The decision on Friday by the San Francisco-based 9th US Circuit Court of Appeals means that, for now, the Trump administration cannot proceed with plans to shed tens of thousands of federal jobs and shutter many government offices and programs.
US District Judge Susan Illston in San Francisco on May 22 blocked large-scale layoffs at about 20 federal agencies, agreeing with a group of unions, non-profits and municipalities that the president may only restructure agencies when authorised by Congress.
A three-judge 9th Circuit panel on Friday denied the Trump administration's bid to stay Illston's decision pending an appeal, which could take months to resolve. The administration will likely now ask the US Supreme Court to pause the ruling.
The White House did not immediately respond to a request for comment.
"The Ninth Circuit's decision today rightfully maintains the block on the Trump-Vance administration's unlawful, disruptive, and destructive reorganisation of the federal government," said a statement from the coalition of plaintiffs.
The court said the administration had not provided any evidence it would suffer an irreparable injury if the lower court order remained in place and said plaintiffs were likely to prevail.
"The executive order at issue here far exceeds the president's supervisory powers under the Constitution," said the majority opinion from Judge William Fletcher, who was appointed by Democratic President Bill Clinton. He was joined by Judge Lucy Koh, who was appointed by Democratic President Joe Biden.
Illston's ruling was the broadest of its kind against the government overhaul that was spearheaded by Trump ally Elon Musk, the world's richest person and CEO of electric vehicle maker Tesla.
Along with blocking layoffs, Illston barred the Department of Government Efficiency from ordering job cuts or reorganisation at federal agencies.
Dozens of lawsuits have challenged DOGE's work on various grounds, including claims that it violated labour and privacy laws and exceeded its authority, with mixed results.
Two judges had separately ordered the Trump administration to reinstate thousands of probationary employees, who are typically newer hires and were fired en masse in February, but appeals courts paused those rulings.
