Any effort to delay the June 9 implementation date of the Labor Department's fiduciary rule will face significant procedural obstacles, and potential legal challenges, according to one administrative law expert.
"It's not impossible to propose a new delay before the June 9 deadline, but there are substantial hurdles to doing so," said Bethany Davis Noll, an attorney with the Institute for Policy Integrity at the New York University School of Law.
One hurdle is timing. The first 60-day delay of the rule took about five weeks from start to finish. A little more than three weeks remain before June 9.
Labor Secretary Alexander Acosta has made rolling back the fiduciary rule a top priority, according to a leaked communication between Acosta and Sen. Tim Scott, R-SC that was obtained by NAPA-net.org.
Scores of Republican lawmakers and financial services and insurance industry trade groups have called on Acosta to delay the June 9 implementation of the impartial conduct standards until the agency completes a new economic impact analysis of the rule.
In order to do that, Labor would have to issue a notice of a new proposed delay and request comments from stakeholders. A proposed delay would also have to include an updated cost benefit analysis, and give reasoned explanations for a change in the implementation date, including an explanation for disregarding the facts and circumstances that justified the first 60-day delay of the rule, Davis Noll explained.
"A new delay would essentially amount to an effective repeal and that is something that would have to be justified," said Davis Noll. "Labor has a huge burden to overcome if they want to delay this."
Some stakeholders have called on Labor to issue an indefinite delay of the entire rule. Courts would likely treat that as a repeal of the rule, and apply higher standards for Labor to justify the move.
"A delay by itself is a substantive change–if it is indefinite, it is even more important to open the proposed rule to notice and comment. The bar for justifying an indefinite delay is even higher," said Davis Noll.
Labor's litigation risk
Any attempt to issue a temporary or indefinite delay could expose what Davis Noll says are substantively weak aspects of the first 60-day delay.
That could give the upper hand to proponents of the rule, should they issue a legal challenge to a new delay.
"If they try to delay the rule again, the problems with the first delay will be amplified," said Davis Noll. "It's highly likely Labor will be subjecting itself to a risk of litigation, if it hasn't already."
Davis Noll, who previously served as assistant solicitor general for the state of New York, says the overall fiduciary rule was "impressive" and "really well done" in the context of administrative law.
