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Washington, D.C.—As a successful and unique follow-up to its federal court victory earlier this year, the National Treasury Employees Union (NTEU) has won agreement from the Internal Revenue Service (IRS) for more than $40,000 in back pay to employees in a contracting out matter.

“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,” said NTEU President Colleen M. Kelley. “It was important to us to hold the IRS accountable for its violation of the law, and this settlement accomplishes that goal.”

The issue revolved around the agency’s illegal use of appropriated funds in 2004 to convert its mailroom operations to a private contractor without giving federal workers the chance to compete for their jobs.

Ten former mailroom employees, who were involuntarily separated from their positions on Dec. 10, 2004, are each expected to receive a $4,100 lump-sum payment.

Seven months ago, NTEU won a favorable decision in U.S. District Court for the District of Columbia on its argument that the IRS was prohibited by the language of the Consolidated Appropriations Act of 2004 from using appropriated funds to convert work to a private contractor unless a public-private competition for the jobs had been conducted. The IRS failed to hold such a competition for the mailroom positions, many of which were held by individuals with disabilities.

Earlier, in 2003, when the Office of Management and Budget (OMB) revised the rules governing federal contracting, NTEU was able to persuade OMB to prohibit the direct conversions of federal work.

Nonetheless, agencies continued the practice. NTEU’s response was to successfully lobby Congress to approve legislative language prohibiting the use of appropriated funds on direct conversions. The IRS, however, defied that requirement and turned over its mailroom functions to a private company. NTEU’s lawsuit followed.

President Kelley noted that NTEU at both the national and chapter levels succeeded in obtaining other arrangements for many of the 70 impacted mailroom workers, including buyouts, retirement and early retirement, as well as placement in other federal jobs.

The NTEU victory, both in federal court and in the settlement negotiations that followed, is particularly gratifying, Kelley said, because “lawsuits challenging agency contracting out decisions are notoriously difficult for unions to win initially and to defend on appeal.”

She added: “The law is slanted so heavily in favor of agencies in this area that courts routinely dismiss such actions without even considering the merits of the union’s claim.”

NTEU is the largest independent federal union, representing some 150,000 federal workers in 30 agencies and departments.