Supreme Court Weighs DOL's Power to Fine H-2A Employers

A $212,000 fine and $370,000 back-wage order sit at the center of a Supreme Court case that could strip the Labor Department of its power to penalize H-2A employers through administrative proceedings.

The court heard arguments Tuesday in the dispute stemming from DOL's 2019 enforcement action against Sun Valley Orchards, a New Jersey farming firm that ceased operations in 2021. An administrative law judge found myriad H-2A violations, and the department's administrative review board and a federal district court upheld the ruling. The 3rd Circuit Court of Appeals then reversed, and DOL petitioned the Supreme Court.

Sarah Harris, principal deputy solicitor general, warned the justices that ruling for the employer would upend how the department enforces H-2A rules. "There are hundreds of enforcement proceedings in a given year for just this program," she said. The impact could reach further, she added, limiting administrative remedies involving Medicare, Medicaid and the federal student loan program.

What does the case turn on?

The fight is over the Seventh Amendment and the "public rights" exception that lets agencies issue civil penalties without a jury. Harris said the case "rises and falls on the public rights exception," arguing two historical categories overlap here: sovereign control of immigration and government-granted privileges.

"The government is exercising its plenary immigration power on the employer's behalf to grant aliens visas and allow them to stay and work for that employer," she told the court.

Rob Johnson, a senior attorney at the Institute for Justice representing Sun Valley Growers, countered that the case involves private, not public, rights, because it is essentially about a breach of contract. He quoted the regulation creating the administrative enforcement program: "This is a scheme for the enforcement of all contractual obligations."

"That's a quote. So, if the government didn't view this as enforcing a contract, they would not be able to proceed under this regulation," Johnson said. He noted that before the H-2A program existed, a job order circulated through the employment system "gave rise to a contract that could be enforced through a breach-of-contract action at common law."

Justice Elena Kagan pushed back. "The real source of liability here is … the regulations," she said, pointing to the interpretation adopted by both the ALJ and the DOL review board. "It's fortuitous that those regulations are mimicked in the job order." Johnson answered that the "regulation itself … is a scheme for the enforcement of contracts."

Harris also cautioned that voiding the contractual setup would be "quite disruptive for the government" and could burden federal courts with added workload.

What did the ALJ actually find?

The administrative law judge documented numerous violations, which the company disputed:

• Firing more than 20 employees in the middle of harvest season
• Failure to provide workers with sanitary housing
• Transporting workers from housing to fields daily with unlicensed drivers and unsafe vehicles

How did farm groups respond?

The National Council of Agricultural Employers, joined by the Southeastern Legal Foundation and national and state farm associations in an amicus brief, urged the court "to uphold the Third Circuit's ruling that the case belongs in an independent federal court."

NCAE flagged two friendly justices. Justice Neil Gorsuch cited FCC v. AT&T, where the court read similar penalty language to mean only "the right to assign a penalty that could then be subject to enforcement in court," and asked the government, "Why isn't that the more natural reading of the statute?" Justice Brett Kavanaugh pointed to Tull v. United States, calling its statement that civil penalties "only be enforced in courts of law" "a fairly definitive statement in our precedent."

"Every farmer who uses the H-2A program was tuning in to today's critical hearing, and our voice was heard," NCAE President and CEO John Hollay said. "Justice Gorsuch's question went to the heart of our brief: Congress gave the Department the power to assess penalties, not to build its own courts."

What does this change for growers?

Johnson said the "key problem" with the current scheme is that the agency's trial is essentially conclusive, with only very limited review available afterward. "The important thing is, at the end of the day, you should have a right to go to a real court, to an Article III court, and to make your case," he said, adding he felt "great" after arguments and sensed the justices found the government's immigration framing of a farm labor dispute unconvincing.

Joe Marino, former co-owner of Sun Valley, was blunter outside the court: "When the government comes after you for any kind of monetary compensation or enforcement, you should have your fair day in front of a federal judge in a federal court." He called the system "extremely rigged, one-sided for the Department of Labor" and said the enforcement action "played a big part in the financial decision to quit" in 2021.

"We got the entire book thrown at us in an administrative courtroom, and then your first appeal is within the appellate division of the Department of Labor," Marino said.

A decision is expected by the end of the term, and it will determine whether hundreds of annual H-2A enforcement proceedings stay inside DOL or move to federal courtrooms.