HHS Issues New Guidance on Staff Terminations Amidst Legal Setbacks, Preceding New OMB Regulations

The Department of Health and Human Services (HHS) has issued new internal guidance to its staff regarding employee and award terminations, emphasizing adherence to court orders, federal statutes, and the Constitution. This memo, dated July 6, 2025, suggests a shift towards a more legally rigorous approach to workforce reductions and grant management, particularly concerning "non-alignment with agency priorities" after October 1, 2025. This future date coincides with the anticipated implementation of new, government-wide regulations from the Office of Management and Budget (OMB).

This internal advisory follows a period of significant workforce restructuring within HHS, initiated earlier in the year. In March 2025, HHS announced plans to cut approximately 10,000 full-time employees across its agencies, including the FDA, CDC, and NIH, citing aims for increased efficiency and realignment with new administration priorities. These large-scale reductions were part of a broader federal initiative, the "Department of Government Efficiency" Workforce Optimization Initiative, which sought to eliminate non-statutorily mandated functions and reduce the federal workforce.

The administration's aggressive approach to terminations and grant cancellations has faced considerable legal challenges. Federal judges have ruled against some of these actions, with one June ruling declaring certain NIH grant terminations "void and illegal." Earlier in the year, the Office of Personnel Management (OPM) also faced judicial scrutiny over its directives for mass terminations of probationary workers, prompting some agencies to reinstate employees. These legal defeats underscore the need for HHS to refine its termination processes to withstand court challenges.

A noteworthy piece of the new HHS guidance focuses on terminating awards for "non-alignment with agency priorities," but explicitly states such actions should occur "after Oct. 1, 2025." This aligns with a March 2025 staff guidance from NIH, which detailed procedures for assessing and potentially terminating grants related to Diversity, Equity, and Inclusion (DEI) initiatives that no longer align with Secretarial directives. The delay until the next fiscal year's beginning suggests a strategic pause to incorporate the forthcoming, comprehensive OMB regulations on government-wide workforce adjustments.

The evolving strategy reflects a recognition of the complexities involved in federal workforce management. As one Harvard affiliate, Steve McGuire, observed, > "I’ve said before the administration was likely to lose its arguments in court, not because they’re trying to burn down the large domains of health science research, but because they burned it down the wrong way." McGuire further noted a potential shift in legal reliance, stating, > "We won’t be able to rely on the courts as much in the months ahead as we did in the first half of this year," indicating a possible change in the nature or frequency of legal interventions.