The U.S. Federal District Court for the Southern District of Texas issued an order halting further action in an enforcement case brought by the Office of Federal Contract Compliance Programs (OFCCP) against ABM Industry Groups LLC, a janitorial service provider in Houston, Texas. The case involves allegations that ABM favored Hispanic applicants over African American applicants in its hiring practices. The court’s ruling prevents the U.S. Department of Labor, the Acting Secretary of Labor, the OFCCP, the Acting Director of the OFCCP, and Administrative Law Judge Fort from continuing with this particular case. This order applies only to this case and does not affect other cases in the agency’s internal courts.
Specifically, the case arose through an OFCCP compliance audit. Here, OFCCP conducted an audit and alleged that ABM was unlawfully discriminating at three of its thousands of branch establishments against certain applicants for janitorial and cleaning jobs. More specifically, OFCCP alleges that ABM favored Hispanic applicants to the detriment of White and Black applicants – in other words, ABM hired too many Hispanic workers. OFCCP based its claims solely on statistical analyses, without any applicant complaints or anecdotal evidence establishing that ABM intentionally discriminated in its hiring processes at these work locations.
In effect, the case brought to the Administrative Court and Administrative Law Judge (ALJ), was a civil case alleging discrimination. The question before the U.S. District Court is whether the Administrative Court has the jurisdiction to hear the civil case which would impose monetary damages on ABM.
ABM alleged that the administrative court and more specifically the ALJs did not have the jurisdiction to rule on this type of case. The court agreed and relied on Jarkesy v. Securities and Exchange Commission, 34 F.4th 446, 463 (5th Cir. 2022) which held that having two or more layers of good-cause removal restrictions between the President and SEC ALJs was unconstitutional. ABM said that ruling applies here because DOL ALJs exercise similar executive functions as SEC ALJs because they are all insulated by the same removal protection layers.
The U.S. District Court stated that "[t]he court agrees that Jarkesy is dispositive. SEC ALJs' authority to conduct hearings are essentially the same as DOL ALJs, and DOL ALJs are therefore 'officers of the United States.' Jarkesy therefore requires that DOL ALJs not be insulated by two layers of good-cause removal protections."
The DOL argued that the DOL’s in-house judicial systems are distinct from the SEC’s because DOL ALJs are overseen by the secretary of labor who, unlike SEC commissioners, is removable at-will by the president. Therefore, the DOL argued, DOL ALJs are sufficiently accountable to the president.
The District Court disagreed and pointed out that the process to remove an ALJ is convoluted and not as direct as the DOL argues. More to the point, the District Court stated:
DOL ALJs are protected by two layers of restrictions: they can only be removed for cause, a decision that is made by the MSPB, who the President in turn can only remove for inefficiency, neglect of duty, or malfeasance in office . . . [and] the President "is powerless to intervene unless [the MSPB's good-cause] determination is so unreasonable as to constitute 'inefficiency, neglect of duty, or malfeasance in office.'"
Therefore, the DOL internal courts, at least in the current type of case, are unconstitutional under Article II of the constitution as the President does not have direct power to remove and ALJ.
ABM also raised the 7th Amendment case in which an administrative court was to impose financial penalties on it without recourse to a jury trial which was the basis of the Supreme Court’s decision when Jarksey was appealed. The court never ruled directly on this point.
The case will be appealed to the 5th Circuit. Regardless, with one court ruling this way, it sets precedent for any proceeding similar to ABM in which financial penalties will be imposed, whether Wage and Hour, Pensions, etc.
Source: ABM Industry Groups LLC v. United States Department of Labor et al., No: 4:24-cv-03353, (U.S. District Court for the Southern District of Texas, 10/30/24), Law360 10/31/24