Safety Review Board Lawsuit Adds Fuel to Agency Power Struggle

A lawsuit attacking the structure of an independent agency that hears appeals to OSHA citations paves the way for similar challenges as employers seek to test the limits of recent US Supreme Court decisions.

Kenric Steel LLC—a New Jersey-based steel fabrication company—sued the US Occupational Safety and Health Review Commission on Sept. 17 to block enforcement of a $348,000 safety fine against it. It argued the process is unconstitutional because OSHRC’s leadership panel is illegally shielded from being fired at will by the president, and because the agency’s administrative law judges are improperly appointed and protected from removal.

The case is part of a swath of challenges to agency power that hone in on either removal protections for government officials or the validity of in-house judge systems. The National Labor Relations Board, the Equal Employment Opportunity Commission, and the US Labor Department are just a handful of agencies targeted in recent months, with the high court set to soon decide whether to take up the removal issue in a case involving the Consumer Product Safety Commission.

The OSHRC litigation will “set the stage nicely” for lawsuits citing Supreme Court decisions focused on reining in federal agencies’ adjudicative powers, said Eric Compere, co-lead of Nixon Peabody LLP’s OSHA practice.

Kenric Steel’s complaint, for example, cited to rulings such as Lucia v. SEC, which found that the Securities and Exchange Commission’s judges are “inferior officers” that must be appointed by the president, courts of law, or heads of department under the US Constitution’s Appointments Clause.

Some agencies, like the Labor Department, have satisfied Lucia by having a presidentially appointed department head ratify ALJ selections. But OSHRC’s in-house judges are installed by the three-member commission’s chair, Kenric Steel argued. The chair, it said in part, falls outside of the Appointments Clause because they aren’t the president, a court, or a department head.

Closely Watched

The company also pointed to June’s high court ruling in SEC v. Jarkesy, which held that defendants have a constitutional right under the Seventh Amendment to a jury trial when the SEC seeks financial remedies.

Kenric Steel acknowledged that the justices in 1977’s Atlas Roofing Co. v. OSHRC held that the Seventh Amendment “did not prevent Congress from assigning to the Review Commission the task of adjudicating alleged violations” of the Occupational Safety and Health Act.

“Nevertheless, the Supreme Court’s later opinions effectively overruled Atlas Roofing,” the company wrote in its lawsuit.

More challenges that test the limits of the high court’s recent administrative law decisions are likely to follow, Compere said.

“OSHA has gotten more aggressive, with increased penalties and more employers being cited into the hundreds of thousands of dollars, and the increased stakes just start to feel like civil litigation,” Compere said.

OSHRC declined to comment for this story.

Melissa Peters, who co-leads with Compere, added that the Kenric Steel case will be closely watched by the business community as the burden of the cost of litigation for small employers could be greater considering federal courts are more expensive.

“We don’t know what the impact will be on small employers if a ruling comes down requiring that all OSHA citations be defended in district court,” she said.

Circuit Split Potential

The issues raised in the Kenric Steel lawsuit and similar cases are likely to spur split decisions among federal appeals courts that will require Supreme Court intervention, some legal observers said.

For example, the US Court of Appeals for the Fifth Circuit’s 2022 ruling in Jarkesy v. SEC held that the removal protections for the agency’s in-house judges were unconstitutional. But the Supreme Court didn’t rule on that issue when it reviewed the circuit court’s decision, instead only weighing in on the Seventh Amendment issue.

“The Supreme Court is in a position to deal a very serious blow to the administrative state if this argument is upheld,” said Michael Duff, a professor of law at St. Louis University School of Law.

Other circuits—such as the First, Second, Third, and Ninth—could side with agencies and find that they don’t lose jurisdiction over certain disputes even with challenges arguing that the ALJ system is invalid, Duff said.

“I don’t think that the argument, in the end, is going to prevail,” Duff said regarding the removal issue and the broader agency challenges. It would essentially eliminate the administrative power of federal agencies, he said.

The case is Kenric Steel LLC v. OSHA, No. 1:24-cv-09221.