A third-party arbitrator is ordering the Department of Health and Human Services to walk back its return-to-office mandate for thousands of employees represented by one of its unions.

Arbitrator Michael J. Falvo ruled on Monday that HHS must “rescind the return-to-office directive,” and must immediately reinstate remote work and telework agreements for members of the National Treasury Employees Union.

HHS rescinded those workplace flexibility agreements early last year, after President Donald Trump ordered federal employees to return to the office full-time.

Falvo found that HHS committed an unfair labor practice by unilaterally terminating telework and remote agreements, without regard to its five-year collective bargaining agreement with NTEU. The labor contract, which covers 2023 through 2028, states the agency can only terminate telework and remote work agreements “for cause.” That includes emergency situations and cases when an employee falls short of a “fully satisfactory” performance rating.

The ruling will impact thousands of HHS employees represented by NTEU. Its members include employees at the Food and Drug Administration, the Substance Abuse and Mental Health Services Administration, the Administration for Children and Families, the Administration on Community Living, the Health Resources and Services Administration, the National Center for Health Statistics and the HHS Office of the Secretary.

Falvo is also ordering HHS to post a signed notice, “admitting that the agency violated the statute by repudiating the collective bargaining agreement.” The arbitrator wrote that his ruling does not limit NTEU from “seeking additional remedies to the extent permitted by law.”

HHS officials argued that Trump’s return-to-office presidential memorandum supersedes the collective bargaining agreement. But the 1978 Federal Services Labor-Management Relations Statute makes it an unfair labor practice for an agency “to enforce any rule or regulation … which is in conflict with any applicable collective bargaining agreement if the agreement was in effect before the rule or regulation was prescribed.”

According to Falvo, the Federal Labor Relations Authority set a precedent in previous labor disputes that a presidential memorandum “is not a governmentwide rule or regulation that the employer is obligated by law to implement immediately upon issuance.”

“These cases compel the conclusion that the agency breached the agreement and violated the statute,” he wrote.

The arbitrator decided Trump’s return-to-office memo does not override telework and remote work protections outlined in NTEU’s collective bargaining agreement. HHS did not respond to a request for comment. NTEU declined to comment.

NTEU Chapter 282, which covers FDA headquarters employees, told members in an email that HHS is likely to appeal the arbitrator’s decision and has 30 days to do so. The union’s message states, “NTEU will push the agency to accept the ruling and restore your rights without delay.”

“This is a significant win that reaffirms that telework and remote work rights negotiated in a term contract cannot be unilaterally taken away,” NTEU Chapter 282 told members.

More than a year into the second Trump administration, several recent exceptions to its return-to-office policy have emerged.

The Labor Department’s Office of Workers’ Compensation Programs recently told employees that some of its employees will be eligible for remote work, because the agency is “extremely challenged” covering rent expenses for a fully in-office workforce.

Meanwhile, a second arbitrator ruled that the Centers for Medicare and Medicaid Services “violated statutory obligations” to bargain with the American Federation of Government Employees over implementation of the administration’s return-to-office directive.

The arbitrator in this dispute determined CMS wasn’t required to negotiate with the union over the administration’s return-to-office mandate, but did have an obligation to ensure implementation complied with its collective bargaining agreement with AFGE.

The arbitrator ordered CMS to meet and negotiate with AFGE over the “effects of the implementation of the directive on work/life balance of employees.”

Trump touted his return-to-office mandate at a White House press briefing on Tuesday, where he looked back on the accomplishments of his first year in office.. Trump told reporters that when he took office last year, “we had so many of our federal workers who wouldn’t come into work.”

“We don’t want them sitting in their home, on their bed, working. We want them in an office that we’re paying for in Washington, D.C., or wherever it may be. And we’ve largely taken care of that mess,” Trump said. “I guarantee you they’re out on the ballfields. I guarantee you they’re out playing golf. And you can’t run a country or a company that way.”

Trump’s presidential memorandum directed agencies to terminate remote work and telework agreements, but also stated that the return-to-office mandate must be “implemented consistent with applicable law.”

“Reasonable persons could have different notions whether a presidential memorandum (or an executive order) is such a ‘rule or regulation’ under ‘applicable law.’ On January 20, 2025, what ‘applicable law’ required was not a matter of first impression,” Falvo wrote.

NTEU filed a grievance against HHS last February, after the agency issued a directive requiring all bargaining unit employees to report to the office on a full-time basis.

Union officials argued that HHS refused to negotiate with NTEU before the return-to-office memo took effect, and would agree to “post-implementation bargaining.”

HHS officials denied the grievance and told the union that an agency head “retains the statutory right to determine overall telework levels and to exclude positions from telework eligibility.”

Christina Ballance, the executive director of the agency’s National Labor and Employee Relations Office, told the arbitrator that HHS “was obligated to comply with the presidential memorandum.”

“Ultimately, the president is our chief, and if he directs that employees return to offices in person, the agency is required to do so,” Ballance said in her testimony.

HHS officials rejected NTEU’s claims that it terminated all telework and remote work agreements. They said the agency still allows situational and ad-hoc telework, as well as workplace flexibilities for military spouses and reasonable accommodations for employees with disabilities.

But Federal News Network first reported last month that a new HHS policy restricts employees with disabilities from using telework as an interim accommodation, while the agency processes their reasonable accommodation request.

HHS is also centralizing the processing of reasonable accommodation requests on behalf of its component agencies. As a result, it is inheriting a backlog of requests that HHS officials expect will take about six to eight months to review.

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Congressional appropriators are one step closer to reaching a comprehensive spending deal for the rest of the fiscal year before a stopgap spending bill expires at the end of the month.

Members of the House and Senate appropriations committees released a four-bill “minibus” of fiscal 2026 spending bills on Tuesday.

Congress is roughly halfway to passing a spending plan for the rest of FY 2026. The current continuing resolution expires on Jan. 30.

The latest “minibus” covers annual appropriations for the departments of Defense, Homeland Security, Labor, Health and Human Services, Education, Transportation and Housing and Urban Development, as well as some smaller related agencies.

House Appropriations Committee Chairman Tom Cole (R-Okla.) said in a statement that the spending package delivers “results without waste.”

“At a time when many believed completing the FY26 process was out of reach, we’ve shown that challenges are opportunities. It’s time to get it across the finish line,” Cole said.

Here are a few highlights from the spending package:

3.8% pay raise for air traffic controllers

The spending deal would give the Federal Aviation Administration a $1.58 billion budget for fiscal 2026, as well as funding to hire 2,500 new air traffic controllers

The FAA is about 3,500 air traffic controllers short of its staffing goals. Many current air traffic controllers are working six days a week, including mandatory overtime.

As part of this budget plan, the FAA would receive $140 million to implement a 3.8% pay raise for air traffic controllers, as well as supervisors and managers who oversee air traffic.

The Trump administration approved a 3.8% pay raise for federal law enforcement personnel, which went into effect at the start of January. Air traffic controllers were not on the Office of Personnel Management’s list of positions receiving a higher pay raise.

The spending bill states that the 3.8% pay raise “shall be implemented for all such employees only to the extent that the administrator determines, in his sole discretion, that improvements in workforce scheduling, staffing utilization, or other operational efficiencies are achieved that contribute to addressing workforce shortfalls and enhancing aviation safety.”

If the FAA administrator determines these conditions, the pay raise would retroactively go into effect for the first pay period in January 2026.

Spending cuts for a smaller federal workforce

Republican appropriators applauded overall spending cuts in the spending bill that funds the Transportation Department, HUD and related agencies.

GOP lawmakers on the House Appropriations Committee wrote that the spending deal “codified DOGE recommendations to reduce the federal bureaucracy” of Transportation, HUD and related agencies by 29%.

More specifically, GOP lawmakers said the spending package reflects a 24% reduction in HUD staffing achieved partially through layoffs last year.

Lawmakers said a smaller HUD workforce will save $348 million in salaries and related expenses.

Republican appropriators said the spending deal reflects the Transportation Department “right-sizing” its workforce through a 5% staffing reduction, “all without compromising transportation safety.”

President Donald Trump told reporters at a White House press briefing on Monday that his administration “slashed tremendous numbers of people off the federal payroll” during his first year in office.

OPM data shows over 300,000 federal employees left government last year. That’s about a net loss of 220,000 employees, when accounting for new hires.

Trump said downsizing the federal workforce was necessary, because “they had 10 people for every job,” and that terminated federal employees have moved on to higher-paying jobs in the private sector.

“I don’t feel badly, because they’re getting private sector jobs, and they’re getting sometimes twice as much money, three times as much money,” Trump said. “They’re getting factory jobs, they’re getting much better jobs and much higher pay.”

Higher HHS spending, proposed cuts rejected

The spending bill gives the Department of Health and Human Services $116.8 billion in discretionary spending — a $210 million increase in discretionary spending. By contrast, the Trump administration proposed a nearly 20% cut to HHS discretionary spending this year.

The congressional spending deal rejects the administration’s calls for deep cuts within HHS. The administration sought a 50% spending cut for the Centers for Disease Control and Prevention. Instead, the compromise reached by lawmakers essentially keeps CDC funded at current levels, and includes funding increases for some of its pandemic preparedness programs.

The spending package would give $7.4 billion to the Substance Abuse and Mental Health Services Administration (SAMHSA) a $65 million increase over current funding levels.

The bigger budget reflects increased spending to address a rise in opioid overdoses, especially from fentanyl, as well as boosts to substance abuse disorder prevention and mental health services.

Lawmakers rejected a 15% cut to SAMHSA funding proposed by the Trump administration. The spending deal also rejects the administration’s plan to reorganize SAMHSA into the Administration for a Healthy America (AHA), a new office envisioned by HHS Secretary Robert F. Kennedy, Jr.

Democrats on the appropriations committees said the spending deal ensures SAMHSA remains its “own, independent agency to help ensure substance use and mental health remain a priority at HHS” and “includes new guardrails to ensure SAMHSA funds are allocated as intended.”

NPR reported last week that HHS briefly terminated $2 billion in addiction and mental health grants, but quickly walked back those cuts.

Education Department budget remains intact

Lawmakers are largely rejecting the administration’s proposal to dismantle the Education Department, and move many of its functions to other federal agencies.

The spending bill gives the department $79 billion in discretionary spending — a roughly flat budget compared to current spending levels.

The Trump administration proposed cutting the Education Department by $12 billion, or about 15% of its current discretionary budget.

The Education Department has already signed six interagency agreements to transfer some of its programs and employees to HHS and the departments of Labor, Interior and State.

Education Secretary Linda McMahon told employees last November that the department is soft-launching plans to reassign its work to other parts of the federal government, before calling on Congress to permanently shutter the agency.

Senate Appropriations Committee Vice President Patty Murray (D-Wash.) said in a statement that “Congress will not abolish the Department of Education, and the people’s representatives will have the final say on how taxpayer dollars get spent.”

Budget boost for Social Security

The Social Security Administration would see a higher budget under this spending plan.

Lawmakers propose giving SSA $15 billion for its administrative budget in fiscal 2026 — a $554 million increase compared to current spending levels.

Lawmakers from both parties agreed that the funding will help the agency improve customer service for the public. Democratic appropriators urged SSA to use these increased funds to resume hiring.

SSA currently has about 50,000 employees in total, according to the latest data from the Office of Personnel Management. The agency lost more than 7,000 employees through voluntary incentives last year. It also relocated many of its employees from its headquarters and regional offices to field offices.

SSA Commissioner Frank Bisignano told staff at an all-hands meeting last week that the agency is continuing to hire, according to several employees in attendance. Those employees, however, said the agency still faces a hiring freeze.

Labor Dept. federal contractor watchdog spared from elimination

The spending bill provides $13.7 billion in discretionary spending to the Labor Department — a slight increase compared to its current $13.5 billion discretionary budget.

The department’s Office of Federal Contract Compliance Programs would receive a $101 million budget, about a 9% cut to current spending levels. OFCCP ensures federal contractors aren’t discriminating against their employees.

OFCCP, however, would remain largely intact, after the Trump administration proposed major staffing cuts. An earlier funding proposal from House Republicans also proposed fully eliminating OFCCP.

The agency sent layoff notices to 90% of its staff, but rescinded those layoffs last August. Instead of being reinstated to their jobs at OFCCP, the agency said impacted employees would be “reassigned to a new position” at the Labor Department.

Small agencies marked for closure stay open

The spending bill also includes funding for small, independent agencies marked for elimination by an executive order last year.

Lawmakers propose giving the Institute of Museum and Library Services a $292 million budget — a $3 million cut compared to current spending levels.  The spending bill also proposes $3 million in funding for the Interagency Council on Homelessness.

President Trump signed an executive order last March, eliminating these agencies and five others “to the maximum extent consistent with applicable law.”

A federal judge in Rhode Island ordered a permanent injunction last November, putting the Trump administration’s plans to shutter these small agencies on hold.

House Appropriations Committee Ranking Member Rosa DeLauro (D-Conn.) said in a statement that the funding package “continues Congress’s forceful rejection of extreme cuts to federal programs proposed by the Trump administration.”

“Where the White House attempted to eliminate entire programs, we chose to increase their funding. Where the administration proposed slashing resources, we chose to sustain funding at current levels,” DeLauro said.

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Nearly a year after President Donald Trump directed nearly all federal employees to return to the office full-time, new exceptions to the policy have emerged.

An agency within the Labor Department is allowing some of its employees to work remotely. At the Department of Health and Human Services, an arbitrator is directing one of its agencies to consult with one of its unions over more exemptions to the in-office mandate.

A recent memo from the Office of Workers’ Compensation Programs (OWCP) states that some of its employees will be eligible for remote work later this month.

OWCP Deputy Director Douglas Pennington told employees in the memo that, as the agency “vigorously implemented” Trump’s mandate for a full-time return to office last year, “we determined that OWCP will be extremely challenged to cover rent expenses.”

According to the Jan. 6 memo, the Labor Department will allow “100% remote work” for OWCP employees who perform adjudicatory work and perform payment processing work.

Pennington wrote that while most of the agency’s positions benefit from in-person collaboration, “certain OWCP positions do not engage in collaborative interactions, but benefit from focused time free of distractions, and therefore would benefit from remote work and allow a reduction in rent expenses.”

Eligible employees will be able to request full-time remote work starting Jan. 26. If employees are not approved for remote work, they must continue to show up to the office full-time. The memo states that increased telework “is not an option.”

Pennington wrote that allowing a subset of agency employees to work remotely, while having the rest of the workforce in the office full-time, is the “most cost-effective way to accomplish a reduction in rent expenses and continue performing OWCP’s mission.”

Meanwhile, a third-party arbitrator is directing the Centers for Medicare and Medicaid Services to meet with the American Federation of Government Employees to discuss exemptions to the administration’s return-to-office mandate.

The arbitrator, Timothy Buckalew, wrote in his opinion that CMS “was not required to negotiate over return to in-person work,” but found that the agency “violated statutory obligations to bargain with the union over the implementation of the work in-person directive.”

Buckalew found that Trump’s return-to-office presidential memorandum (PM) allowed remote work to continue in some limited cases, including medical need.

However, the arbitrator determined CMS has not made any exceptions to its return-to-office policy.

“For reasons not apparent in the record, agency management declined to use the discretion allowed in the PM to make exemptions to the wholesale return to work or to submit the issues of impacts to bargaining as required by law as protected in the PM,” Buckalew wrote.

HHS has recently set new restrictions on telework as a reasonable accommodation for employees with disabilities.

The arbitrator is ordering CMS to meet and negotiate with AFGE over the “effects of the implementation of the directive on work/life of employees.”

According to Buckalew, AFGE Local 192 President Anita Marcel Autrey stated that CMS “unilaterally repudiated” parts of the union’s collective bargaining agreement, and that implementation of the agency’s return-to-office policy was “inconsistent and erratic.”

Autrey told the arbitrator that CMS employees in Chicago and San Francisco have not fully returned to the office because of a lack of office space.

Meanwhile, about 60 financial management employees were granted an exemption to keep working remotely because their work was considered essential to a new budget bill.

About 90% of CMS employees had telework agreements before the second Trump administration.

Donna O’Dowd, director of the workforce compliance division of the CMS Office of Human Capital, told the arbitrator that the presidential memo was a governmentwide rule that “left the agency with no discretion but to follow such directives.”

Federal News Network has reached out to OWCP and CMS for comment.

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