Arbitrator Orders IRS to Restore Telework Agreements, Rules Agency Unlawfully Repudiated Union Contract

An independent arbitrator has ordered the Internal Revenue Service (IRS) to restore telework agreements from 2024, ruling that the agency unlawfully repudiated its union contract when it ended workplace flexibility arrangements last year. The decision marks the latest instance of a federal agency being directed to reinstate such policies.

Background of the Dispute

The National Treasury Employees Union (NTEU) filed a grievance in March 2025 shortly after the IRS unilaterally cancelled telework and remote work agreements en masse. The collective bargaining agreement (CBA) required a "case-by-case" review of employees' eligibility, along with a detailed list of potential rationales for termination. The IRS rejected the grievance in May 2025, prompting the union to seek arbitration.

Agency's Attempt to Halt Proceedings

In late March 2026, the IRS informed arbitrator Christopher Shulman that he was "no longer authorized to accept or adjudicate any grievances involving the IRS and NTEU," and that management was withdrawing from all pending grievance proceedings.

This action coincided with:

• A push by the Office of Personnel Management (OPM) to encourage agencies to formally terminate union contracts in accordance with President Trump's 2025 executive orders banning unions at most federal agencies due to purported national security work.
• Efforts by some in the administration to prevent the Federal Mediation and Conciliation Service from assigning arbitrators.

Arbitration Proceeds Without IRS Participation

Shulman and NTEU conducted a hearing in May 2026 with the agency absent, citing a provision in the CBA allowing proceedings to continue with only one party's consent.

Shulman acknowledged the broader uncertainty surrounding federal collective bargaining, noting that multiple lawsuits challenging the validity of Trump's anti-union executive orders remain pending in the courts.

"It is not hyperbole that most federal sector labor practitioners await a final judicial determination on this issue with bated breath," he wrote. "If the EO's exclusion of the agency from [the federal sector labor management statute's] ambit is ultimately upheld, then the agency's termination of the parties' collective bargaining agreements and subsequent withdrawal from the arbitration process will be deemed legal. If the IRS exclusion under executive order 14251 is not upheld, then the agency will likely have committed an unfair labor practice by terminating the collective bargaining agreement and withdrawing from this arbitration."

Key Legal Finding

Shulman determined that the question of contract termination was moot because the IRS cancelled its telework and remote work agreements before the March 2025 executive order and the subsequent March 2026 contract termination.

"It is black letter law that expiration of a collective bargaining agreement does not terminate rights and obligations arising under the contract during its term," Shulman wrote. "The obligation to arbitrate survives expiration where (as here) 'the dispute arose during the life of the contract but arbitration proceedings had not begun before termination. The same would be true if arbitration processes began but were not completed, during the contract's term.'"

Agency's Defense Rejected

Despite the IRS's lack of participation, Shulman reconstructed the agency's likely argument based on its withdrawal announcement and initial grievance denial. Like other agencies, the IRS claimed it was compelled to implement its return-to-office mandate by:

• Trump's January 20 memo instructing federal workers to return to agency offices full-time.
• OPM's declaration that telework is a management right, making CBA provisions on workplace flexibility "unenforceable."

Shulman dismissed OPM's guidance as an "unqualified overstatement" of Federal Labor Relations Authority (FLRA) caselaw.

"As noted by the union, telework and remote work arrangements do not address what work duties employees are to perform, which employees will perform the work, how they are to do so, or when," he wrote. "Instead, these arrangements simply discuss where employees will perform assigned work. As such, FLRA and the courts have held these arrangements do not affect an agency's rights to determine mission or to assign work."

Remedy Ordered

Shulman ruled that the IRS must:

• Restore bargaining unit employees' telework and remote work agreements that were in effect prior to March 2025.
• Make whole any employees who suffered financial losses as a result of the unlawful cancellation.