Federal Court Ruling in Texas Challenges OSHA’s Administrative Law Judge System

Quick Hits

• Application of precedent: Following the Supreme Court’s ruling in SEC v. Jarkesy, which restricted the use of ALJs at the SEC, a U.S. district judge in Texas has extended this ruling to include ALJs at the DOL, potentially affecting OSHA’s adjudication procedures.
• Constitutional challenges: The judge’s ruling indicates that the Occupational Safety and Health Review Commission’s administrative review procedures may not withstand constitutional scrutiny, particularly due to the multilevel good-cause removal protections for ALJs, which infringe on the president’s authority under the Take Care Clause.
• Impact on employers and the legal landscape: The decision could significantly alter the legal landscape for employers, particularly those in Texas, by providing new leverage in disputes with OSHA.

Employer disputes with OSHA, including disputes related to claims of discrimination under Section 11(c) of the Occupational Safety and Health Act (OSH Act) and twenty-four other whistleblower statutes over which OSHA has jurisdiction, are decided by ALJs within the Occupational Safety and Health Review Commission (OSHRC). The decision by Senior U.S. District Judge Sim Lake appears to suggest that, regardless of the type of proceeding, OSHRC’s administrative review procedures do not stand up to constitutional scrutiny. The decision is likely to turn that system on its head and radically alter the landscape for employers, at least for employers in Texas.

The case in question arose from a compliance action under the Office of Federal Contract Compliance Programs (OFCCP). The plaintiff, a federal contractor, subject to OFCCP oversight, was audited to determine whether it had complied with the antidiscrimination provisions of its contract. After OFCCP concluded the contractor had violated those provisions, OFCCP had the option of referring the matter to an administrative enforcement proceeding or to the U.S. Department of Justice for enforcement in federal court.

In this case, OFCCP elected referral to an administrative enforcement proceeding. In administrative proceedings, ALJs manage all aspects of litigation, including ruling on discovery disputes and procedural and substantive motions, managing the schedule of proceedings, ruling on the admissibility of evidence, and holding final hearings. Judge Lake concluded that this authority infringed on the president’s authority under the Take Care Clause because the ALJs were insulated from removal by two or more layers of good-cause restrictions. Judge Lake explained:

DOL ALJs are appointed by the DOL with the approval of the Office of Personnel Management (“OPM”). DOL ALJs may not be removed from office except ‘for good cause[.]’ Good cause must be “established and determined by the Merit Systems Protection [MSPR] Board on the record after opportunity for hearing before the Board.” MSPR members are appointed by the President with consent of the Senate but “may be removed by the President only for inefficiency, neglect of duty, or malfeasance in office.” (Citations omitted and cleaned up.)

In concluding that the multilevel good-cause restriction was unconstitutional, Judge Lake relied heavily on the Fifth Circuit Court of Appeals’ Jarkesy decision, which was subsequently affirmed on other grounds by the Supreme Court. In addition to the grounds the Court affirmed on, the Fifth Circuit’s Jarkesy decision held that SEC ALJs were “Officers of the United States” with two or more layers of good-cause removal restrictions, which violated the Take Care Clause of the U.S. Constitution. The Fifth Circuit explained that because the SEC ALJs could be removed only for cause, the president’s ability to ensure that the laws are faithfully executed was unconstitutionally burdened.

The Supreme Court’s Jarkesy decision affirmed the Fifth Circuit based solely on the grounds that the plaintiff was denied his Seventh Amendment right to a trial by jury by being forced to defend against what was, in essence, a common law fraud claim before an administrative law judge. The Supreme Court, however, did not reach the other issues addressed by the Fifth Circuit—whether the SEC structure violated the nondelegation doctrine and whether the SEC ALJ structure’s for-cause removal requirement was unconstitutional. Still, Judge Lake followed the Fifth Circuit Jarskey decision’s alternative holdings and concluded that the multilevel for-cause removal protection afforded OSHRC ALJs was unconstitutional.

In his October 30, 2024, memorandum opinion and order, Judge Lake stated that DOL ALJs hearing OFCCP cases enjoyed the same for-cause protections as SEC ALJs. Therefore, consistent with Fifth Circuit precedent, he decided that the ALJ structure was unconstitutional and granted a temporary restraining order against the DOL, concluding, “[Plaintiff] faces a substantial threat or irreparable injury by being subjected to the administrative proceeding while these [for-cause] removal restrictions are in place.” Accordingly, the court enjoined the DOL from continuing “any further” with the administrative proceeding.

Judge Lake is not the first Texas judge to extend the Fifth Circuit’s Jarkesy decision’s alternative holdings. In July, Judge Jeffrey Vincent Brown of the U.S. District Court for the Southern District of Texas relied on removal restrictions to enjoin the National Labor Relations Board’s (NLRB) attempts to adjudicate an unfair labor practice charge. Likewise, Judge Alan Albright of the U.S. District Court for the Western District of Texas and Judge Mark Pittman of the U.S. District Court for the Northern District of Texas have also enjoined the NLRB. However, Judge Jeffrey Cummings of the U.S. District Court for the Northern District of Illinois refused to follow the Fifth Circuit’s Jarkesy decision. Additionally, there are two similar cases pending in the Fourth Circuit, where the courts are not bound by the Fifth Circuit Court of Appeals’ logic and reasoning in Jarkesy. A split among the various federal courts of appeal seems likely and could compel the Supreme Court to take up the issue.

In addition to the multilevel for-cause removal restrictions, OSHRC may soon find itself facing a number of other constitutional challenges that have found success against other agencies, including actions addressing (1) an employer’s right to a trial by jury; (2) the constitutionality of OSHRC’s ALJ appointment scheme; (3) the constitutionality of for-cause removal of OSHRC commissioners; and (4) due process issues arising from OSHRC’s current lack of quorum.

While the ramifications of Judge Lake’s order to the ever-changing legal landscape is unclear, the broad language of his order suggests a constitutional argument could be extended to any ALJ who is subject to a dual level for-cause removal restriction. This for-cause restriction undoubtedly applies to DOL OSHRC ALJs. Thus, it could be argued that OSHRC cannot proceed “any further” with any matter pending. At a minimum, the decision gives employers new leverage with OSHA when negotiating settlement agreements or seeking other equitable relief.

Ogletree Deakins’ Workplace Safety and Health Practice Group will continue to monitor developments and provide updates on the Government Contractors, OFCCP Compliance, Government Contracting, and Reporting, Texas, and Workplace Safety and Health blogs as additional information becomes available.

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