Will the Trump Administration Rescind Illegally Promulgated Regulations?

Date: November 18, 2016

Over the past eight years, President Obama has touted his power to impose new regulation through rulemaking procedures. When Congress refused to go along with the President’s agenda, he invoked the power of his “pen and phone”—instructing bureaucrats at the Environmental Protection Agency, and the Department of Labor, to finalize radical new rules that impose massive costs on small business. But what happens to those rules now that President Obama is leaving office? 

NFIB Has Effectively Blocked Implementation of Many of These Rules

The National Federation of Independent Business has opposed these burdensome new rules at every juncture. Yet despite our adamant protestations, the Obama Administration has moved forward with rule after rule without even considering small business impacts. Ultimately we’ve been forced to fight these battles in court. In fact here is a quick break-down of a few major rules that NFIB is challenging:

DOL’s Overtime Rule imposes new requirements on employers to pay overtime to employees previously categorized as exempt. If enforced, this rule would require employers to radically raise the salary floor for exempt employees to $47,476 annually.
DOL’s Persuader Rule makes it harder for businesses to obtain legal counsel when dealing with labor issues. The Rule would require public reporting of an attorney-client relationship when consulted on many labor issues, and would even make it harder for NFIB to talk to its members about problems they may be facing. 
The Clean Power Plan imposes draconian new environmental regulations under the guise of the Clean Air Act. These rules aim to force radical emission reductions—all of which will impose major costs on small business.
The WOTUS Rule radically expands the jurisdictional reach of the Environmental Protection Agency and Army Corps of Engineers. Under this Rule, ordinary landowners will be prohibited from developing any portion of land that is even occasionally wet without an exorbitantly expensive federal permit.

The good news is that NFIB has thus far managed to hold-off implementation of most of rules these rules. Just this week, we obtained a decision striking-down the Persuader Rule, and we are waiting to hear whether a federal court in Texas will issue an injunction blocking implementation of the Overtime Rule before it becomes effective on December 1st. But the important take away is that NFIB has managed to tie the Obama Administration up in court. And in all likelihood, most of these cases will still be pending before the courts when Donald Trump is inaugurated as President in January. So what happens then?

The New Administration May Seek to Rescind These Rules

We were preparing for a long and arduous fight to invalidate the Obama Administration’s final rules in court. That might have become even more of an uphill battle if Hillary Clinton had been elected President. Indeed, conventional wisdom held that the Senate would likely have confirmed Merrick Garland, therein making it all the more difficult to win these cases in the Supreme Court. But while that outcome seemed all but inevitable several weeks ago, the reality is that we now have a new political landscape with the election of Donald Trump. 

For one, a Republican controlled Congress may very well enact legislation undercutting the legal basis for the regulations that the Obama Administration had been pushing. While President Obama threatened to veto any such bill that might come across his desk, the small business community can hope that President Trump will sign such legislation into law—therein defeating the Obama Administration in the political sphere. For example, if Congress enacted legislation unequivocally defining the Environmental Protection Agency’s jurisdiction and power more narrowly, that would effectively render invalid the Clean Power Plan and or the WOTUS Rule. Likewise, Congress could enact legislation stating that DOL lacks the power to define the salary floor for exempt employees so as to definitively reject the Overtime Rule.

But even without an act of Congress, President Trump may very likely seek to rescind any previously promulgated Obama Administration rule. Indeed, if those rules were creating by executive power, they can be rescinded just the same. However, it’s not as simple as issuing an executive order. If President Trump seeks to reverse course—after a rule has been finalized—his Administration must initiate new rulemaking proceedings. In other words, the Administration would have to propose new rules and allow the public an opportunity for comment before finalization. 

That process may well take some time. But as the Trump Administration moves in this direction, the Department of Justice might (under new leadership) ask the courts to stay proceedings, or to have these cases dismissed as moot. Of course that would not be the end of the legal fight—as we can fully expect environmentalists and labor organizers to challenge any attempt to rescind these already finalized rules. So one way or the next, the NFIB will remain active fighting in the courts on these issues.
Trump Can Immediately Stop Rulemaking on Pending Obama Administration Rules 

As NFIB has warned for a long time, there are more rules coming down the regulatory pipeline. For example, the Department of Treasury has proposed a troublesome rule concerning valuation of estates, which would have major tax consequences for the small business community. While NFIB opposes this proposal, there is reason to believe that President Trump will issue an order preventing Treasury from finalizing the rule. 

Until a rule is officially finalized, with approval from the White House, it cannot be implemented. That means that any proposed (but non-finalized) rule can be rejected by the Trump Administration on day one. Accordingly, the small business community can—hopefully—breath a collective sigh of relief. 
We Can Also Expect Judicial Nomination Proceedings this Spring

Finally, who can forget that the Supreme Court has been operating with eight justices since Justice Scalia passed away in February? At this point it seems certain that Trump will fill this vacancy. Indeed, with a Republican controlled Senate, one can expect his choice will be confirmed—unless he should deviate from the list of potential candidates that he circulated earlier this year.

This is extremely important for the future of our country and for the small business community. Without doubt, we will continue to press the envelope on the most serious legal issues facing entrepreneurs. As such, it is encouraging to think that Scalia’s seat will likely be filled by a true constitutionalist. Indeed, now more than ever it is vital to stand up for our constitutional principles: federalism; separation of powers; and individual rights. 

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