Union wins back pay for former IRS mailroom workers

The Internal Revenue Service and an employee union have announced a settlement agreement that includes modest lump-sum payments to former mailroom employees who lost their jobs in 2004 when their positions were outsourced.

Ten employees who were subject to a reduction in force in December 2004 will each receive payments of $4,100 from the agency. The settlement resolves a lawsuit filed by the National Treasury Employees Union. In February, a judge for the U.S. District Court for the District of Columbia found the agency at fault in the case, and asked the parties to propose remedies.

At that time, union representatives said they sought reinstatement with back pay for 44 employees who lost their jobs as a result of the direct conversion of IRS mailroom jobs to contractor performance. But a lawyer with the union's office of general counsel said Tuesday that legal precedents prevented those employees who had accepted early-out options and transfers -- which are considered voluntary actions -- from being entitled to back pay.

He said the settlement amount represents about 60 days of pay, to compensate the former mailroom employees for time that should have elapsed between being given notice of a reduction in force and their last day. The settlement also includes a payment of $45,000 to the union for legal fees.

"This is the first case of which NTEU is aware in which the government has paid money to employees in settlement of a contracting out lawsuit," NTEU President Colleen Kelley said. "It was important to us to hold the IRS accountable for its violation of the law, and this settlement accomplishes that goal."

The lawsuit centered on the legality of IRS' 2004 conversion of its mailroom functions to contractor performance without running a public-private job competition. Direct conversions of more than 10 positions are not permitted under the most recent version of the Office of Management and Budget's Circular A-76, the competitive sourcing rulebook, published in May 2003. They also were prohibited under the 2004 Consolidated Appropriations Act.

Several union challenges to the administration's competitive sourcing agenda have foundered because of a lack of legal standing to protest on behalf of employees. "Lawsuits challenging agency contracting out decisions are notoriously difficult for unions to win initially and to defend on appeal," Kelley said.

Crucially, the NTEU lawsuit hinged on restrictions in the appropriations act, and not on the OMB circular itself. "We've urged IRS that they really shouldn't have done this direct conversion," said the NTEU lawyer, noting that the conversion was clearly not permitted under OMB's rules. But he said the legal force of the circular was not a matter of settled law.

Just days after the employees were terminated, the appropriations act restriction expired and the agency was no longer statutorily banned from conducting such conversions. An IRS spokesman confirmed that Alexandria, Va.-based ServiceSource continues to perform the mailroom work, but declined to comment further on the matter.