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Power of DOL Administrative Judges Faces Federal Court Challenge

Sept. 8, 2021, 4:04 PM

A libertarian legal group is mounting a constitutional challenge of the U.S. Labor Department’s administrative law judges, arguing in a federal lawsuit that the internal trial court lacks authority to impose penalties against employers.

The Institute for Justice, a legal nonprofit focused on preserving individual liberty and curbing the government’s size and power, filed suit Wednesday in U.S. District Court for the District of New Jersey, appealing a decision from the department’s Administrative Review Board, a legal-review panel that hears appeals of rulings from DOL administrative judges.

The May 27 decision affirmed an administrative law judge’s holding that a farm owed $300,000 in back pay to workers plus $250,000 in penalties. The case stemmed from a 2015 investigation by DOL’s Wage and Hour Division that alleged the farm violated the H-2A temporary agricultural workers’ visa program. A party wishing to challenge an administrative law judge’s decision in federal court must first appeal to the review board.

Rather than seeking a straightforward reversal of the ruling, the Institute for Justice is asking a federal judge to declare that the department’s entire process of permitting administrative law judges, or ALJs, to assess H-2A fines was never authorized by Congress, thereby contravening Article III of the U.S. Constitution, which upholds an independent judiciary.

“We’re focused in this case on adjudication for H-2A violations, but the implications of these Article III-type challenges extend beyond that to the whole system of ALJs for the Department of Labor,” Rob Johnson, a senior attorney at the Institute for Justice, said in an interview.

A Labor Department spokesman declined to comment.

The lawsuit marks the latest example of a libertarian-minded organization attacking the administrative state. These groups have tried to leverage the federal bench’s increasing rightward tilt in hopes of winning decisions that restrict the government’s enforcement authority.

‘Real Judge’?

The statute governing DOL’s enforcement of H-2A wage standards grants the labor secretary authority to impose “appropriate penalties,” but is silent on whether such penalties can be ordered by agency judges, the Institute for Justice said in its complaint.

Administrative law judges are chosen through an internal merit-based selection process within DOL. Many DOL enforcement actions, such as an agency’s finding that an employer failed to pay sufficient prevailing wages to construction workers or that a federal contractor engaged in hiring discrimination, can be contested by the employer before an ALJ. The department’s administrative law judges hear cases in eight district offices across the country.

Some administrative law judge adjudications at other federal agencies are reasonable, Johnson said, such as in the context of Social Security benefits.

“When it becomes a problem,” he added, “is when the government is going to try to subject somebody to a fine or an award of back wages or anything like that where they’re trying to take away somebody’s property, and they’re doing that without giving them a real hearing in front of a judge.”

Johnson took over the case from an attorney who previously represented the farm, seeing the review board’s decision as an ideal vehicle to challenge the powers of DOL administrative law judges. His client, Sun Valley Orchards, which operates a vegetable farm in southern New Jersey, is presenting its argument before what the Institute for Justice considers to be a “real judge"—one appointed by a president and confirmed by Congress, Johnson said.

When asked if exercising the farm’s right to appeal the review board decision in federal court could undermine the argument about receiving a fair trial, Johnson said federal judges generally apply a standard of review that is “extremely deferential” to the administrative decision and that courts typically don’t hear new testimony.

Johnson said his group will appeal up to the U.S. Supreme Court, if necessary.

Cause of Action: Article III, U.S. Constitution

Relief: Declaratory and injunctive relief; an award of plaintiffs’ costs and expenses, together with reasonable attorneys’ fees.

Response: Labor Department declined to comment.

The case is Sun Valley Orchards, LLC v. DOL, D.N.J., No. 21-cv-16625, complaint filed 9/8/21.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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