Crown lawyers argue the legislation enacted in 2009 violates their rights to bargain collectively for more money.
Known as the Expenditure Restraint Act, the law was a response to the global economic slump.
It essentially limited wage hikes for about 400,000 federal workers for five years retroactive to 2006.
A lower court judge upheld the legislation, but struck down the 2006 retroactivity.
The government wants that part of the ruling set aside while the association that speaks for 2,700 federal lawyers wants the entire act struck down.
"The government can't arbitrarily say it's only paying half as much for paperclips because there's a recession," Andrew Lokan, who speaks for the Association of Justice Counsel, said Tuesday.
"To take aim at wages the way it does, they need to pass through a standard of justification."
In his ruling last year, Ontario Superior Court Justice Duncan Grace agreed the federal government was faced with "virtually unprecedented" economic conditions and reacted to avoid an "unimaginable financial catastrophe."
However, he found the government violated the lawyers' Charter rights by including 2006-2007, a year in which the association says Ottawa ran a record $13.2-billion surplus.
Grace said courts had to be vigilant to ensure that "troubled times are not used, even if innocently, to discard constitutionally protected rights and freedoms."
Two other groups — the Mounties and dockworkers in British Columbia — have also been fighting the legislation in other courts.
In its appeal, the association argues there was "no obvious connection" between the global financial crisis and any need to suspend their right to bargain collectively over wages.
The union says the estimated $1-billion savings under the act were "dwarfed" by tax cuts and government stimulus spending.
For its part, the government argues Grace failed to show appropriate deference to Parliament.
At the end of 2006, federal Crown lawyers earned on average $101,332 a year — about one-third less than their provincial counterparts in Ontario, and about half of what private-sector lawyers made.
The act essentially scuttled their hopes of catching up.