A federal appeals court is allowing the Trump administration to resume plans to lay off most employees at the Consumer Financial Protection Bureau.
The U.S. Court of Appeals for D.C. lifted a lower court’s preliminary injunction on Friday, allowing CFPB to proceed with plans to eliminate 80% of its workforce through a reduction-in-force. In the meantime, the case will be sent back to the lower court for further proceedings.
The Trump administration plans to cut the financial watchdog agency from a workforce of about 1,700 employees to approximately 200 employees to carry out legally required activities.
The majority of a three-judge panel ruled that the lower court “lacked jurisdiction to consider the claims predicated on loss of employment,” and that plaintiffs representing CFPB employees — including the National Treasury Employees Union and CFPB Employee Association — could challenge individual layoffs before the Merit Systems Protection Board or the Federal Labor Relations Authority.
Other plaintiffs, who joined the lawsuit on the grounds that a downsized CFPB would be unable to keep providing legally mandated services to the public, could sue under the Administrative Procedure Act, once they can demonstrate that a “service has been unlawfully withheld or unreasonably delayed.”
“Such challenges would target specific agency action or inaction that is alleged to be unlawful and to harm specific individual plaintiffs,” Judge Gregory Katsas wrote for the majority. Judge Neomi Rao, the former head of the Office of Information and Regulatory Affairs under the first Trump administration, also ruled in favor of the majority.
Judge Cornelia Pillard, however, wrote in her dissent that plaintiffs would likely be unable to obtain that kind of relief from CFPB, if it “permanently destroyed the valuable resources on which the bureau has long relied to understand and tackle the problems Congress established it to address.”
“It will be cold comfort to plaintiffs if they ultimately succeed on the merits in their challenge to the CFPB’s shutdown only to discover that defendants have put the agency in a hole from which it can never fully recover,” Pillard wrote. “That would be the effect of the agency’s decisions to fire all or virtually all employees who once worked at the agency, terminate every contract that supported their work, purge all the data they amassed, and ghost all the experts and organizations with whom they had built up beneficial working relationships.”
Even if CFPB tried to restore its full capacity after those cuts occurred, Pillard added that, “at best, the defunct agency would face a years-long process of rebuilding.”
NTEU National President Doreen Greenwald said in a statement that the appeals court “inexplicably paved the way for a widescale reduction in force and dismantling of operations at the Consumer Financial Protection Bureau.”
“NTEU is committed to continuing the fight for the CFPB employees and their work on behalf of the American people,” Greenwald said.
The bureau, which was created in 2011, has returned over $21 billion to consumers.
Acting CFPB Director Russ Vought shut down the agency’s headquarters in February and directed employees to “not perform any work tasks” without prior approval from the agency’s legal counsel. The agency’s legal counsel later clarified that employees “should be performing work that is required by law and do not need to seek prior approval to do so.”
CFPB fired 85 probationary employees and 130 term employees, including its student loan ombudsman, and planned to lay off about 80% of its remaining staff through a RIF.
The agency also cancelled contracts and terminated its lease on the agency’s headquarters, opting to move to a smaller space.
A district court granted a preliminary injunction on March 28. The court found that the government was “engaged in a concerted, expedited effort to shut the agency down” and that it had “no intention of operating the CFPB at all.”
The preliminary injunction required CFPB to reinstate all terminated probationary and term employees, refrain from any work stoppage and rescind contract terminations.
The appeals court issued a partial stay in April that allowed the CFPB to terminate employees or stop work if the agency determined “that the employees or work at issue were unnecessary to the performance of the Bureau’s statutory duties.” Days later, CFPB sent RIF notices to more than 80% of its workforce.
Katsas wrote in the majority’s opinion that the appeals court’s partial stay order “immediately embroiled the courts in compliance issues about how many employees were necessary — a determination that the Judicial Branch is neither authorized nor competent to make.”
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