Employment Law Daily New hearing, different ALJ required based on Appointments Clause challenge to MSHA penalty
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Friday, August 3, 2018

New hearing, different ALJ required based on Appointments Clause challenge to MSHA penalty

By Joy P. Waltemath, J.D.

Although a road contractor that challenged the legality of a $2,940 civil penalty imposed by the Mine Safety and Health Administration (MSHA) argued that the agency did not have the power to issue the citations, and it also mentioned (but did not argue) that the administrative law judge (ALJ) who upheld the citations might not be constitutionally appointed, the Sixth Circuit found that the contractor had an obligation to exhaust its constitutional claim; it had forfeited (but not waived—because it identified the issue but failed to argue it) its constitutional claim; but there were extraordinary circumstances to excuse its forfeiture. As such, the appeals court was free to consider whether the ALJ was constitutionally appointed under the Supreme Court’s Lucia v. Securities & Exchange Commission 2018 decision. Holding that as inferior officers, the Federal Mine Safety and Health Review Commission’s ALJs must be appointed by the president, a court of law, or a head of department, and that the MSHRC is a “Department” and its five commissioners collectively serve as its “Head,” the appeals court determined that only the full Commission could appoint ALJs. Because the Commission had impermissibly delegated that power to its chief administrative law judge, who appointed the ALJ here, the contractor was entitled to a new hearing before a constitutionally appointed ALJ, even though in April, the Commission had acted to cure this constitutional defect by having every commissioner ratify the appointment of every ALJ (Jones Brothers, Inc. v. Secretary of Labor, Mine Safety and Health Administration, July 31, 2018, Sutton, J.).

Extracting rock. Suffice it to say the road contractor was under contract with the Tennessee DOT to repair a section of collapsed roadway; it extracted rock from a site nearby by drilling and blasting and then loaded and hauled the sifted rock to the roadway. An MSHA inspector found fault with the process in terms of proper safety equipment and training and imposed the $2,940 civil penalty on what was a $977K contract. The contractor challenged MSHA’s power to issue the citations in from of the MSHRC; the ALJ rejected its challenge, as did the Commission itself.

Appointments Clause issue identified. The contractor did not mention the Appointments Clause issue in front of the ALJ, but it identified the constitutional issue before the Commission, saying only that there was a circuit split as to whether ALJs who are not appointed by the president “may constitutionally decide cases brought before them.” To the appeals court on review, this procedural posture triggered three threshold issues: Did the contractor have an obligation to exhaust a constitutional claim like this one? If so, did its identification of the issue suffice? If not, did the “extraordinary circumstances” exception apply?

Had to administratively exhaust. First, the Sixth Circuit determined that the contract did have an obligation to exhaust this constitutional claim before the Commission. Among other things, the governing statute said that petitions for discretionary review shall be filed upon one or more of certain enumerated grounds, including that the decision is contrary to law, or that a substantial question of law, policy, or discretion is involved. Although agreeing that an administrative agency could not entertain a facial challenge to the validity of a law, the appeals court found that petitioners like the contractor had to preserve as-applied constitutional challenges or constitutional-avoidance arguments before the relevant agency. It reasoned that “the crucible of administrative review ensures that the petitioner’s case presents a true constitutional dispute before the Judiciary steps in to decide those weighty issues.”

Commission could hear this challenge. Here, the contractor went through the administrative review process first, and then to the appeals court. It argued all its non-constitutional claims to the agency, and the agency rejected them in full. All that remained was the contractor’s Appointments Clause challenge. Could the Commission have entertained that challenge? Finding the contractor only sought to enforce the Mine Act requirement that the power to appoint ALJs rested with the Commission itself, and read in light of the Appointments Clause, imposed a non-delegation requirement, the court found the contractor was not a making facial challenge; instead, it was making a challenge that “the Commission was fully suited to entertain.”

Constitutional claim forfeited, but forfeiture excused. Before the Commission, the contractor acknowledged the circuit split on the Appointments Clause issue but made no argument. Because a party forfeits any allegations that lack developed argument, the contractor forfeited it here. However, that forfeiture was excused, said the appeals court, because the Mine Act allows courts to excuse forfeiture “because of extraordinary circumstances,” and the absence of legal authority addressing whether the Commission could entertain the claim was such a circumstance. Not every circuit agrees, noted the appeals court, citing the Fifth Circuit in D.R. Horton, Inc. v. NLRB, and the Eighth Circuit in NLRB v. RELCO Locomotives, Inc.

Appointments Clause merits.Lucia v. Securities & Exchange Commission held that the SEC’s ALJs are inferior officers within the meaning of the Appointments Clause because they hold continuing office established by law and exercise significant discretion when carrying out important functions. That was true here too, said the Sixth Circuit, noting the Commission’s ALJs are established by statute, exercise significant authority like their SEC counterparts, preside over trial-like hearings, and have the authority to issue initial decisions assigning liability and imposing sanctions.

New hearing, different ALJ. Holding that as inferior officers (like the SEC’s ALJs), the Commission’s ALJs must be appointed by the president, a court of law, or a head of department, and that the MSHRC is a “Department” and its five commissioners collectively serve as its “Head,” the appeals court determined that only the full Commission could appoint ALJs. Because the Commission had impermissibly delegated that power to its chief administrative law judge, who appointed the ALJ here, the contractor was entitled to a new hearing before a constitutionally appointed ALJ, even though in April, the Commission had acted to cure this constitutional defect by having every commissioner ratify the appointment of every ALJ. As a result, the Sixth Circuit vacated the Commission’s decision and remanded to the Commission for fresh proceedings.

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