By John Kruzel
WASHINGTON (Reuters) -When the U.S. Supreme Court rules on President Donald Trump’s effort to remove two federal labor board members, Federal Reserve Chair Jerome Powell will be watching for clues about his own job security.
The court fight over Trump’s firings of two Democratic labor board members despite legal protections for these positions has emerged as a key test of his efforts to bring under his sway federal agencies meant by Congress to be independent from a president’s direct control.
At issue in the dispute over Trump’s dismissals of Cathy Harris from the Merit Systems Protection Board and Gwynne Wilcox from the National Labor Relations Board is whether safeguards passed by Congress to prevent officials in these posts from being fired without cause encroach on presidential authority set out in the U.S. Constitution. Harris and Wilcox were appointed by the Republican president’s Democratic predecessor Joe Biden, and both had years left in their terms in office.
The cases are being watched as potential proxies for whether Trump has the authority to fire Fed officials, particularly after his recent criticism of Powell shook financial markets and fueled questions about the U.S. central bank’s ability to pursue monetary policy free from political interference.
Powell began a four-year term as Fed chief in 2018 after being nominated by Trump during his first presidential term and was reappointed by Biden to serve in that post to May 2026. His 14-year term on the Fed’s Board of Governors is set to run through January 2028.
Members of the Fed’s Board of Governors, like the labor board members, have “for-cause” removal protections meant to let a president fire them only for reasons such as inefficiency or malfeasance, not policy disagreement.
Legal experts said that if the Supreme Court decides to eliminate removal protections for the two labor boards, it may try to create an exception that would insulate Federal Reserve officials like Powell in a bid to preserve the Fed’s independence.
The court gestured in this direction in a footnote to a 2020 ruling that suggested, but did not decide, that the Fed may be able to “claim a special historical status” entitling it to a greater degree of distance from presidential control than some other independent agencies.
‘PERSONAL POLICY PREFERENCES’
Other legal grounds have been offered for why the Fed should be more insulated from presidential control than certain other agencies, including an argument advanced by some conservative judges and advocates that the central bank does not necessarily wield substantial executive power.
But legal scholars who found the rationales unconvincing said there is no principled reason for treating the Fed differently than the labor boards under a series of Supreme Court rulings that have upheld for-cause protections for certain agencies.
“If the court carves out a special exception for the Federal Reserve, it will appear that the justices are not applying Article II but legislating from the bench and substituting their personal policy preferences,” said Christine Chabot, a professor at Marquette University Law School in Wisconsin, referring to the constitutional provision delineating presidential powers.
Trump’s move to oust Harris and Wilcox was part of his far-reaching shakeup and downsizing of the U.S. government, including firing thousands of workers, dismantling agencies, installing loyalists in key jobs and purging career officials.
Harris and Wilcox filed separate legal challenges to their firings, leading two Washington-based federal judges to block their removal under a 1935 Supreme Court precedent in a case called Humphrey’s Executor v. United States. In that ruling, the court rebuffed Democratic President Franklin Roosevelt’s attempt to defy protections for U.S. Federal Trade Commission members.
Chief Justice John Roberts on April 9 granted the Trump administration’s request to temporarily halt the judicial orders that had kept Harris and Wilcox in office. The labor boards after that decision confirmed the officials were no longer in their posts.
The action by Roberts gave the justices more time to decide whether Trump can keep Harris and Wilcox sidelined while their legal challenges proceed. That decision could come at any time.
Justice Department lawyers have asked the Supreme Court to consider hearing arguments on a fast-track basis on whether the labor board protections encroached on presidential power and whether Humphrey’s Executor was wrongly decided and should be overruled. They said a ruling in favor of Trump need not have implications for other agencies such as the Fed.
Even some prominent conservative scholars have expressed skepticism that overruling the 1935 decision could be limited in this manner. The court has a 6-3 conservative majority.
“I don’t think that the court could overrule Humphrey’s Executor and logically not bring into doubt the for-cause removal protections for members of the Federal Reserve Board,” said John Yoo, who served as a Justice Department lawyer under Republican President George W. Bush and is now a professor at the University of California, Berkeley School of Law.
FED INDEPENDENCE
Concerns about Fed independence grew when Trump rattled financial markets by repeatedly criticizing Powell over the Fed’s decision, for now, not to further cut interest rates. Trump on April 21 even called Powell a “major loser.” The president deescalated the matter the next day by saying he has no plans to fire Powell. Trump previously said he believes Powell would leave if he asked him to do so.
Powell has said the Fed will wait for more data on the U.S. economy’s direction before changing interest rates and has cautioned that Trump’s tariff policies risked pushing inflation and employment further from the central bank’s goals.
Shortly after Trump’s election last year, Powell said he would refuse to leave office early if the president tried to oust him and that he cannot be legally removed. Powell said on April 16 that he is “monitoring carefully” the dispute at the Supreme Court over the labor board firings. Powell said he did not think the outcome of those cases would apply to the Fed but did not explain why in those remarks.
The fate of the statutory tenure protections in question likely rests on how the justices treat Humphrey’s Executor and related rulings. In the 1935 ruling, the court upheld for-cause removal protections for Federal Trade Commission members, faulting Roosevelt’s firing of a commissioner for policy differences.
In that decision, the court said that restricting a president’s removal of commissioners was lawful because that agency performed tasks more closely resembling legislative and judicial functions, rather than those belonging squarely to the executive branch, headed by the president. The Constitution set up a separation of powers among the federal government’s coequal executive, legislative and judicial branches.
Many proponents of a conservative legal doctrine called the “unitary executive” theory that envisions vast executive authority for a president have portrayed Humphrey’s as wrongly decided. They argue that Article II gives a president sole authority over the executive branch, including the power to fire heads of independent agencies despite protections under law.
The Supreme Court in recent decades narrowed the reach of Humphrey’s Executor but stopped short of overruling it. In a 2020 ruling that upheld Humphrey’s, it said Article II gives the president the general power to remove heads of agencies at will, but that the Humphrey’s Executor decision had carved out an exception that allowed for-cause removal protections for certain multi-member, expert agencies.
Justice Department lawyers in filings to the court contended that the judges presiding over the Harris and Wilcox cases read the Humphrey’s exception too broadly.
They argued that the 1935 precedent upheld tenure protections for Federal Trade Commission members because that agency does not significantly encroach on presidential authority, while the Merit Systems Protection Board and National Labor Relations Board “wield substantial executive power.”
According to Chabot, the Federal Reserve exercises substantial executive power, too. If Humphrey’s Executor permits for-cause removal protections only for multi-member, expert agencies that do not exercise substantial executive power, then tenure protections for the two labor boards and the Fed “will fail,” Chabot said.
The court’s 2020 footnote hinting that the Fed could be distinguished from other independent agencies by its “special historical status” is unconvincing, according to Todd Phillips, a law professor at Georgia State University’s Robinson College of Business.
“I predict that the court is going to come up with some rationale” to treat the Fed’s independence differently, Phillips said. “If they do that, it’s not going to be principled.”
(Reporting by John Kruzel; Editing by Will Dunham)
Read the full article here
