The U.S. Supreme Court issued a pair of decisions reshaping the constitutional framework for federal agencies. In one decision, the Court held the President may remove agency leaders at will, rejecting long-standing statutory limits that had insulated certain agency officials from removal except for cause. In a companion decision, however, the Court declined to permit the President to remove a Governor of the Federal Reserve, preserving special protections for the central bank.
For employers, the decisions matter because many workplace rules are shaped by federal agencies, such as the National Labor Relations Board, the Equal Employment Opportunity Commission, the Federal Trade Commission, and the Occupational Safety and Health Review Commission. Historically, new federal administrations had little power to immediately affect change within the agencies since leadership was thought to be protected from removal. However, with immediate presidential control over agency leadership, change can be demanded immediately, or the leader will be removed. While agency change will never be immediate, it will be dramatically faster given the new Presidential authority.
What the Court Decided
In the case where removal was allowed, the Court overruled or substantially displaced the framework associated with Humphrey’s Executor v. United States, the 1935 decision that had allowed Congress to provide for-cause removal protections for certain agencies with multimember boards/leaders. The Court concluded officials who exercise executive power must remain accountable to the President, and protections preventing removal of leaders without cause will shield such leaders from presidential supervision. The practical result is presidents may replace agency leaders at their whim, including when those leaders’ policy views diverge from the administration’s priorities.
At the same time, the Court treated the Federal Reserve differently. The Court held the President could not remove a Federal Reserve Governor without satisfying the statutory and procedural protections applicable to that office. The majority emphasized the Federal Reserve’s distinctive historical role, long terms, and the importance of insulation from political pressure in monetary policy decisions.
Why Employers Should Pay Attention
Historically, change came slowly to the federal government. Regardless of the President’s agenda, the agencies that implement the executive agenda moved slowly and the President had limited power to force cooperation. That is no longer true. Now, if leadership of an agency doesn’t align with the President’s agenda, the President can remove the leader and find a more compliant one.
Leadership changes can affect how agencies investigate charges, pursue litigation, issue guidance, prioritize rulemaking, and interpret ambiguous statutes. Employers should expect a change in administration to now translate more quickly into changes in agency direction.
Potential Workplace and Employment Law Impacts
The power of federal agencies over issues pertaining to employers is dramatic. Here are just a few ways the President can wield this newly recognized power:
- Labor relations: A President can control the priorities of NLRB, potentially affecting such things as union election rules, joint-employer standards, remedies, and case-processing priorities.
- Employment-related rulemaking: Agencies largely operate based on rules they create. Leadership makes those rules. If the President objects to those operating rules, leadership can be removed. Employers now need to monitor regulatory developments rather than relying on long-term practices.
- Enforcement priorities: Agency leadership shift resources toward or away from particular categories of workplace claims, industries, remedies, or settlement practices. Such moves will parallel the President’s agenda as leadership can be removed.
- Litigation posture: Federal agencies may change positions in pending cases, including enforcement actions, as leadership aligns agency strategy with the President’s policy agenda or faces removal.
- Compliance planning: Employers need to be lighter on their feet. From now on, employers must be ready to meet new compliance standards as soon as a new administration is sworn in.
What the Federal Reserve Exception Signals
The Federal Reserve ruling shows the Court did not adopt unlimited removal power for every federal institution. Instead, the Court distinguished the central bank based on its unique structure, historical independence, and statutory protections. That distinction may invite future litigation over whether other agencies can claim similar treatment, but most employment-related agencies are unlikely to fit the Federal Reserve model.
Recommended Employer Action Items
- Monitor agency leadership and rulemaking calendars. Leadership changes may now be a leading indicator of enforcement and regulatory shifts.
- Review pending matters involving federal agencies. Employers with active charges, investigations, audits, or administrative appeals should assess whether agency priorities or settlement posture may change with a new administration.
- Update compliance risk assessments. Consider whether existing policies depend on agency guidance that may be revised, rescinded, or reinterpreted.
- Track state and local developments. If federal enforcement priorities shift, states and municipalities may respond with their own initiatives, sometimes shifting in the opposite direction. Employers must remain vigilant.
Bottom Line
The Supreme Court’s decisions mark a major shift in the balance between presidential control and agency independence. While the Federal Reserve remains protected by a distinctive constitutional and statutory tradition, most other agencies are now more directly accountable to the President. Employers should prepare for a more dynamic regulatory environment in which workplace policy can change rapidly with new administrations.
Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560
