The 3rd Court of Appeals affirmed a 2011 ruling that says Austin discriminated against the officers age 40 and older.
City officials on Tuesday said their attorneys are reviewing the decision.
Austin in 2009 consolidated its park, airport and municipal court police into the Austin Police Department. Some officers sued, saying their years of service and other benefits were not carried over. The officers won.
The city appealed and cited insufficient evidence that years of service were not carried over due to ages of the officers.
Three appellate judges last Friday ordered Austin to pay $1.1 million in back salary, give the officers raises and pay another $400,000 in legal fees.