Department of the Treasury v. Federal Labor Relations Authority

Background

A federal employee union (the National Treasury Employees Union) asked the Internal Revenue Service to treat the union contract’s grievance and arbitration process as the internal appeals procedure required by OMB Circular A-76 for contracting-out decisions. The IRS refused to bargain over that proposal. The Federal Labor Relations Authority (FLRA) and the Court of Appeals sided with the union, prompting the Supreme Court to review whether the agency had to bargain.

Reasoning

The key question was whether the Act that governs federal labor relations lets agencies make contracting-out decisions free from contract-imposed controls when those decisions are “in accordance with applicable laws.” The Court concluded the FLRA’s reading of the statute was not reasonable because the management-rights clause plainly reserves contracting-out authority when decisions are in accordance with outside “applicable laws.” The Court did not finally decide whether OMB Circular A-76 itself counts as an “applicable law” or whether another statutory provision about Government-wide rules bars bargaining. Instead, the Court reversed the decision that required the IRS to bargain and sent the case back for further proceedings to sort out those questions.

Real world impact

The ruling makes it harder for unions to force agencies to use grievance arbitration as the exclusive internal appeal for challenges to contracting-out decisions under Circular A-76 until lower bodies decide whether the Circular is a binding “applicable law.” It leaves open important questions about how binding OMB Circular A-76 is and returns those questions to the FLRA and lower courts for clarification.

Dissents or concurrances

Justices Brennan and Marshall would have upheld the FLRA, while Justice Stevens argued for reversal on alternate statutory grounds, reflecting disagreement about how binding the Circular is and how the statute should be read.