A demoted police commander will be $85,000 richer and city of Pittsburgh employees will see their free speech rights affirmed under a legal settlement confirmed yesterday.

In the end, police Cmdr. Catherine McNeilly's federal whistleblower lawsuit could cost the city several times that amount, because the city will pay her attorneys fees that could range into the hundreds of thousands of dollars.

The settlement avoids what could have been a contentious series of depositions and then an expensive federal trial before Chief U.S. District Judge Donetta Ambrose, who had issued an interim ruling favorable to Cmdr. McNeilly. It appears to put an end to the controversy surrounding former city Operations Director Dennis Regan that plagued the first few months of Mayor Luke Ravenstahl's administration.

"I have no intention on pursuing something that's going to further line the pockets of attorneys at the expense of taxpayers," the mayor said.

"I think it's ridiculous," said Fraternal Order of Police President James Malloy of the settlement. "How do you justify paying somebody $85,000 who has, in fact, freely admitted that they violated the rules and regulations they helped write?"

Employment lawyers said one provision -- a statement by the mayor personally affirming that the First Amendment applies to city workers -- could have an impact on future cases.

That city employees have free speech rights "in my opinion goes without saying," said Mr. Ravenstahl, adding that Cmdr. McNeilly's legal team wanted the acknowledgement. "It was never anybody's intent to keep city employees from speaking their minds."

The first act in what became a lengthy drama was Mr. Ravenstahl's Oct. 2 nomination of Mr. Regan to the post of public safety director, which has final say over police, fire and paramedic disciplinary matters.

Cmdr. McNeilly sent the mayor an Oct. 6 e-mail alleging that Mr. Regan had intervened in her efforts to discipline Officer Francis Rende for sick-time abuse -- a charge that has never been substantiated. After waiting a weekend with no response, she sent a similar e-mail, along with an electronic version of the disciplinary report against Officer Rende, to the mayor, all City Council members, top city public safety officials, her brother, and her husband, former Police Chief Robert W. McNeilly Jr.

She and Mr. Regan were suspended with pay during a seven-week investigation. The mayor found no conclusive evidence of wrongdoing by Mr. Regan, who nonetheless resigned. Police Chief Nate Harper demoted Cmdr. McNeilly to lieutenant in the backwater warrants office.

She sued for her old job. Though she admitted knowingly violating privacy regulations she helped write, a legal team, including Tim O'Brien and Witold Walczak, legal director of the American Civil Liberties Union of Pennsylvania, turned the focus to Mr. Regan.

They introduced testimony suggesting that Mr. Regan interfered with Cmdr. RaShall Brackney's efforts to rein in Duke's Tire Service, which was changing tires on a South Side street. They also echoed reports that he cancelled the termination of Sgt. Mark A. Eggleton, whose actions in roughing up a patron at the Original Hot Dog Shop led to a separate federal lawsuit and $200,000 city payment.

Mr. O'Brien was the plaintiff's attorney in the civil case against Mr. Eggleton. The Fraternal Order of Police had argued that the termination was an effort by the city to reduce liability in the case, and would be reversed in arbitration.

In January, Judge Ambrose restored Cmdr. McNeilly to her rank temporarily, pending trial. The job pays $79,877, compared to $69,458 for a lieutenant. The settlement keeps her in command of Zone 1 station, which covers the North Side.

The settlement requires City Council approval, and the exact amount of attorney fees the city must pay will be determined through an arbitration process. Cmdr. McNeilly and her attorneys declined comment yesterday.

Absent from the settlement is any stipulation about how police side jobs will be managed. Cmdr. McNeilly's team had raised the issue in settlement talks, since Officer Rende was accused of abusing the side-job system by calling off sick to take private work and Sgt. Eggleton was working such a job when he roughed up Devon Werling. They dropped the issue late in the talks.

The mayor's acknowledgement of city workers' free speech rights is like saying "the sky is often blue," said Daniel P. O'Meara, an employment lawyer with the Philadelphia firm Montgomery McCracken. Everybody has some First Amendment protection.

The mayor's acknowledgement, though, "may have the effect of saying to city employees, 'Whatever happened to that whistle-blowing employee, they seem to admit that it was a mistake, and it probably won't happen to me,' " he said.

Public-sector employees may not know that they have more free speech protections than private-sector workers, who can be disciplined for off-hours political speech, lawyers said. Governments sued for stifling speech often claim they weren't aware of special rights held by their employees, said Sam Cordes, a Downtown employment lawyer.

The settlement eliminates that defense in any future cases involving this mayor, he said.