Court Rules DOL's ALJ Enforcement Scheme Likely Unconstitutional
In Short
The Situation: A government contractor challenged a U.S. Department of Labor ("DOL") Office of Federal Contract Compliance Programs ("OFCCP") enforcement scheme in federal court as violating the United States Constitution. The contractor asserted that removal protections for the presiding DOL administrative law judge ("ALJ") violated Article II of the U.S. Constitution because two layers of for-cause removal protections prevented the president from exercising his authority to take care that the laws be faithfully executed.
The Result: For the first time, a federal court preliminarily enjoined the OFCCP from prosecuting its case against a government contractor after the court determined that removal protections for DOL ALJs unconstitutionally interfere with the president's ability to take care that the laws be faithfully executed.
Looking Ahead: If the court's decision is sustained and followed by other courts, the OFCCP will be unable to enforce government contractor employment antidiscrimination standards. Contractors will be able to seek injunctive relief to halt OFCCP enforcement actions against them.
On October 30, 2024, in ABM v. Department of Labor, the United States District Court for the Southern District of Texas preliminarily enjoined a pending DOL OFCCP enforcement action against ABM Industry Groups ("ABM"), citing a violation of Article II of the U.S. Constitution. Specifically, the court reasoned that limits on the authority of the president to remove the DOL ALJ adjudicating the matter violate the Constitution. ABM also challenged ALJ adjudication as violating its Seventh Amendment right to a jury trial, but the court did not reach the issue.
The court's decision heavily relied on a decision by the U.S. Court of Appeals for the Fifth Circuit: Jarkesy v. Securities and Exchange Commission. The court ruled in Jarkesy that two or more layers of good-cause removal restrictions that limit the president's ability to remove Securities and Exchange Commission ("SEC") ALJs violated Article II of the Constitution. Applied to ABM and the OFCCP's administrative enforcement proceeding against it, the district court issued a preliminary injunction reasoning that, because DOL ALJs exercise similar functions to the SEC ALJs at issue in Jarkesy and are similarly insulated by two layers of good-cause removal protection, ABM is likely to succeed on the merits of its claim that the DOL ALJ is unconstitutionally insulated from removal by the president.
Significantly, the district court also determined that when a plaintiff "is [] subject to a proceeding before an improperly insulated ALJ," that is "a harm separate from any substantive action taken by the ALJ." Because this harm cannot be remedied once an ALJ has ruled on the merits, the harm constitutes irreparable injury.
What Are the Decision's Implications?
ABM has several implications. First, if the court reaches the same conclusion finally on the merits, and other courts follow it, the currently existing OFCCP enforcement scheme will become practically invalidated. Second, it is not clear that other courts will follow the decision, especially those that are outside the Fifth Circuit and, as such, not bound by the Fifth Circuit's decision in Jarkesy. This may result in a split in the circuits and inconsistent legal precedents. Third, whether the OFCCP ALJ scheme violates the Seventh Amendment right to a jury trial remains an open question. Subsequent decisions may decide that issue. Fourth, the ABM case is one of several pending constitutional challenges to the DOL's ALJ enforcement schemes. Actions challenging the Department's Sarbanes-Oxley Act and Occupational Safety and Health Act ALJ enforcement schemes are pending in the Eastern District of Virginia and Eastern District of North Carolina, respectively. See Comcast Corporation et al. v. United States Department of Labor et al., No. 1:24-cv-01401 (E.D. Va.); Perdue Farms Inc. v. Su et al., No. 5:24-cv-00477 (E.D.N.C). Decisions by the courts in the Comcast and Perdue Farms cases may be appealed to the U.S. Court of Appeals for the Fourth Circuit.
Whether the Fourth Circuit's stance on the constitutionality of the ALJ proceedings in these actions will meaningfully differ from that of the Fifth Circuit and also create a circuit split is an open question. If it does, a scenario where ALJ proceedings are allowed in some jurisdictions but not others may arise. Such a situation may lead to Supreme Court review. Finally, putative plaintiffs, particularly in the Fifth Circuit, may rely on the ABM decision to halt ALJ proceedings when two or more layers of good-cause removal restrictions insulate the decisionmaker from presidential removal.
How Should Employers Respond?
Employers facing enforcement actions before a DOL ALJ should consider challenging the proceedings on Article II grounds and seeking a preliminary injunction. Employers should also consider broader separation-of-power challenges to the OFCCP enforcement scheme. The OFCCP enforcement scheme is a creature of executive order, and the statutory basis for OFCCP's enforcement scheme is both obscure and dubious and subject to challenge. And while the ABM court did not reach the adequacy of such proceedings under the Seventh Amendment, employers should also consider a Seventh Amendment challenge following the Supreme Court's SEC v. Jarkesy opinion.
Two Key Takeaways
- A Texas federal district court has held that the OFCCP's ALJ enforcement scheme is likely to violate Article II of the U.S. Constitution. Whether other courts will agree is an open question.
- Employers facing enforcement actions before a DOL ALJ should consider challenging the proceedings on Article II grounds and seeking a preliminary injunction.
