Labor & Employment Law Daily Wrap Up, REMEDIES, DAMAGES—1st Cir.: Stay of HHS reduction in force upheld, (Sep 18, 2025)

By Todd Harrison, J.D.

Although the Supreme Court has issued stays in similar cases, it has not ruled on the types of actions at issue in the present case.

Denying the government’s motion for a stay pending appeal of its case involving a reduction in force of thousands of Health and Human Services employees, the First Circuit determined that the government was unlikely to succeed on the merits and that recent Supreme Court decisions granting stays in similar cases may have been based on arguments that were not presently before the court (State of New York v. Kennedy, No. 25-1780 (1st Cir. Sept. 17, 2025)).

In a March 27, 2025, statement, HHS announced it would “streamline the functions” of the department, partly by terminating 10,000 employees through a RIF plan, consolidating sub-agencies, and reducing the number of regional offices. Several days later, HHS began implementing this process. It acknowledged that it did not closely examine employees’ job responsibilities before removing them because it “‘would take[] too long’ and would sacrifice ‘political momentum.’”

Lawsuit. Subsequently, 19 states and the District of Columbia filed suit, challenging on numerous grounds the RIF. The district court concluded that the plaintiffs were likely to succeed on their claim that the department’s actions in issuing and implementing the RIF were both arbitrary and capricious and contrary to law, in violation of the Administrative Procedure Act (APA), and granted a preliminary injunction. Here, the government motioned for a stay of the injunction pending appeal.

Merits. Beginning with the first stay factor under the Nken test—whether the government has made a “strong showing” that it is likely to succeed on the merits of its appeal—the government made three merits-based arguments: (1) that the plaintiffs lack Article III standing; (2) that the Civil Service Reform Act (CSRA) divests the district court of jurisdiction; and (3) that, under the APA, the plaintiffs cannot challenge the agency action at issue because it is both programmatic and not final, and, in addition, is neither arbitrary and capricious nor contrary to law. The court addressed each argument in turn.

Standing. According to the government, the plaintiff states lack standing because they allegedly rely only on claimed injuries to their citizens rather than to the states themselves. The court was not persuaded.

The district court made factual findings that the plaintiffs alleged myriad injuries to the states themselves, including the cessation of services on which state agencies—not just residents of the states—rely, leading to increased costs and burdens on the state agencies’ operations. “The government points to no contrary evidence in the record to discredit those factual findings,” said the court here.

Texas. The government did cite to United States v. Texas, 599 U.S. 670 (2023), to support the following statement: “A state might respond to a reduction in federal services by providing additional state services, but a desire to ‘supply social services such as healthcare and education’ is not cognizable.” However, the court found this holding to be inapposite, as Texas concerned a challenge to the government’s authority to decide how many arrests or prosecutions it will bring against those accused of violating federal law. The present case, in contrast, concerns traditional monetary and operational injuries to the states and their instrumentalities, explained the court.

Informational harms. In its next Article III standing argument, the government contended that the plaintiffs alleged only non-cognizable informational harms insufficient to establish standing. To the extent that the plaintiffs’ injuries are informational—and only some are—the district court found that they had alleged clear downstream consequences from failing to receive the information. Again, the government failed to point to any record facts or legal precedent that would undermine the district court’s conclusion that these alleged harms satisfied the requirements of Article III standing.

With regard to the government’s suggestion that an injunction requiring it to produce the information at issue would have been sufficient to address the plaintiffs’ informational injuries, it had not shown how the invalidation of the March 27 statement and the injunction against the RIF would fail to provide the plaintiffs with the relief that they were seeking. Accordingly, the government had not met its burden to make a “strong showing” that it is likely to succeed on appeal on the Article III standing arguments presented in support of its motion to stay.

Jurisdiction. Turning to the government’s argument that the district court lacked jurisdiction because the CSRA channels any dispute involving federal personnel decisions to the Merit Systems Protection Board (MSPB), the court observed that this contention relied heavily on the Supreme Court’s decision in McMahon v. New York, 145 S. Ct. 2643 (2025). However, the court explained that McMahon did not identify the specific grounds for the Court’s ruling that the government had met the Nken factors in that case, nor has any other Supreme Court interim order or decision accepted the government’s CSRA argument in a like case.

This is significant, continued the court, because although the government made a CSRA jurisdictional argument in McMahon, it also made a number of other arguments, at least some of which do not apply to the present case and were not reasserted here.

AFGE. To further support its CSRA argument, the government pointed to the Supreme Court’s decision in Trump v. Am. Fed. of Gov't Emps. (AFGE), 145 S. Ct. 2635 (2025), which stayed an injunction of the same executive order that prompted the March 27 statement. However, the court here found that that interim order pointed to the opposite conclusion.

First, the Supreme Court explicitly did not rule in AFGE “on the legality of any Agency RIF and Reorganization Plan produced or approved pursuant to the Executive Order.” In other words, it specifically did not rule on the type of actions at issue in this case.

Second, even though the government raised the same CSRA argument in AFGE that it asserted here, the Court’s determination that the government was likely to succeed in establishing that the executive order was lawful, a necessarily merits-based ruling, indicated that the Supreme Court concluded that the district court likely had jurisdiction to make that decision.

“Thus, in issuing its interim order in AFGE, the Supreme Court likely decided that the CSRA did not funnel the dispute at issue—which the government argues to us is similar to this one—to the MSPB,” said the court.

APA claims. As to the merits of the plaintiffs’ APA claims, the government did not meaningfully engage with the district court’s analysis of those claims. Although the government asserted that the March 27 statement was not a reviewable “final agency action,” it did not explain how it was not a consummation of the agency’s decisionmaking process and did not have legal consequences given that it was followed by a RIF impacting 10,000 employees.

The government also argued that the plaintiffs’ claims call for general judicial review of an agency’s day-to-day operations. However, the court could not conclude that the government had made a strong showing of likely success on this argument, given that the plaintiffs were challenging a particular directive, not a variety of programmatic deficiencies or all aspects of a program.

With regard to whether the department’s actions in issuing and implementing the March 27 statement were arbitrary and capricious, the government did not put forth any argument that HHS examined the relevant data and articulated a rational connection between the facts found and the choices that were made.

Because the government had not met its burden to make a “strong showing” that it will succeed on appeal in overturning the district court's arbitrary-and-capricious ruling, the court determined that it need not address the district court's alternative holding that the challenged action was also likely contrary to law.

Irreparable harm. As to the second prong of the Nken test, the court credited the government’s contention that it would be irreparably harmed if it were erroneously required, during the pendency of the preliminary injunction, to pay salaries to employees it would otherwise terminate under the RIF. However, the court concluded that this argument cannot be enough to meet the government’s burden for a stay when the government failed to make a strong showing of a likelihood of success on the merits.

In addition, the government did not point to any grounds to question the district court’s findings of substantial harm to the plaintiffs if the withdrawal of services and support that began with the March 27 statement were to continue.

Public interest. Finally, the court determined that the government fared no better with Nken’s public interest prong. Seeing has how the government barely challenged the district court’s view that the plaintiffs’ arbitrary-and-capricious claim was likely to succeed, the court here was again especially mindful that “there is generally no public interest in the perpetuation of unlawful agency action.”

The case is No. 25-1780.

Judge: Per curiam.

Attorneys: Molly Brachfeld, Office of the Attorney General, for State of New York. Cynthia Alexander, Office of the Attorney General, for State of Washington. Dorothea C. Lindquist, Office of the Attorney General, for State of Rhode Island. Kevin M. Bolan, U.S. Attorney's Office, for Robert F. Kennedy, Jr., U.S. Department of Health and Human Services, Susan Monarez, Martin Makary, U.S. Food & Drug Administration and Andrew Gradison.

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