Labor & Employment Law Daily Wrap Up, PUBLIC EMPLOYEES—1st Cir.: VA must reinstate labor contract, but appeals court stays ‘compliance’ order, (May 18, 2026)

By Jason Albright, J.D.

“The defendants identify an irreparable harm that stems directly from the enforcement order's ‘compliance’ directive…”

Declining to stay a preliminary injunction against the termination of a labor contract by the Department of Veterans Affairs, the First Circuit nonetheless granted the agency a stay of a subsequent order directing it to “compl[y] with the... CBA, along with any ‘amendments, local supplemental agreements, and memoranda of understanding related thereto’... in both form and substance,” as well as its directive that the defendants “continue to... process[]” “the currently pending grievances and arbitrations submitted under the... CBA.” Rejecting the agency’s newly-raised argument that the President’s decision to exclude the VA from the Federal Service Labor-Management Relations Statute rendered the contract “inoperable,” the appeals court nonetheless found that, given the absence of an explanation by the district court of the basis for its authority to order “specific performance” of the contract, that additional order could not be sustained (American Federation of Government Employees Local 2305 v. United States Department of Veterans Affairs, No. 26-1321 (1st Cir. May 16, 2026)).

Executive order. On March 27, 2025, according to the court, the President issued an executive order (EO) pursuant to 5 U.S.C. § 7103(b)(1) in which he excluded the VA from the coverage of the Federal Service Labor-Management Relations Statute (FSLMRS). In the EO, the President “delegated” authority to the Secretary of the VA to suspend that “exclusion[]” for “any subdivision[]” of the VA, such that those subdivisions would remain subject to the FSLMRS.

Letter to union. On August 6, 2025, the Secretary sent a letter to the union notifying it that the Master Collective Bargaining Agreement (CBA) between it and the VA had been terminated effective that day. The CBA was signed in August 2023, went into effect on August 8, 2023, and provided that it would “remain in full force and effect for a period of three years after its effective date.” The CBA further provided that it “may only be amended, modified, or renegotiated in accordance with the provisions of this Agreement,” and that “[n]egotiations initiated by either party during the term to add to, amend, or modify this Agreement may be conducted only by mutual consent of the parties.”

Lawsuit and preliminary injunction. Later that fall, on November 4, 2025, the plaintiffs filed a complaint in federal district court in Rhode Island challenging the termination of the CBA under the APA and First Amendment. On March 13, 2026, the district court granted the plaintiffs’ preliminary injunction motion and ordered that the defendants “shall reinstate the... CBA -- as well as any amendments, local supplemental agreements, and memoranda of understanding that were in place subsidiary to the... CBA—for the remainder of the agreed-upon term provided in the... CBA.”

VA’s motion for clarification. On March 18, 2026, a VA official shared a letter with other VA officials noting that the CBA had been reinstated pursuant to the preliminary injunction. Then, on March 20, 2026, the defendants filed a motion to clarify the preliminary injunction. The motion asked the district court, among other things, to clarify whether the defendants were permitted to terminate the reinstated CBA “for other reasons.”

Clarification. That same day, the plaintiffs filed a motion to enforce the preliminary injunction, but on March 23, 2026, before ruling on the motion to enforce, the district court “granted” the defendants’ motion to clarify the preliminary injunction. It explained, in relevant part, that it was “at a loss to understand how... the [preliminary] injunction could possibly be read to order that... the [d]efendants are wholesale prohibited from terminating the... CBA again prior to the end of the three-year term governing the contract.” The district court further explained that “[t]o reinstate the... CBA means that all parties covered by [the CBA] will continue to be covered by [the CBA] until it is terminated or amended in a lawful manner.”

Re-termination. Then, on March 26, 2026, the defendants filed a status report with the district court stating that they had “re-terminated” the CBA, effective that day. They attached a letter from the Secretary notifying the union of the termination and explaining that the CBA was being terminated again because (1) President Trump excluded the VA from the FSLMRS’s coverage, (2) the CBA cannot operate without the FSLMRS, and (3) “continued adherence” to the CBA would be inconsistent with both the President's EO and the “national security determinations therein.”

Enforcement order. Ultimately, on March 27, 2026, the district court granted the union’s motion to enforce the preliminary injunction. It concluded that the re-termination of the CBA was not in compliance with the preliminary injunction as clarified, which required that any re-termination be done “in a lawful manner.” It then ruled that “the re-termination letter shall not be given any force or effect.”

The district court also “order[ed] and instruct[ed]” that “[t]he [d]efendants' reinstatement of and compliance with the... CBA... be in both form and substance.” It directed the defendants to continue processing “the currently pending grievances and arbitrations submitted under the... CBA.”

Re-termination rescinded. On April 2, 2026, the defendants issued guidance pursuant to the enforcement order. It noted that, “the August 6, 2025, termination letter and the March 26, 2026, re-termination letter will not be given any force or effect.”

Emergency motion to stay and interlocutory appeal. The defendants then filed an emergency motion to stay the preliminary injunction and the enforcement order pending their interlocutory appeal of the injunction and order to the First Circuit. The district court denied the motion, and the defendants then timely sought a stay from the First Circuit pending appeal and an administrative stay of both the preliminary injunction and the order granting the motion to enforce the preliminary injunction.

Stay of preliminary injunction denied. The appeals court first found that the government was not entitled to a stay of the preliminary injunction. Consistent with Nken v. Holder, 556 U.S. 418 (2009), the appeals court focused first on the critical “likelihood of success” factor, which it found lacking. The government argued that the President’s decision to exclude the VA from the FSLMRS rendered the CBA “inoperable” because “VA employees may not collectively bargain, AFGE may not exclusively represent VA employees, and the [CBA’s] negotiated-grievance process—which is enforced through arbitration, FLRA orders, and limited review by courts of appeals—is no longer available.” Here, the appeals court agreed with the plaintiffs that the government did not make this argument in opposing the motion for a preliminary injunction. Finding that defendants failed to “explain why the demanding standard of review that applies to a forfeited argument does not apply,” the court concluded that they failed to satisfy their burden as to the “likelihood of success” factor based on this argument.

Given the defendants” failure to meet their burden as to the critical “likelihood of success” factor, the appeals court observed that it could “not see how the defendants’ arguments as to the three remaining Nken factors suffice to support their request to stay the preliminary injunction.”

Enforcement order and “compl[y].” The First Circuit granted the government’s motion for a stay, however, concerning the portion of the enforcement order directing it to “compl[y]” with the CBA. The appeals court understood the government to be arguing that the “compliance” portion of the “enforcement order greatly expand[s]” the preliminary injunction’s scope, and thereby modifies it, in the specific sense that it makes every breach of the CBA itself a violation of the preliminary injunction, even after the CBA has been reinstated as a binding agreement. This, according to the government’s argument meant this portion of the enforcement order subjected it, for the first time to district-court-ordered specific performance as a remedy for any such breach, seemingly notwithstanding the distinct grievance procedures and related remedies contemplated under the CBA and seemingly also including breaches of those CBA-specified procedures.

Here, the First Circuit was persuaded. “The plaintiffs do dispute the defendants’ contention,” it observed, “that the ‘compliance’ portion of the enforcement order greatly expanded the preliminary injunction's scope.” The government, in turn, “made a strong showing that, in requiring ‘compliance with the... CBA’ and further in requiring the defendants to ‘process[]’ ‘the currently pending grievances and arbitrations submitted under the... CBA,’ the enforcement order likely ‘substantially readjusts the legal relations of the parties.’” That portion of the order likely modified the preliminary injunction in a manner contemplated by 28 U.S.C. § 1292(a)(1), the appeals court concluded. Observing that the district court, in turn, did not address its jurisdiction in issuing the enforcement order, the appeals court ultimately found the “likelihood of success” and other Nken factors satisfied.

Order as to re-termination. Finally, the First Circuit declined to stay the portion of the enforcement order that deemed the government’s second termination of the CBA unlawful and therefore ineffective. Here, the defendants failed to meet their burden to show that this portion of the enforcement order “substantially readjusts the legal relations of the parties” and thereby modified the injunction for purposes of 28 U.S.C. § 1292(a)(1).

The case is No. 26-1321.

Judge: Barron, D.

Attorneys: Edwina Bullard Clarke (Zimmer Citron & Clarke) for American Federation of Government Employees Local 2305 and American Federation of Government Employees National Veterans Affairs Council. Tyler J. Becker, U.S. Department of Justice, for U.S. Department of Veterans Affairs.

Companies: American Federation of Government Employees Local 2305; American Federation of Government Employees National Veterans Affairs Council; U.S. Department of Veterans Affairs

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