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Washington, D.C.—Thanks to the work of the National Treasury Employees Union (NTEU), more than 30,000 Internal Revenue Service (IRS) employees will share in a $5 million settlement negotiated by the parties for improper agency payments under the 2003 National Performance Awards program.

The $5 million settlement implements the decision of an arbitrator last December, who ruled in favor of NTEU in its national grievance alleging that the agency had underpaid awards program recipients, mainly because it had under-funded the program by wrongly basing its awards calculations on outdated employee salary figures. Payments to impacted employees will be made within the next 60 days.

NTEU President Colleen M. Kelley called the settlement “a major victory” not only for underpaid 2003 awards recipients, but for future IRS performance award recipients as well. That is because the parties also agreed that any future supplemental awards payments—including for such reasons as under-funding the awards pool—will be paid from fiscal year funds in which the award was paid, and not by reducing awards funding levels in subsequent years.

NTEU’s evidence at the arbitration hearing included the bargaining history of the awards program and IRS spreadsheets showing the amounts the agency paid employees in performance awards was less than the amount it should have paid.

“The arbitration decision underscores the importance of fully funding any kind of pay-for-performance system,” said President Kelley. In addition to full funding, the NTEU leader warned that any pay-for-performance system that is not transparent and credible with employees will fail.

NTEU is the largest independent federal union, representing some 150,000 employees in 30 agencies and departments, including some 98,000 in the IRS.