One of the key people responsible for getting the Department of Labor’s controversial Fiduciary rule vacated last year will now be nominated by President Donald Trump to run the agency.
Via President Trump’s Twitter account late on July 18: I am pleased to announce that it is my intention to nominate Gene Scalia as the new Secretary of Labor. Gene has led a life of great success in the legal and labor field and is highly respected not only as a lawyer, but as a lawyer with great experience working with labor and everyone else. He will be a great member of an Administration that has done more in the first 2 ½ years than perhaps any Administration in history!
Longtime labor lawyer Gene Scalia, a partner in the Washington D.C. office of Gibson, Dunn & Crutcher and son of the late Supreme Court Justice Antonin Scalia, met with Trump Thursday.
POLITICO, which broke the story Thursday even before Trump tweeted it, said the administration has been busy assessing whether he could be confirmed.
The reliably conservative Scalia previously served as chief legal officer for the Labor Department during the George W. Bush administration, a position he took following a 2001 recess appointment by the former Republican president after the Democrat-controlled Senate failed to confirm him. He also worked as a special assistant to William Barr, now the attorney general.
Scalia’s role in killing Fiduciary Rule
Scalia played a central role in getting a federal judge to vacate the Obama Labor Department’s fiduciary rule, which requires brokers to consider only the best interests of the client, irrespective of commissions or fees, when providing retirement advice.
On March 15, 2018, the Fifth Circuit Court of Appeals, based in New Orleans, vacated the fiduciary rule in a 2-to-1 decision, saying it constituted “unreasonableness,” and that the DOL’s implementation of the rule constitutes “an arbitrary and capricious exercise of administrative power.” The case had been brought by Scalia’s client, the U.S. Chamber of Commerce, among other parties.
Investopedia notes three lawsuits have been filed against the rule, but the one that drew the most attention was Scalia’s, filed in June 2016 on behalf of the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Roundtable in the U.S. District Court for the Northern District of Texas.
The basis of the suit was that the Obama administration did not have the authorization to take the action it did in endorsing and fast-tracking the legislation. Some lawmakers also believe the DOL itself was reaching beyond its jurisdiction by targeting IRAs.
Precedent dictates Congress alone has approval power regarding a consumer’s right to sue. This is the suit that resulted in the March 15, 2018, ruling against the fiduciary rule and it being officially vacated as of June 21, 2018 by the U.S. Fifth Circuit Court of Appeals.
In May 2019 the DOL said it was working with the Securities and Exchange Commission (SEC) to reintroduce a new version of the rule in December of this year, but that plan is in doubt following last week’s resignation of DOL Secretary Alexander Acosta over criticism of his role more than a decade ago in the plea deal of convicted billionaire sex offender Jeffrey Epstein.
Tough road to confirmation?
Many Republicans had expected Acosta’s temporary replacement, Patrick Pizzella, (who ironically takes over in the interim role Friday as Acosta’s resignation becomes official) to get the DOL Secretary nomination from Trump, according to Politico. Pizzella was called “a polarizing figure beloved by conservatives for his pro-business views and disliked by unions and Democrats for a history of opposing worker protections.”
But several conservatives including Arkansas Senator Tom Cotton were pushing Trump to nominate Scalia instead. Media reports say Cotton spoke to Trump Thursday and joined Trump’s meeting later in the day with Scalia when Trump offered Scalia the nomination.
Democrats and labor unions are expected to contest Scalia’s nomination because of his long record of representing corporations in cases against labor laws and financial regulations.
New York Democrat Senator and minority leader Chuck Schumer told The New York Times Thursday night that the selection of Scalia was a missed opportunity.
“President Trump has again chosen someone who has proven to put corporate interests over those of worker rights,” Schumer said. “Workers and union members who believed candidate Trump when he campaigned as pro-worker should feel betrayed.”
No timeline has been established yet for a Senate confirmation hearing for Scalia. In April 2017, 60 senators, including eight Democrats, voted to confirm Acosta as DOL Secretary.