When the Office of Federal Contract Compliance Program believes that a contractor has violated affirmative action obligations, its tried-and-true practice for obtaining relief is an administrative enforcement action.

The OFCCP initiates such an action by filing an administrative complaint against the contractor with the U.S. Department of Labor’s Office of Administrative Law Judges. The ALJ assigned to the proceeding is charged with overseeing discovery, holding hearings, and issuing a recommended decision and order. That recommended decision is then reviewed by the DOL’s Administrative Review Board for a final agency determination.

But a court just found that this procedure violates the U.S. Constitution because the DOL ALJs cannot be removed from office directly by the President.  

The case against ABM Industry Groups

After a routine compliance evaluation, the OFCCP concluded that ABM Industry Groups, LLC, violated Executive Order 11246 by discriminating against Black and white applicants and favoring Hispanic applicants. Presumably, the parties attempted to resolve the issues through conciliation, but the OFCCP filed an administrative complaint against ABM with the Office of Administrative Law Judges in September 2021.

On September 9, 2024 (yes, three years later), ABM filed a Complaint in the U.S. District Court for the Southern District of Texas against the OFCCP, the DOL, and related agency officials, seeking to enjoin the administrative enforcement action. ABM contended, among other things, that there are two “layers” protecting DOL ALJs from being removed from office by the President and that this violates Article II of the U.S. Constitution.

Article II

In a super-simplified nutshell, Article II provides that the President of the United States has the power to appoint certain Officers of the United States. The U.S. Supreme Court has interpreted this to mean that the President has the power both to select and to remove administrative officers in the Executive branch. And possessing removal power is essential to carrying out the responsibilities of the Office of the President.

The “two layers”

ALJs employed by the DOL can be removed from office only “for good cause” (Layer 1), and the Merit Systems Protection Board is empowered to determine whether good cause exists. Members of the Merit Systems Protection Board, in turn, can be removed by the President “only for inefficiency, neglect of duty, or malfeasance in office.” (Layer 2)

The court’s decision

U.S. Senior District Judge Sim Lake (a Reagan appointee) noted that the U.S. Court of Appeals for the Fifth Circuit has previously ruled that two or more layers of removal restrictions on the President’s ability to remove ALJs working for the Securities and Exchange Commission was unconstitutional because it interfered with the ability to ensure that laws are faithfully executed, another constitutional requirement.

Judge Lake found that the rationale that applied to the SEC ALJs also applied to the DOL ALJs because the latter “are protected by two layers of [removal] 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.”

Thus, Judge Lake granted ABM’s motion for preliminary injunction and enjoined the OFCCP from proceeding further with its administrative enforcement action.

What’s next?

Although this is intriguing news for federal contractors, I wouldn’t uncork the champagne just yet.

First, this is just a preliminary injunction, and as its name implies, the litigation will continue to a full decision on the merits. Moreover, even if Judge Lake issues a permanent injunction, the DOL and the OFCCP are very likely to appeal to the Fifth Circuit. A decision from the appellate court (or even the Supreme Court) is likely to take many years. But if the DOL appeals, it is not clear whether the appeal would continue once President Trump takes office.   

In addition, the preliminary injunction applies only to this one matter involving ABM, not to any other contractor. At this time, nothing prevents the OFCCP from proceeding with other administrative enforcement matters before an ALJ.

And finally, as Judge Lake notes, in lieu of proceeding before an ALJ, the OFCCP may refer a contractor’s alleged non-compliance to the U.S. Department of Justice, which can pursue remedies through a lawsuit filed in federal court. The Office of Administrative Law Judges is not the only game in town for the OFCCP.

Conclusion

The OFCCP typically files only a few administrative complaints each year. Most contractors find it more expedient to resolve (or at least try to resolve) allegations of discrimination with the OFCCP before the matter escalates to enforcement. So, theoretically, this decision is unlikely to affect many contractors.

However, this decision – combined with the Supreme Court’s recent decision in Jarkesy v. Securities and Exchange Commission, holding that the SEC’s process unconstitutionally deprives litigants of their Seventh Amendment right to a jury trial – is certainly a help to federal contractors. It might even assist in persuading the OFCCP that fewer cases of alleged discrimination are worth pursuing, which could potentially decrease conciliation costs for contractors.