Court Finds Administrative Law Judge Job Protections Unconstitutional

The following article was submitted by Brody and Associates, LLC. It is posted here with permission. 

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The U.S. District Court for the District of Columbia in VHS Acquisition Subsidiary No. 7 v. NLRB significantly shifts the balance of power within the federal government.

The court decided the longstanding tenure protections for National Labor Relations Board administrative law judges are unconstitutional.

If upheld, the ruling calls into question tenure protections for all executive branch administrative law judges.

At a high level, the court concluded the statutory framework governing ALJ removal violates Article II of the Constitution by excessively insulating these officials from presidential control.

The Decision

Specifically, the court took issue with the dual-layered system under which ALJs may be removed only for “good cause.”

The good cause determination must be made by the Merit Systems Protection Board, whose own members are also protected from at-will removal.

The decision significantly alters the balance between independence of the ALJs and accountability.

According to the court, this structure impermissibly restricts the president’s ability to oversee executive officers.

Thus, the court severed the “good cause” removal provision from the statute, effectively making ALJs removable at will by the NLRB (and therefore the president).

While the overall administrative system remains intact, the decision significantly alters the balance between independence of the ALJs and accountability to the president.

‘For Cause’ Removal

The decision rests heavily on the Supreme Court’s ruling in Free Enterprise Fund v. Public Company Accounting Oversight Board, which invalidated a similar dual-layer system of “for cause” removal protections as inconsistent with Article II (which sets forth the powers of the executive branch).

In that case, the court emphasized the president must retain sufficient authority to supervise and, if necessary, remove executive officers.

Applying that reasoning, the District Court found NLRB ALJs are subject to a materially similar structure.

Under existing law, ALJs may be removed only for good cause, and that cause must be determined by the Merit Systems Protection Board after a formal hearing.

Because MSPB members themselves are insulated from at-will removal, this creates a two-tier system that unconstitutionally limits presidential oversight.

The court rejected the NLRB’s argument that ALJs should be treated differently.

The court rejected the NLRB’s argument that ALJs should be treated differently because they perform adjudicatory functions.

Instead, it emphasized that ALJs are executive branch officers who exercise significant authority under federal law. As such, they must remain accountable, at least indirectly, to the president.

The dual-layer removal protections, the court concluded, improperly restrict accountability by preventing the president from determining whether removal is warranted.

To remedy the constitutional violation, the court severed the statutory “good cause” removal provision. In doing so, it preserved the general functions of the Agency while eliminating the language it found to be unconstitutional.

The result is a system in which ALJs continue to adjudicate cases, but without the same level of protection that has historically defined their role.

The decision also contributes to an existing circuit split on the issue. The Fifth Circuit has rejected similar dual-layer protections, while the Sixth, Ninth, and Tenth Circuits have upheld them. This division increases the likelihood of eventual Supreme Court review.

Will Agency Precedent Survive?

American jurisprudence historically has generally given great deference to prior decisions.

The NLRB’s ALJs have followed this practice. However, this decision will likely upend this practice.

Now, if the president opposes certain NLRB precedents, the ALJs will abandon them or risk being discharged.

The only option for an independent decision will be the federal courts (where NLRB decisions are appealed).

The power of agency decisions has also been dramatically reduced by another line of cases.

The power of agency decisions has also been dramatically reduced by another line of cases; Loper Bright Enterprises v. Raimondo, which overruled Chevron.

Chevron held federal courts should defer to administrative agencies when it comes to interpreting the law the agency is enforcing since that agency is the “expert” on their law. 

The U.S. Supreme Court overruled Chevron when they issued the Loper decision. Now agency decisions may be considered but they are not given any deference.

Implications

The potential impact of these decisions extend beyond the NLRB.

Many federal agencies rely on ALJs with similar tenure protections, and the reasoning of VHS Acquisition could be invoked to challenge those structures as well.

The SEC has already dealt with this issue in SEC v. Jarkesy, requiring the SEC to bring defendants to court for civil penalties, rather than allowing ALJs to impose penalties.

The potential impact of these decisions extend beyond the NLRB.

Additionally, the Department of Labor received a decision that limiting the president’s authority to remove an ALJ is unconstitutional.

Other agencies that may be affected include the Social Security Administration, Environment Protection Agency, Department of Health and Human Services and Occupational Safety and Health Administration.

The scope of these decisions could be massive.

If Agency Precedent Is Fading, What Comes Next?

If ALJs are removable at will by agency leadership or the president, decisions may vary dramatically based on the sitting administration.

This in turn may lead to more decisions being challenged in court where predictability is more likely and constant.

If this occurs, the time to get a binding decision and the cost of the process could dramatically increase.

The result may leave the process to large companies and individuals with the resources and patience to bankroll such a costly process.

If this decision holds, each administration will try to swing the law more than ever toward their party’s desired interpretation.

If ALJs are removable at will by agency leadership or the president, decisions may vary dramatically.

However, a practical matter may prevent this from materializing.

In theory, if ALJs produce decisions that do not align with presidential policy, the president may seek to remove them. However, replacing them may not be easy.

By the time a president finds a suitable replacement, there will likely be a backlog of disputes.

Moreover, there will be a learning curve for the new ALJ. In combination, this may cause a standstill in enforcement for many agencies early in each new presidential term.

If this is a common result, presidents will have to consider new alternatives or accept their actions may shut down much of the executive branch.

Takeaways

VHS Acquisition Subsidiary No. 7 v. NLRB reflects a broader judicial trend toward limiting the authority of administrative law judges while granting the president more power to control the agencies’ execution of policy.  

Precedent has lost much of its meaning and predictability of agency decisions is limited.

The end result for employers may be to put limited efforts into the administrative process and try to focus on success before the judiciary.

Time will tell what happens.