Safety Perspectives From the Dallas Region: Federal Court Ruling Sparks Uncertainty in OSHA Proceedings

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Frank Davis: Greetings to all our listeners out there. Today you have Frank Davis, a shareholder with Ogletree Deakins, broadcasting to you from the Ogletree Tower in the heart of Texas, sitting here in downtown Plano. With me, I have John Surma, my law partner, hailing from the Houston area. John, good morning.

John Surma: Good morning, Frank. And I think this is going to be an interesting podcast for both yourself and myself.

Frank Davis: What we’re talking about today is a series of decisions that have come out of the Fifth Circuit, which I think is fair to say, although one has been reviewed all the way up to the Supreme Court of the United States. But the cases we’re going to be talking about originated in the Fifth Circuit, which is the Circuit Court of Appeals that covers Texas, Louisiana, and Mississippi. And the case that we’re going to be talking about, I guess the origin case is the Securities and Exchange Commission v. Jarkesy.

In that case, the court, the Fifth Circuit, let’s start with the Fifth Circuit, determined that administrative law judges in certain matters before the US Securities and Exchange Commission were not authorized to hear cases for two reasons. One was a Seventh Amendment reason, Seventh Amendment of the Constitution that requires or gives defendants the right to a trial by jury, but the one that’s going to be center stage for us today was an Article 2 question. Article 2 of the Constitution establishes the executive branch and the powers of the executive branch.
So John, with that intro, I’m going to defer to you a little bit because you wrote a pretty awesome blog. You and Ryan Swink, another lawyer out of our Houston office, wrote a pretty awesome blog on this. Could you give us a little bit of background about the Article 2 issue that was raised before the Fifth Circuit?

John Surma: Yeah, sure, Frank, and thank you for the kind words. So full and fair disclosure to our audience. Frank actually kind of roughed out an outline for us or a base on which we built, and I appreciate the base on what you built, Frank. So to answer your question more directly, Judge Lake in the Southern District of Texas heard a case and there was a challenge to the Department of Labor’s administrative judges, the administrative courts established under the Department of Labor that are administered by the Department of Labor.

And in a nutshell, the decision that Judge Lake or the order that Judge Lake rendered was predicated on the Jarkesy case or Jarkesy. We go back and forth in terms of how we pronounce it, but one way or the other, Judge Lake looked at what was laid forth by the Fifth Circuit Court of Appeals in that decision and said, “Look, because…” And I’m distilling this into sort of non-legal terms. “Because these judges are protected by the Civil Service Reform Act of 1978 and are not subject to removal like a US District Court Judge or somebody in the Article 3 courts would be removable. This system does not work and these judges cannot hear these cases.”

And so as a consequence of that, we’ve got a situation where functionally, at least in the state of Texas, the law of the land as it stands today, is that any of these administrative courts that are part of the Department of Labor or that are promulgated under the Department of Labor, cannot hear cases, cannot hear controversies that arise. So whether it’s OSHRC, which is part established as part of the OSHRC in 1970, or any of the other court systems in the Department of Labor and the case in question dealt with the Office of Federal Contractor Compliance, none of them can hear cases in the state of Texas.

Frank Davis: To put it all in perspective. So everybody’s familiar with OSHA and OSHA coming out and doing inspections. Some are familiar with OSHA issuing citations. And so when you receive that citation, as we’ve talked about on another podcast, once you receive that citation, you have some options. You can agree, pay it and move on. You can go have an informal conference and try to reach a different resolution. If you don’t accept one or two, the first two options, or if you don’t reach an agreement during an informal conference, then you have the right to appeal it and that appeal goes to a judge. And those judges are employed by the Occupational Safety and Health Review Commission. We call them administrative law judges. And the administrative law judges were the target of this decision that came out of Judge Lake’s court that you’re referring to now.

And so without being able to go to that administrative law judge to hear these citations that are in dispute, the question now is what happens to those citations? So since 1970, we’ve had this resolution process where if you disagreed with the citation, you could appeal it to an administrative law judge, but based on this decision out of the Southern district of Texas, we’re now barred from proceeding to the administrative law judges. And so the question that we’re presented with is so what now?

John Surma: That’s a huge question. It’s an enormous question, and I’ll be honest with you, we’re not supposed to date these podcasts, but we’re basically a week and a half after that decision from Judge Lake came down, there’s been an election that took place in between Judge Lake’s decision and us recording this podcast that is radically going to alter or that radically alters what the landscape looks like for OSHA and other administrative agencies going forward. And I don’t think anybody’s got the answer, but I certainly think that this complicates things from the standpoint of OSHA trying to prosecute those citations once we can test them and not having a court system within which to do it. I don’t even know, and I’ve been pondering this, Frank, and I’m curious as to what your thoughts are from the standpoint of filing the contest. That’s just submitting correspondence to the area director, notifying them that you’re contesting the citations. In order to initiate the proceedings, the solicitor of labor has to file a complaint with OSHRC. I don’t know that they can even file the complaints with OSHRC under Judge Lake’s order.

Frank Davis: You’re hitting the same mental barrier I am because Judge Lake issues a temporary restraining order saying that DOL judges basically are not authorized to hear cases, and therefore, if they’re not authorized to hear cases, where do you file the complaint? Complaint can’t go to an administrative law judge. My first thought was, well, maybe it just goes to a federal court, but I’m not sure that US DOL lawyers could do that. I’m not sure they have authority to do that just to file it in federal court. So instead of filing it with the review commission, they would file it in Judge Lake’s court, for example. I’m not sure they have the authority to do that.

John Surma: And maybe it’s tomato-tomatoe, beyond not having the authority. I don’t know that there is the procedural method or the procedural basis for them to go directly to a federal court.

Frank Davis: Yeah, no, that’s what I mean. I’m not sure that the act authorizes them to go directly to federal court, because the process usually goes ALJ then if the parties are unhappy with the decision by the administrative law judge and the filing, then the appeal, sorry, goes to the Review Commission, the Occupational Safety and Health Review Commission that we often call OSHRC. And then if the parties are unhappy with the outcome there, then it finally gets appealed to federal court. And that’s a federal circuit court, not a district court.

John Surma: For our audience, the difference Frank is making is Judge Lake’s court is not the court that you would go to. It would be the Fifth Circuit Court of Appeals if you’re in Texas.

Frank Davis: Yeah, that’s exactly right. So I guess the question… My knee-jerk reaction was, well fine, just file it with the federal judiciary, take it to an Article 3 judge, take it outside… Article 2, by the way, is the constitutional provision addressing the executive branch, which is headed by the President of the United States. Article 3, when you hear John and I refer to Article 3, we’re talking about the article in the Constitution addressing the judicial system, the judiciary that is obviously crowned by the Supreme Court of the United States. So my initial thought was that you’d just file it in Article 3 court, but I don’t see where they have authority to bypass the Article 2 structure and go directly to federal court. And maybe that’s what I’m referring to when I say I don’t believe that the US DOL attorneys have authority to do that. I do wonder if maybe the Department of Justice lawyers would have authority to do that.

John Surma: Potentially, but here’s the problem at the end of the day, well, I mean there’s several problems at the end of the day, the number one problem is there’s an established procedure for how contests are supposed to take place. And whether it’s the solicitor labor or DOJ attorney, I don’t know that there’s any way that they can bypass that procedure. That’s that whole exhausting of administrative remedies and the way the procedure is set up, I don’t think they can do it. Number two, can you imagine even if it was only Texas, if every Texas employer that was cited ended up with their case in a US district court or even more outrageous in the Fifth Circuit Court of Appeals? You talk about creating judicial backlog. I mean it would stack things up…

And the cases that we’re talking about are only one tiny subset of all the cases at issue. I mean, you’re talking about all the whistleblower cases that are filed. You’re talking about all the other cases under the Department of Labor. So I mean labor cases, employment case, everything. I mean, you talk about creating a massive roadblock in the federal courts, whether it’s the district courts or the Court of Appeals. I mean, the backlog would be insane. This is one of those things where you kind of sit back and look at things and just scratch your said head and say, “How in the world did we end up here?”

Frank Davis: Yeah, I agree. I thought about that as well. You always hear about the backlog created just by drug cases alone. Well, this would truly compound that problem. The courts wouldn’t be able to hear anything else between criminal drug cases and DOL cases, they’ll just come to a standstill.

John Surma: Or would have to hire a whole bunch of new federal judges.

Frank Davis: And if your prediction is right about the impact on the practice, maybe you and I could be federal judges. Can you imagine?

John Surma: Hey, you know what? Sign me up, folks. I’m ready for that. But I mean, here’s the thing, and I mean this is obviously beyond this podcast and outside of our lane, but the Department of Labor and its administrative courts are just one slice of the very big administrative agency pie. And there’s a ton of federal agencies that have their own… I mean, the SEC is where this thing started out. And so if we’re going to start putting everything into federal court that is currently handled by one of these administrative courts, I mean, I don’t know how many times the number of current sitting federal judges we would need, but I’m guessing it’s dozens and dozens of times more federal judges than we currently have in order to handle that caseload.

Frank Davis: Well, how many ALJs are there for OSHA right now? What do we have four in Colorado, four, five in Atlanta, and the similar number in Washington? So what are we talking about?

John Surma: Like 15-ish.

Frank Davis: 15 judges somewhere in there.

John Surma: Something like that.

Frank Davis: You’d have to add at least that many just to handle this docket.

John Surma: Right. You think about how small… I mean, OSHA is only 2200 employees strong. You think about how small it is compared to some of the other agencies in question and the IRS, the EPA. I mean, you just go on down the list. I mean, it’s going to create a massive demand for court structures. I mean, I’d love to be in the business of building US district court buildings if this is where we end up. But I mean, on the other hand, at the end of the day, I kind of agree with some of what Justice Thomas’s opinions were as expressed in the all-states refractory dissent where he basically says, “Look, Congress has delegated extensive legislative power to these administrative agencies, and Congress has really given up its ability to write legislation.”

There’s one place that can fix this all. Congress, I mean Congress, people talk about… Well now with Chevron deference, et cetera, et cetera, the OSHA standards as they exist, they’re gone. It’s like, well, no. I mean, Congress could literally adopt legislation that essentially said effective whatever date the legislation, all the OSHA standards that exist are now basically adopted by Congress whole cloth.

Frank Davis: And obviously Congress could pass legislation to clear this up. The problem is it takes a while to get legislation passed. So we’ve got at least months of trying to reconcile this issue.

John Surma: If they worked like the rest of the country worked, they could get this done in a few days, but leave it to government and leave it to Congress, we’re going to drag it out.

Frank Davis: Yeah, I’m not optimistic about a quick resolution through Congress. What I am interested in talking about now is what do we do in the interim? I mentioned a moment ago that once a citation is issued, employers can have multiple choices. They can say, “Yeah, I’m guilty of that. I’ll just pay it and I’ll abide by it.” Not something we typically recommend, but that is an option. Step two is to go to a settlement conference and try to resolve it, and hopefully you settle it there in a way that’s satisfactory. But if not, then that’s when the appeal comes. That’s when the notice of contest gets submitted, and that’s when the US DOL lawyers have to decide what they’re going to do at that notice of contest. Do they go and file a complaint that could arguably violate this enjoiner from the Southern District of Texas? And so if you don’t have that third step available, then what is that? Is that leverage for a settlement?

John Surma: Well, look, we’re not supposed to render legal advice on this, so this is not legal advice, but I mean, number one, and you and I spent a fair amount of time talking before we started recording this podcast about what does the landscape look like now? And I mean, I think the only thing that we can say with a high degree of certainty is we’re really not sure what the landscape looks like. Having said that, my inclination is that we have to figure out what solicitor labor, Department of Labor, OSHA, OSHRC are going to do, and we don’t know what they’re going to do until we start testing those boundaries. And I think we probably are going to be in a situation where the only really viable option in order to test those boundaries is going to be filing contests in our cases because we will never know what could have been, but for contesting those citations.

Frank Davis: I get that. What about current pending cases though, aren’t we already testing what the result is going to be with our current pending cases?

John Surma: We are. That’s interesting, and I had not really thought about that, and I guess I should have given some more consideration of that. But I mean, I certainly think that that kind of brings everything to a screeching halt as relates to pending cases. I mean, I suppose we can proceed with discovery, I suppose we can proceed with depositions, et cetera. But from the standpoint of any hearings, be they on discovery motions or on dispositive motions, summary judgment motions, whatever, or ultimately on the hearing/trial, those can’t proceed under Judge Lake’s order. Honestly, it creates a whole brave new world as we started off saying, doesn’t it?

Frank Davis: It really does. I mean, it’s a hard question to answer, and so far I haven’t heard a good answer from anybody yet except that the judges without authority to issue rulings on these decisions. And if that’s the case, it is a brand new place for us to be. I’ve never seen a situation in, what is it now? 25 years of doing this job where there wasn’t a trial or a fact to go to.

John Surma: Oh, yeah. I’ve been practicing for almost 30 years. I guess it’s not almost, I guess it’s 30 years. I’ve never had anything where there was no fact. I mean, I certainly have had cases where judges died or whatever, and so until somebody was appointed to replace them or whatever, there was a gap in coverage, but never where the entire system is ostensibly hamstrung by something like Judge Lake’s decision. I mean, I think it’s exciting. I think it’s interesting.

One of the things I tell folks when we’re talking about what we do for a living is part of the reason I so enjoy what we do is every day is different. You don’t wake up and do the same day twice. And certainly this affords us a great opportunity for that. But from the standpoint of prognosticating about what the future looks like, your guess is as good as mine. I mean, I don’t know how these things are ultimately going to shake out. I think that this is a preview of what’s to come. I think the Supreme Court’s decisions at the end of last term, I think that Justice Thomas’s dissent and Allstate’s refractory contractors leads to a pretty obvious conclusion that with the right challenge, the administrative agencies and OSHA in particular likely will cease to have the rulemaking authority that they have, and we seriously have their authority curtailed. But how does this actually play out in terms of any particular case? I think anybody saying they know is lying.

Frank Davis: Well, here’s the representation I would make is that we’ll keep an eye on this as events develop, and we’ll be prepared with the updates, your blogs and our podcast to keep our listeners updated with the information as we get it. But for right now, there’s just not much more information to share.

John Surma: No, there isn’t. And one of the things that you mentioned, and I do think it bears mentioning, again, Judge Lake’s not the only judge in Texas, not the only US district court judge in Texas to basically make a similar ruling, similar decision. It’s just this is the first one that really hones in on the Department of Labor Administrative Courts. And so that’s why I thought, and let’s face facts, you’re the one that brought this to the fore. That’s why we thought this was important to talk to our audience about.

Frank Davis: Yeah, that’s fair enough. And like I said, we’ll continue to keep everybody updated as we figure things out or as the Department of Labor and the other executive agencies figure it out because as you suggested, Security and Exchange Commission, the National Labor Relations Board, US DOL, the United States Department of Labor that is, all have had similar decisions issued against their judges. So we’ll be watching and we’ll be updating and we’ll be hoping for an answer and a better direction soon.

John Surma: Yeah, unfortunately, clarity just eludes everybody, and at this point in time, there’s a lot going on in the country, and I think that there’s a lot of pieces have to start getting moved around on the table before people have a clear picture of what this is going to look like.

Frank Davis: John, thank you for your blog. Everybody should be looking for that blog. It’s a good one. It lays everything out really succinctly and clearly in a very understandable way. Appreciate you talking to me this morning. I hope you have a good rest of your day and stay out of the rain.

John Surma: Hey, Frank, thank you so much. Thank you for the spark to get this going, and I genuinely appreciate our partnership. And look, man, take care of yourself.

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