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IRS Told Managers to Ignore a Telework Arbitration Award: What NTEU’s New Lawsuit Says

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The National Treasury Employees Union (NTEU) has sued the IRS over a telework arbitration award, and the lawsuit alleges that when the agency lost, it told its managers to ignore the decision. The case is NTEU v. IRS, No. 1:26-cv-03812, filed October 29, 2026, in the U.S. District Court for the District of Columbia. Here is what the complaint alleges, the legal question it raises, and what IRS employees should do now. Nothing in the case has been decided.

What the Lawsuit Alleges

According to the complaint, the IRS canceled telework in February 2025, and NTEU filed a grievance. This July, an arbitrator ruled that the IRS broke its contract and ordered it to cease and desist.

Six days later, the lawsuit says, a “Leader’s Alert” went to IRS managers stating that the “current telework policy remains in effect” and that the arbitrators “no longer have jurisdiction over the IRS, or any dispute NTEU unilaterally attempts to pursue.” The policy in question allows up to five ad hoc telework days a year.

NTEU also alleges that the IRS never challenged the award, and that no court or administrative tribunal has invalidated the arbitrator’s decision.

A Year of Participation

The complaint describes a year in which the IRS took part in the process. In September 2025, it says, the IRS told NTEU it had not terminated the contract. The IRS then terminated the contract and skipped the hearing. The contract itself says the arbitrator shall hold the hearing even if one party refuses to attend.

The Legal Question

The central question is whether an arbitration that has already started ends when the contract does. Shaun Southworth notes that the Supreme Court said no in 1977. Because an executive order excluded the IRS from the federal labor statute, NTEU says the Federal Labor Relations Authority cannot hear this dispute, so it brought the matter to a federal judge under the Administrative Procedure Act, arguing the manager email is final agency action that is arbitrary and capricious.

Our Take and the Risk

Conceding the termination while arguing that rights had already accrued is a smart approach, and the IRS’s own year of participation is evidence for it. The risk is that a judge decides a manager email is not the kind of action a court can review. Nothing is decided. But if an agency excluded from the labor statute can ignore an award it already lost, awards at every excluded agency could become paper.

What IRS Employees Should Do Now

If you have a personnel action that came from the telework cancellation, keep every document related to it. The arbitrator’s award ordered those actions rescinded, and your records may matter later. If you have questions about your own situation, talk with your union representative or a federal employment attorney.

The complaint is available for free on CourtListener. Reporting on the case: “IRS facing new lawsuit over return-to-office policy,” Drew Friedman, Federal News Network, October 30, 2026.

Legal Disclaimer: This content is for general informational purposes only and does not constitute legal advice. Federal employment situations are fact-specific and time-sensitive. Please consult a qualified federal employment attorney about your specific situation.

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