IRS Starts Process to Cancel $70 Million in Bonus Payments

By on July 9, 2013 in Current Events with 59 Comments

The Internal Revenue Service is canceling this year’s employee bonuses for managers and is working to cancel bonuses for union workers according to an email sent to employees from Acting IRS Commissioner Danny Werfel. The agency has been under intense scrutiny as a result of allegations for targeting conservative political groups, posting Social Security Numbers for some taxpayers on the internet, and for paying out $70 million in bonuses when the agency was already under fire.

According to the Acting Commissioner: “This is not a reflection of the quality or performance of the work done by you and your colleagues, but rather an unfortunate byproduct of the difficult budgetary situation we find ourselves in.” Also noted by the IRS Commissioner, “[I]t is my intention to continue to pursue eliminating award payouts this year to bargaining unit employees. This approach is consistent with government-wide policy, which requires suspension of awards during sequestration to the extent appropriate legal procedures are complied with. We will continue to fulfill our bargaining obligations by working with NTEU.”

Previously, the agency told the Associated Press that the IRS was complying with OMB directives, but was “under a legal obligation to comply with its collective bargaining agreement, which specifies the terms by which awards are paid to bargaining-unit employees.” Apparently, when weighing politics and the collective bargaining agreement, the pressure of politics is the bigger winner.

As noted in an earlier article written by Robert Gilson posted recently, the IRS agreed with NTEU to pay the bonuses. As noted in the Gilson article, the agency did not have to agree to pay the awards but did so anyway. “The Awards article starts out with “ ‘The Employer has determined that it will distribute 1.75% of total annual bargaining unit salary pursuant to the NTEU-IRS Contract Award program discussed below.’ ”  The union cannot legally make the Agency do this so someone high up in IRS (Political, maybe?) decided to concede this even though doing so could not be mandated.” Apparently, the agency’s regret was sufficient to try to get back the $70 million.

It will not come as a surprise to learn that the National Treasury Employees Union (NTEU), doesn’t think the awards can be taken away after the agreement was signed, regardless of budget or political problems the agency may be facing. And, as noted by Mr. Gilson in his article, who apparently believed the agency might cave to the political pressure and anticipated the union’s reaction:  “[I]f IRS were to renege on the deal, the FLRA would certainly find them guilty of an unfair labor practice and seek a court order to enforce its view, if IRS tried to play hardball.  Based on past FLRA decisions, IRS would likely end up paying the awards retroactively with interest at some future date.”

So, if the agency was expecting the union to agree to give up the money it sought and obtained when negotiating the labor agreement, it is probably in for a surprise. While the federal employee unions have been very supportive of the Obama administration, and Democrats in general during elections, their amenable nature when dealing with political appointees within the administration will probably end at  the thought of giving up $70 million in bonus payments that it has already been bragging about to IRS employees.

The email distributed to IRS employees is quoted below. Our thanks to a FedSmith reader who provided us with a copy of the email.

EMail Distributed to IRS Employees

Today, I want to announce several important developments with regard to cost-cutting, furlough days and awards.

While we have made significant progress in cutting costs, we must be committed to doing more. To that end, and in this unprecedented budget situation, I do not believe the IRS should pay performance awards this year to employees, managers or executives. This is not a reflection of the quality or performance of the work done by you and your colleagues, but rather an unfortunate byproduct of the difficult budgetary situation we find ourselves in.

Following guidance related to sequestration issued earlier this year, leadership determined that non-bargaining unit employees and managers would not receive awards. I have now instructed my senior leadership team to determine options we can take to eliminate awards for senior executives.

In addition, it is my intention to continue to pursue eliminating award payouts this year to bargaining unit employees. This approach is consistent with government-wide policy, which requires suspension of awards during sequestration to the extent appropriate legal procedures are complied with. We will continue to fulfill our bargaining obligations by working with NTEU.

It’s important to note that if awards are eliminated for bargaining unit employees this year, the IRS should be able to cancel the furlough days on July 22 and Aug. 30. We will provide an update on the status of our furlough days shortly. If the IRS cancels the remaining furlough days, all employees would be paid on those days. Even more importantly, it would mean the IRS would remain open on those days to serve taxpayers and meet the needs of the nation’s tax system.

These steps are part of a wider effort at the IRS to cut costs. The IRS has taken extraordinary measures over the last several years to become more responsible in our use of taxpayer dollars. We will have absorbed $1 billion in budget reductions through savings and efficiencies between Fiscal Years 2010 and 2013. In recent months and with your assistance, the CFO office and your business units have found even more places to reduce costs.

I believe we are beginning an important new chapter in our efforts to set the IRS on a new path. It is my hope that in the coming weeks and months, we can have a robust public dialogue about the future of the IRS budget. We have demonstrated our commitment to making hard choices to reduce our spending, and we must also make it clear that the IRS needs adequate resources for the necessary investments in services and enforcement that will enable us to continue carrying out our mission to serve the American taxpayer, now and in the years ahead.

Thank you for your service and support during this challenging time.

–Danny Werfel

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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