back pay and promotion. It also denied his claim for compensatory damages, saying he had not exhausted all possible administrative remedies because he had not pursued his claim with the VA or EEOC.

Gibson again appealed, and the lower court decision was overturned by the Seventh Circuit appeals court, which said that Gibson had pursued all possible administrative remedies because the EEOC had no right to order federal agencies to pay compensatory damages.

The VA then appealed to the Supreme Court. The high court ruled that the EEOC under the 1964 Civil Rights Act and subsequent amendments has the right to order "appropriate remedies," including compensatory damages, and remanded the case back to the appeals court.

Writing for the court, Justice Stephen G. Breyer said to deny that the EEOC has the authority also "would force into court matters that the EEOC might otherwise have resolved. And by preventing earlier resolution of a dispute, it would increase the burdens of both time and expense that accompany efforts to resolve hundreds, if not thousands, of such disputes each year."

Joining Breyer in the decision were Justices John Paul Stevens, Sandra Day O'Connor, David H. Souter and Ruth Bader Ginsburg. Chief Justice William H. Rehnquist and Justices Anthony M. Kennedy, Antonin Scalia and Clarence Thomas dissented.

The Supreme Court decision was applauded by federal employee representatives, who called such authority to award damages integral to protecting the rights of federal employees and preserving the enforcement role of EEOC.

"If the other view had prevailed, it would have undermined the purpose of the EEOC," said Greg O'Duden, general counsel for the National Treasury Employees Union, the largest independent federal union with 155,000 members in 21 agencies and departments.

CAPTION: Justice Stephen Breyer said that one benefit of the court's ruling would be earlier resolution of disputes.