National Treasury Employees Union, Petitioner, v. Federal Labor Relations Authority, Respondent, 791 F.2d 183 (D.C. Cir. 1986)

This case involves an unfair labor practice charge filed by the National Treasury Employees Union (NTEU or union) against the Internal Revenue Service (IRS). The union alleged that the IRS interfered with its employees' exercise of protected activities by disciplining two union members for disclosing confidential taxpayer information to their union lawyers in the course of preparation for a grievance proceeding. The Federal Labor Relations Authority (FLRA or Authority) found that the disclosure violated the Internal Revenue Code and IRS regulations because the employees had failed to obtain the necessary authorization from IRS officials. The Authority therefore held that the IRS had not committed an unfair labor practice by disciplining the employees.

We agree with the FLRA and the IRS that the Code prohibits the disclosure of taxpayer information for personnel purposes except when specific permission is granted by the Secretary of the Treasury or his designee. Under the unique circumstances of this case, however, we conclude that the two employees in question lacked fair notice that their action was prohibited; we therefore hold that it was an unfair labor practice for the IRS to discipline them. Accordingly, we reverse the order of the FLRA and remand the case to that agency for determination of appropriate remedial measures.

Section 6103(a) of the Internal Revenue Code states the general rule that " [r]eturns and return information shall be confidential, and except as authorized by this title--(1) no officer or employee of the United States ... shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee...." 26 U.S.C. § 6103(a) (1982). This general ban on disclosure provides essential protection for the taxpayer; it guarantees that the sometimes sensitive or otherwise personal information in a return will be guarded from persons not directly engaged in processing or inspecting the return for tax administration purposes. The assurance of privacy secured by Sec. 6103 is fundamental to a tax system that relies upon self-reporting.

Absolute confidentiality, however, is neither attainable nor desirable. Competing concerns, as the large number of exceptions enumerated in Sec. 6103 attests, impel some compromise of the taxpayer's privacy. One such concern is the maintenance of fair and stable labor relations within federal agencies. If a union is to fulfill its duty to represent federal employees, it must have access to agency records for bargaining and grievance resolution purposes.¹  The Code provides for such access in Sec. 6103(l) (4) (A), which is captioned "Disclosure of returns and return information for use in personnel or claimant representative matters." This subsection authorizes the Secretary of the Treasury to disclose return information "upon written request--(i) to an employee or former employee of the Department of the Treasury, or to the duly authorized legal representative of such employee ..., who is or may be a party to any administrative action or proceeding affecting the personnel rights of such employee...." The IRS has specified the authorization procedure under Sec. 6103(l) (4) (A) and allowed only certain upper level officers to act as the Secretary's designees in dispensing permission to disclose. See IRS Delegation Order 156 (Rev. 2), para. 1(e) (Mar. 21, 1982) (identifying Secretary's designees), reprinted in Brief for the Internal Revenue Service as Amicus Curiae at app.

The two employees whose reprimand gave rise to this case, Robert Bates and Robert Moore, are veteran Revenue Officers in the Wichita District in Kansas City, Kansas. Each has been employed by the IRS for more than sixteen years. Bates was the president of NTEU Chapter 51 and Moore was a union steward. Both men worked under the supervision of Collection Group Manager Glenn Schreiber.

In November 1982, Schreiber began to collect negative documentation of Bates' work performance. Bates, who believed that his workload was excessive, taking into account his union responsibilities, asked Moore to help him pursue a grievance concerning the documentation. Moore thereupon submitted a memorandum to Schreiber requesting information relevant to the grievance, specifically, copies of the Revenue Officer Dailies²  for the four officers in Bates' and Moore's unit, including Bates and Moore themselves.

According to testimony credited by the Administrative Law Judge (ALJ), Schreiber examined the request for the Dailies and asked Moore, "You and Bates have your own, right?" Moore replied, "Yeah, we've got our own." Schreiber then said, "Really, the only thing you need from me would be [the other two officers'] dailies." Moore responded, " [T]hat would be fine." Department of the Treasury IRS, No. 7-CA-30514, slip op. at 5 (Aug. 10, 1984) [hereinafter cited as ALJ Decision], reprinted in J.A. at 62.

Moore learned shortly thereafter that two union lawyers would be coming to Kansas City the following week. When the lawyers arrived, Bates and Moore both gave unsanitized copies of their Dailies to the lawyers to use in preparation for a meeting with the agency. The meeting was attended by Bates, Moore, the two union lawyers, Schreiber, and another IRS official. One of the lawyers quoted some statistics concerning Bates' workload and, when questioned by Schreiber, acknowledged that he had obtained the information from the Dailies. Bates and Moore then confirmed that they had given the lawyers their Dailies and had not removed the confidential taxpayer information from them, although that information was not relevant to preparation of the grievance. See ALJ Decision at 7-8, reprinted in J.A. at 64-65.

Immediately after the meeting, Schreiber called the Inspection Service to report the disclosure. Within the next few days, Schreiber also wrote to Mr. Portz--the Chief of the Collection Division--and a personnel officer named Merle Simpson notifying them of the disclosure to the lawyers. Both Portz and Simpson sought the guidance of James Manuszak, the disclosure officer, who advised them that the disclosure violated the Code. Portz issued notices of proposed disciplinary suspension of three working days to Bates and Moore. After negotiations with the union and an oral reply hearing, Portz reduced the punishment to an oral admonition, the least severe disciplinary action possible.³ 

The union filed an unfair labor practice charge, alleging that the IRS had interfered with its employees' protected activity of processing a grievance. The ALJ found that Moore and Bates had violated the Internal Revenue Code and IRS regulations by disclosing their complete (unsanitized) Dailies to the union lawyers.⁴  The judge held that the employees never obtained proper disclosure authorization under Sec. 6103(l) (4) (A) because Schreiber not only did not intend to give such authorization, he had no power to give it.⁵  The ALJ also concluded that Moore and Bates knew, or should have known, that Schreiber, who was only a Group Manager, lacked authority to grant disclosure permission. The imposition of discipline by the IRS, the ALJ thus concluded, was lawful and not an unfair labor practice.⁶  The FLRA affirmed, adopting the ALJ's findings and conclusions as its own. See Department of the Treasury IRS, 17 F.L.R.A. No. 75 (April 15, 1985).

Under the Federal Service Labor-Management Relations Act, 5 U.S.C. § 7101 et seq. (1982), the FLRA has responsibility for resolving complaints of unfair labor practices by federal agencies or by the unions representing agency employees. See id. at Sec. 7105(a) (2) (G). In reviewing an FLRA decision, a court must accept the Authority's findings of fact if they are supported by substantial evidence in the record as a whole, and must affirm the FLRA's order unless it is arbitrary, capricious, an abuse of discretion, or not in accordance with law. See 5 U.S.C. § 7123(c); 5 U.S.C. § 706.

It is an unfair labor practice for an agency "to interfere with, restrain, or coerce any employee in the exercise by the employee of any right under this chapter...." 5 U.S.C. § 7116(a) (1). Among rights guaranteed to employees by the relevant chapter is the option to pursue a union-negotiated grievance procedure. See id. at Sec. 7121. If the agency disciplines an employee for actions taken in the course of processing a grievance, and those actions are not, in fact, in violation of the applicable statutes or regulations, then the agency has interfered with the employee's rights and committed an unfair labor practice. The union argues that the IRS engaged in such an unfair labor practice in this case.

The ALJ and the FLRA rejected the union's claim because they found that the employees' action did constitute a violation of the Code and regulations. This violation consisted of the disclosure of confidential taxpayer information to persons not employed by the IRS without the approval of the Secretary or his designee under Sec. 6103(l) (4) (A). If the agency's "interference" was simply a legitimate disciplinary reaction to a real infraction, then, as the ALJ held, no unfair labor practice was committed.

We do not doubt, anymore than the ALJ and the FLRA did, that a disclosure without authorization under Sec. 6103(l) (4) (A) violates the Code and regulations. Confidentiality of taxpayer information would be undermined if the IRS could not strictly enforce a scheme requiring high level scrutiny of disclosure requests. Moreover, the same privacy considerations that call for centralized review of disclosures to non-employees also counsel careful control of disclosures within the IRS. Just as the taxpayer's privacy is impermissibly invaded when the unauthorized recipient of the information is an outsider, so it is invaded unlawfully when an IRS employee obtains the information, without authorization, for purposes other than tax administration.⁷  Thus, Sec. 6103(l) (4) (A)--as its caption implies⁸ --provides the exclusive method of authorization for all disclosures of confidential information in relation to personnel matters, whether the recipient is an employee or an outsider serving the grievant as his "duly authorized legal representative." Id.⁹ 

It is beyond question that Bates and Moore lacked proper authorization under Sec. 6103(l) (4) (A) for their disclosure to the union lawyers. The permission to use each other's Dailies that they received from Collection Group Manager Schreiber was insufficient because Schreiber's position carried no authority to grant disclosure requests under Sec. 6103(l) (4) (A). See IRS Delegation Order 156 (Rev. 2), para. 1(e) (Mar. 21, 1982), reprinted in Brief for the Internal Revenue Service as Amicus Curiae at app. The type of disclosure that took place here would, therefore, normally be a punishable violation of Sec. 6103.

The unique circumstances of this case, however, convince us that it was unfair to discipline these two employees. The behavior of their supervisor, and the prevalent uncertainty concerning the disclosure procedure applicable in employee grievance matters, lead us to that conclusion. Bates and Moore lacked adequate notice that they had insufficient authorization to disclose to their legal representatives the information Schreiber told them to obtain from each other. Under these highly unusual circumstances, the IRS committed an unfair labor practice by reprimanding these employees.

Bates and Moore were understandably confused by the unexplained and illegal behavior of Schreiber, their supervisor. When the employees made a formal, written request for disclosure of the Dailies--thus correctly initiating the process that should have led to proper authorization under Sec. 6103(l) (4) (A)--Schreiber unilaterally truncated the process with respect to Bates' and Moore's own Dailies. He essentially instructed the employees to violate the statute by telling them to disclose their Dailies to each other for a non-tax administration purpose without obtaining proper authorization under Sec. 6103(l) (4) (A). Nor was that instruction explicitly limited to disclosures between employees. Schreiber gave the employees no reason to think that the proffered permission, which was unlawful in any event, did not include disclosures to nonemployees who were legitimately involved in processing the grievance. In light of their supervisor's explicit statement about all they were " [r]eally ... need [ing]," ALJ Decision at 5, reprinted in J.A. at 62, Bates and Moore might reasonably have assumed that they had received the agency approval necessary for disclosure to their "duly authorized [albeit nonemployee] legal representative [s]."

Even if the employees had doubts concerning Schreiber's authority to grant them permission to bypass channels with respect to their own Dailies, it would be unfair to discipline them for not insisting that Schreiber's superiors make the decision. Bates had already aroused Schreiber's displeasure and was not securely positioned to object when Schreiber effectively pared down the written request Moore had prepared. Resistance to Schreiber's suggestion that they resort to their own Dailies without further ado seems all the more unexpectable when a further factor is considered: their supervisor's lack of authority was hardly crystal clear.¹⁰  Indeed, the two higher level officers to whom Schreiber reported the disclosure apparently had doubts about whether any violation had occurred. In order to resolve those doubts, these two officials--the Chief of the Collection Division and a personnel officer--contacted one of the agency's experts on disclosure. Only when the disclosure officer advised them that a violation had occurred did they initiate disciplinary proceedings. Bates and Moore can hardly be faulted for sharing their superiors' confusion and uncertainty concerning the legality of their disclosure to the lawyers.

CONCLUSION

The singular circumstances of this case persuade us that it was an unfair labor practice to discipline these two employees. In the midst of prevalent uncertainty concerning the nature of the necessary authorization, Bates and Moore followed their supervisor's bidding and did not persist in requesting their own Dailies through official channels. The IRS, having allowed its supervisor to confuse and mislead the employees, cannot now hold the employees responsible for the disclosure that resulted from their use of the information in processing a grievance. In light of these circumstances, the FLRA's decision that IRS committed no unfair labor practice was arbitrary and capricious. We therefore reverse the FLRA's order dismissing the complaint and remand the case to the Authority for remedial action consistent with this opinion.

We share, however, the deep concern expressed by the IRS, and respected by the FLRA, that taxpayer confidentiality must be jealously guarded from careless or unnecessary disclosures. In order to ensure adequate protection for taxpayers' privacy, the Internal Revenue Code gives the IRS the power and the duty to require prior, high level approval of disclosures for purposes other than tax administration, and to discipline employees who act without such approval. The misadventure in this case, and our account of it, should serve to place IRS officials and employees, as well as union representatives, on clear notice that disclosures for personnel purposes, whether to employees or outsiders, are prohibited by statute unless authorized in the precise manner indicated in Sec. 6103(l) (4) (A).¹¹  Thus, the extraordinary circumstances that require a reversal here should not recur. The IRS remains armed by this judgment to defend fairly and vigorously the confidentiality on which taxpayers rely.

Reversed and remanded for proceedings consistent with this opinion.