Judge Tosses Treasury’s Suit to Void Federal Worker Contract (1)

A Kentucky federal judge dealt a blow to the Trump administration, dismissing a Treasury Department lawsuit seeking to nix a labor contract for IRS workers in Covington.

The Treasury Department lacks standing to bring the action, Judge Danny Reeves of the US District Court for the Eastern District of Kentucky ruled Tuesday. Reeves, a George W. Bush appointee, granted summary judgment to the National Treasury Employees Union Chapter 73.

The ruling is a setback for the administration’s push to nullify collective bargaining and union rights for over a million federal employees. But it comes days after a federal appeals court in Washington, D.C., handed the government a temporary win in a related case. Reeves also indicated he may agree with the administration’s arguments on the merits, leaving the door open for further litigation.

The Trump administration launched the Kentucky lawsuit along with an identical one in Texas against the American Federation of Government Employees, asking the courts to approve of the nullification of their union contracts.

The legal attacks came after President Donald Trump signed an executive order stating that two-thirds of the workforce fall outside the bounds of labor protections in the name of national security.

NTEU struck back with a complaint in US District Court for the District of Columbia, where Judge Paul Friedman issued a preliminary injunction to halt the EO’s implementation. But the US Court of Appeals for the D.C. Circuit held May 16 that Friedman’s injunction should be stayed during Trump administration’s appeal of the order.

Reeves said in Tuesday night’s ruling that the Treasury makes a “good argument on the merits” but couldn’t prove any harm done to it before the complaint had been filed. The administration had argued that it faced injury from NTEU’s threat of enforcement of the CBA if the Treasury moved to disregard it.

“Because Treasury cannot merely allege injury from its pre-existing contractual obligations arising from the CBAs, it cannot show sufficiently coercive conduct engaged in or threatened by Chapter 73,” Reeves said, adding that his decision would likely have been different without the jurisdiction and standing issues.

Representatives for the justice department didn’t immediately respond to a request for comment. A union spokesperson didn’t immediately provide comment on the decision.

NTEU is represented by union lawyers and attorneys from Herzfeld, Suetholz, Gastel, Leniski and Wall PLLC. Justice Department attorneys represented the government.

The case is Dep’t of Treasury v. NTEU Chapter 73, E.D. Ky., No. 2:25-cv-00049, 5/20/25.