Punching In: How Case on Agency Judges Impacts DOL, Immigration

Monday morning musings for workplace watchers.

SCOTUS Fallout|WIOA Opposition

Rebecca Rainey and Andrew Kreighbaum: The US Supreme Court’s decision last week curbing the Securities and Exchange Commission’s use of in-house courts is expected to ignite challenges against similar administrative law judge tribunals at federal labor agencies.

The 6-3 ruling in SEC v. Jarkesy found that defendants have the right to bring their case before a federal jury when the agency is seeking financial penalties. In particular, the court said the SEC’s anti-fraud provisions at issue in the case replicated “common law fraud” and that it was “well established” those types of claims should be heard by a jury.

While the high court’s decision addressed just the SEC, the principles it relies on “sweep more broadly” and won’t be limited to that agency, said Rob Johnson, a senior attorney at the libertarian Institute for Justice. The group has sued the US Labor Department on behalf of employers fighting penalties for violating worker immigration laws.

“We look forward to pressing today’s opinion to make sure that it applies throughout the administrative state,” Johnson said.

At the DOL and its sister agencies that use ALJs to resolve a number of matters, the impact of the ruling may be limited.

The court’s decision won’t necessarily assist those challenges in areas like immigration, where there is no public right of action, said Stephen Yale-Loehr, a professor of immigration law at Cornell Law School.

“The Court did not address the other constitutional issues in the case concerning the nondelegation doctrine and whether the insulation of the SEC administrative law judges from executive supervision violated the separation of powers,” Yale-Loehr said. “Those issues remain for another case.”

The majority in the opinion also noted there is an exception to the jury requirement, one that was recognized in a 1977 case that upheld the Occupational Safety and Health Review Commission, the tribunal that reviews employer appeals of worker safety citations.

In that case, SCOTUS said there is an exception to the jury requirement “when Congress creates new statutory ‘public rights’” or where claims are “unknown to common law.” But the high court noted that the exception from a jury trial shouldn’t apply to “traditional legal claims” or issues that involve common law, like the SEC fraud provisions.

Attorneys say the distinction made by the Supreme Court between OSHA disputes and other common law disputes may shield both OSHRC and its mine-safety counterpart, the Mine Safety and Health Review Commission, from challenges to its authority under the ruling.

“They essentially said, without officially holding it, that the OSHA penalties are really not similar to what the SEC does here,” said Anthony Rainone, a co-chair of the labor and employment practice at Brach Eichler LLC. “So I don’t think this will give people in front of the ALJs for OSHA matters really, any argument that, oh, we should be in front of a judge and jury.”

Nevertheless, Rainone predicted litigation arguing that an ALJ doesn’t have the authority to preside over a dispute will be brought in any penalty proceedings before DOL administrative law judges.

Employers penalized for violations involving temporary work visa programs or alleged hiring bias against non-citizens have already been raising legal challenges over the constitutionality of the administrative law judge system in recent years. That tactic gained new momentum after the Fifth Circuit’s 2022 ruling in Jarkesy.

Seasonal employers represented by the Institute for Justice have sued over penalties connected to H-2A and H-2B seasonal work visas, while a Tulsa construction firm sued to challenge Justice Department penalties for failures involving work eligibility verification.

More high-profile employers Walmart Inc. and Elon Musk’s SpaceX, meanwhile, have secured recent district court wins in cases involving, respectively, employment verification and hiring discrimination by targeting the administrative law judge system.

Several of those cases that were paused while Jarkesy was pending at the Supreme Court can now move forward, but not necessarily with new information from the justices on the broader administrative law system at federal agencies.

The US Supreme Court in Washington, DC, US, on Wednesday, June 26, 2024.

Photographer: Tierney L. Cross/Bloomberg via Getty Images

Diego Areas Munhoz: One might think that legislation that cleared the bitterly divided US House of Representatives by a margin of 378-26 drives overwhelming consensus—but it doesn’t.

Following the House’s reauthorization of the Workforce Innovation and Opportunity Act—the nation’s main job training program funding law—the Senate is now drafting its own bill, with lawmakers planning for a finished product before the August congressional recess.

In a rare sign of bipartisanship on labor policy, notable pro-union Sen. Bernie Sanders (I-Vt.) and conservative Rep. Virginia Foxx (R-N.C.) are working together to reauthorize a program that has the support of governors across the country and some of the largest US businesses in need of skilled workers.

But unions and some on the left aren’t so excited about the direction of the bipartisan legislation, particularly the lack of equal labor representation in the workforce boards that manage job training programs and administer WIOA funds at the local level.

“Co-governance makes complete sense, co-governance is how a lot of other countries run these kinds of systems—workers and employers at the table together,” said Mary Alice McCarthy, senior director of the Center on Education & Labor at New America.

“Why are Democrats, why is Bernie Sanders allowing that?” McCarthy said.

The AFL-CIO sent lawmakers a letter in May asking for more labor representation in the workforce boards, adding that WIOA funds should be going only to employers that pledge to stay neutral during labor organizing.

In its current form, WIOA isn’t delivering quality jobs and is far too employer-focused, the country needs fresher workforce development models, McCarthy said.

But Rep. Bobby Scott (Va.)—the top Democrat on the Education and the Workforce Committee chaired by Foxx—told Bloomberg Law he stands by the WIOA reauthorization, noting that its greatest strength is its local approach.

He also said they have made progress on more labor representation in the boards, even though it’s not exactly what the unions are seeking.

“We do what we can,” Scott said.

We’re punching out. Daily Labor Report subscribers, please check in for updates during the week, and feel free to reach out to us.