MARSHALL v. JERRICO, INC.
Legal provision: Fair Labor Standards
Argument of Kenneth S. Geller
Chief Justice Warren E. Burger: We'll hear arguments first this morning in Number 79-253, Marshall, the Secretary of Labor against Jerrico, Incorporated.
Mr. Geller, I think you may proceed whenever you are ready.
Mr. Kenneth S. Geller: Thank you, Mr. Chief Justice.
May it please the Court.
This case is here on direct appeal from the District Court here in the District of Columbia because a single judge of that Court has declared unconstitutional and enjoined the Secretary of Labor from enforcing the civil penalty provisions of the child labor statute.
Specifically, Judge Gasch found that the Due Process Clause of the Fifth Amendment is violated by the last sentence of Section 16 (e) of the child labor statute, which provides that the sums collected by the Secretary as civil penalties may be applied towards reimbursement of the cost of determining child labor violations.
The facts of this case may be briefly stated.
Appellee runs a chain of restaurants in the southeastern United States.
In 1969, 1973 and again in 1974, Department of Labor compliance officers found that appellee had employed a number of busboys and waitresses in violation of the federal child labor laws.
When two more such instances came to light in March 1975, the Department ordered an investigation into the hiring practices in all of appellee's restaurants.
Thereafter, the Assistant Regional Administrator of the Employment Standards Administration, which is the part of the Department of Labor that enforces the child labor laws, cited appellee for 169 separate child labor violations and assessed the civil penalty of $103,000.
This sum represented a penalty of $300 each for unlawfully implying -- employing seven persons under the age of 14, plus a penalty of $100 each for unlawfully employing 162 persons under the age of 16.
In addition, the Assistant Regional Administrator assessed the penalty of $500 for each of the 169 children, or a total of $84,500, because he believed that the history of child labor violations in appellee's restaurants stretching back to 1969, showed that appellee had been aware of the child labor violations but had done nothing to correct them.
Now, appellee filed an exception to this citation.
And after a hearing, the Administrative Law Judge found that the existence of the child labor violations was clearly established, but he disagreed with the Assistant Regional Administrator on whether these violations were willful.
The Administrative Law Judge therefore struck the $84,500 assessment and reduced the civil penalty to $18,500.
Now, appellee did not seek judicial review of this decision.
Instead, several months later, it began these lawsuits seeking a declaratory judgment that Section 16 (e) is unconstitutional and an injunction prohibiting its enforcement.
Chief Justice Warren E. Burger: Is there any reason why he couldn't raise that on a -- at an earlier stage in -- within the framework of this case?
Mr. Kenneth S. Geller: Appellee could, we believe, have sought judicial review of the Administrative Law Judge's assessment of the $18,500 and raised this constitutional objection as well as any other objections --
Chief Justice Warren E. Burger: Without having raised it before the Administrative Law Judge.
Mr. Kenneth S. Geller: It -- it was raised -- I don't believe it was raised before the Administrative Law Judge, although the Administrative Law Judge could not have given relief on that ground, so I'm not sure that that precludes raising it.
Chief Justice Warren E. Burger: For the first time, he could've raised, it would've been on --
Mr. Kenneth S. Geller: On --
Chief Justice Warren E. Burger: -- review in an Article III court?
Mr. Kenneth S. Geller: That -- well, that's -- he could've raised it earlier, but I think the first time he could have had -- it could have had any expectation of relief was in an Article III court.
That's -- that's right.
Now, as I mentioned a moment ago, the District Court agreed with appellee's contentions, relying on a line of cases beginning with Tumey against Ohio.
Judge Gasch held that the reimbursement provision of Section 16 (e), and I quote, “Creates a situation in which bias may creep into the decisions of the regional office -- officials who impose civil penalties, that the statute is therefore invalid under the Due Process Clause.”
Now, it's the Government's position that the injunction entered by the District Court is erroneous for three separate reasons.
First, we submit that the due process standards established in cases such as Tumey and Ward versus Village of Monroeville, are applicable with full force only to officials exercising judicial or quasi-judicial functions.
Second, even assuming that those standards do apply to the situation in this case, we contend that the court below erred in concluding that the child labor civil penalty scheme creates a significant risk of personal or institutional bias.
And finally, even if the reimbursement provision of Section 16 (e) does violate due process, the court below should have enjoined only the enforcement of that provision.
It should've left the remainder of the civil penalty statute enforced.
Acceptance of any of these three arguments would require reversal of the judgment below.
I'd like to turn first to our broadest contention, which is that the principles recognized in cases such as Tumey and Ward are inapplicable here because the Assistant Regional Administrator in citing an employer for violation of the child labor laws and assessing a proposed penalty is acting as a plaintiff for a prosecutor and not as a judge.
The basic notion that underlies Tumey and Ward is that a litigant is entitled to have his case adjudicated by someone who is free of any substantial likelihood of personal or institutional bias.
The Court in those cases struck down statutory schemes that in the court's words, “Offered a possible temptation to the average men as judge, to forget the burden of proof required to convict the defendant, or which might lead and not to hold the balance nice, clear and true between the State and the accused.”
Now, we certainly have no quarrel with these principles.
But they cannot be easily transferred, we think, to situations such as this one involving governmental officials exercising prosecutor of rather than adjudicative functions.
Justice Potter Stewart: Mr. Geller, let's assume on mine run prosecutor, just an ordinary prosecutor and -- and let's say that his compensation depended entirely upon the fines assessed against people, he was able to get a court to convict.
Would there be any constitutional problem there?
I don't know of any case.
Mr. Kenneth S. Geller: I don't -- well, there is a case in fact, because Tumey against Ohio and there was another aspect of Tumey which involved that and was not challenged by anyone.
In fact, this Court had language in its opinion which I hope to quote to the Court which said that that would be all right.
I don't see any due process from there.
It might be an unwise piece of legislation.
But I -- defendants entitled as a matter of due process to a fair and impartial judge.
I don't know of any case that holds any decision of this Court.
Certainly, that holds that is a matter of due process, he's entitled to a neutral and impartial prosecutor.
Justice Potter Stewart: Well, we -- we have a great deal of prosecutorial discretion as --
Mr. Kenneth S. Geller: That's right.
Justice Potter Stewart: -- also on our system and -- but if that discretion were distorted by --
Mr. Kenneth S. Geller: Well, I --
Justice Potter Stewart: -- economic motive, one wonders.
Mr. Kenneth S. Geller: I think that in light of the traditional deference which courts have given to decisions by the executive branch of who to prosecute and what to prosecute for, that there would -- there would not be a prophylactic or pro se rule -- per se rule such as the Court imposed on judges in cases like Tumey.
I think it would be up to an individual defendant, if he wanted to get the charges against him dismissed to show that his particular prosecution was somehow motivated by some improper or invidious reason.
Appellees never made that -- that charge in this case.
Chief Justice Warren E. Burger: In this case, could any individual anywhere in the chain of command in the labor departments have profited personally?
Mr. Kenneth S. Geller: No.
There's absolutely no evidence or any personal property.
Chief Justice Warren E. Burger: If this -- this apparently, is a means of -- of getting some funds without having them appropriated by Congress directly.
Is that the case?
Mr. Kenneth S. Geller: Well, the -- one of the unfortunate aspects of this case is that there's nothing in the legislative history to explain why the reimbursement provision worked its way into the statute, but I think that that is a very reasonable speculation.
We're not dealing with very large sums of moneys here as I tend to get to in a moment in terms of ESA, the Employment Standard Administration's total budget.
But I think that you're right, Mr. Chief Justice, that in part, it was a desire by Congress to place some of the costs of investigating and prosecuting child labor violations on the perpetuators of those violations.
Now, in our view, the appropriate standard of judicial review should be different when scrutinizing factors that arguably influence the institution, rather than the adjudication of civil or criminal proceedings.
And as I say, I think that's treated well to the traditional -- judicial deference to prosecutorial discretion in bringing cases.
In fact, the Court recognized this crucial distinction of the Tumey case itself, because Tumey involved an Ohio liquor control ordinance which provided that the town mayor who sat as a judge in prosecutions under the ordinance, would receive fees in addition to his salary, if he convicted the defendant, but not if he acquitted the -- the defendant.
The Court found this provision to be unconstitutional.
There is another part of the very same ordinance that was involved in Tumey which provided that 50% of the fines collected were to be placed in a so-called secret service fund, for the purpose of enforcing the prohibition laws and the ordinance specifically provided that 15% of any fine was to go to the deputy marshals, 10% of the fine was to go to the prosecutor, and 15% was to go to the town detectives as compensation for their services in enforcing the liquor laws.
And no one challenged of the legitimacy of these latter provisions of the ordinance in Tumey, involving law enforcement officers rather than adjudicative officers.
The fact the Court expressly stated at the ends of -- end of its opinion that in contrast to the situation with judges, the legislature and I quote, “May and often ought to stimulate prosecutions for crime by offering to those who shall initiate and carry on such prosecutions rewards for thus acting and the interest of the State and the people.”
We think this proposition should govern the case here.
Now, appellee's answer to this argument is essentially to assert that ESA Assistant Regional Administrators function much like judges.
But there's simply nothing in the child labor statute or the accompanying regulations to support that assertion.
Regional Administrators don't preside over hearings or make findings of fact based upon evidence presented in an adversary context.
In issuing a notice of violation or assessing a proposed penalty, they act just like in Assistant United States Attorney, in determining what charges to bring or what relief to seek as in a civil complaint.
And most importantly, perhaps, if the employer disagrees with the Assistant Regional Administrator's determination, either of that, there is a violation or what the penalty should be.
It may seek review and it's entitled to de novo review before the Administrative Law Judge who's unquestionably neutral.
And the Administrative Law Judge's ruling is then subject to judicial review in an Article III court.
It's clear then that an Assistant Regional Administrator in imposing a civil -- a child labor violation and assessing a proposed penalty, does not act as a judge.
And that the standards developed in Tumey and Ward for assuring the neutrality of judges, do not apply.
Our system contains a number of incentives both direct and indirect, to motivate executive branch officials to do their job diligently.
And Section 16 (e) is one such incentive because it stimulates child labor enforcement which Congress prior to the 1974 amendments thought was an area that had been sort of neglected it.
We submit that Congress's efforts to achieve this beneficial result, and as I said, to impose some of the causes of ferreting out child labor violations on those who perpetrate the violations, it's not inconsistent with any notions of fundamental fairness embodied in the Due Process Clause.
Now, if the Court disagrees with this contention and holds that the Assistant Regional Administrator's assessment of civil penalties for child labor violations is subject to the due process standards of Tumey and Ward, we believe that the judgment below must still be reversed because any possibility of bias resulting from the reimbursement provision is wholly insubstantial and remote.
This Court stated in Tumey and indeed Judge Gasch acknowledged that due process does not prohibit the exercise even of judicial power.
When the judicial officer's personal interest is so remote, trifling or insignificant that it may fairly be -- supposed to be incapable of affecting his judgment.
And that describes the situation in this case.First, as I said in response to the Chief Justice's question, unlike in Tumey, here, no labor department official stands to benefit even by $1 personally from any civil penalty assessment.
Justice Harry A. Blackmun: Maybe not personally, but it -- it can get into the regional office in a way, can't it?
Mr. Kenneth S. Geller: It can, but that is dependent upon a number of other things happening over which the Assistant Regional Administrator has no control.
If this case is in some way similar to Ward, I assume, because in Ward, the mayor there also had no personal interest in the fines, but the fines would go into the town treasurers and the mayor was dependent upon the revenues in the town treasury.
But -- but here --
Justice Harry A. Blackmun: This -- this whole argument is based on the assumption that the -- the Administrator is the decision maker.
Mr. Kenneth S. Geller: I think --
Justice Harry A. Blackmun: And --
Mr. Kenneth S. Geller: -- that's right.
I don't think the Court has to reach this portion of our argument if it agrees with us in our initial assertion which is that the District Court erred in relying cases on cases like Tumey and Ward.
But if Tumey and Ward are applicable, we still think that the judgment should be reversed, because the interest here is so insignificant that it couldn't possibly have affected the decision making of the Assistant Regional Administrator.
Unlike in Ward, where the moneys went right to the town treasury, here, all the moneys go to ESA's national office which may or may not decide to distribute the money back to the regional officials.
It doesn't have to.
And the statute is clear that even when ESA's national office decides to distribute the moneys to the -- to the regional officials, it does it on the basis of costs actually incurred by the regional official and not in amount of penalties that are assessed.
Justice Harry A. Blackmun: Nevertheless, you're -- you're speaking of fairly large sums.
Mr. Kenneth S. Geller: Well, I don't think we're talking of fairly large sum -- sums in comparison to ESA's total budget.
Justice Harry A. Blackmun: Where (Voice Overlap) --
Mr. Kenneth S. Geller: -- in Tumey and Ward, the fines --
Justice Harry A. Blackmun: Even though the total budget to create bias.
Mr. Kenneth S. Geller: Well, in Tumey and Ward, the amounts that were involved represent that almost half of the town's budget is quite substantial and there was direct evidence in each of those cases that the mayor was quite concerned about the possible loss of that revenue source.
Now, here by contrast, the evidence shows that the sums collected as civil penalties represent less than 1% of ESA's total budget and that far from being fiscally dependent on these moneys, ESA in each of the year since this reimbursement provision was enacted, has turned back to the Treasury as unused funds, an amount far greater than was even collected as civil penalties.
So it's quite difficult to imagine how any Assistant Regional Administrator would be influenced to even the slightest extent by the possibility that some of the moneys collected as civil penalties which child labor violations might be returned to his office at some later point.
We've set forth at some length in our brief, the series of increasingly improbable assumptions that the Court would have to indulge in, in order to conclude that there's any real possibility of prejudice from the reimbursement scheme.
Justice Thurgood Marshall: What happens if the Washington office notifies all the regional officers that you haven't reported any money in the last year and we need money?
Mr. Kenneth S. Geller: I assume that would be a -- why, I don't know that any such communication would -- would go out.
I think it would be a proper communication for the national office to say to the Atlanta regional office, “You have uncovered X percent of -- of the total nation's child labor violation.”
Justice Thurgood Marshall: No.
Where did you happen to -- you haven't -- and by us is (Inaudible)
Mr. Kenneth S. Geller: I think that would be a proper communication.
And I think that these -- these regional offices --
Justice Thurgood Marshall: When they urged him --
Mr. Kenneth S. Geller: -- has crossed to fair it out, child labor violations.
Justice Thurgood Marshall: When they urged him to sort of bend somebody's arm.
Mr. Kenneth S. Geller: No.
Because the amount of that -- that the --
Justice Thurgood Marshall: I'm not saying that surely it would happen.
Mr. Kenneth S. Geller: Well, I'm sure it wouldn't happen, but even if it did --
Justice Thurgood Marshall: I beg your pardon --
Mr. Kenneth S. Geller: -- it wouldn't have the influence that Judge Gasch attributed to it.
Because the amounts that the Assistant Regional Administrator's assess are really irrelevant.
It's the amounts that are collected and anyone who challenges the assessment gets de novo review before the Administrative Law Judge who can reduce the amount of the penalty to zero or any figure between zero and the amount initially assessed.
Now, I'd like to turn briefly in -- few minutes remaining to an issue that the Court need not reach unless it agrees with Judge Gasch that the reimbursement provision, Section 16 (e) renders the civil penalty statute unconstitutional.
That's the question of the proper remedy.
District Court struck down the entire civil penalty statute.
It's our position that that remedy is overbroad and totally unwarranted.
That at most, the District Court should've severed the last sentence of Section 16 (e) providing for the reimbursement of civil penalty funds that are actually collected.
Question of severance, of course, is essentially one of legislative intent.
In this case, there's strong proof that Congress would have wanted to have a civil penalty statute without any reimbursement provision rather than have no civil penalty remedy for child labor violations at all.
First, the statute contains a broad severability clause.
And second, the legislative history of Section 16 (e) shows that Congress' overriding concern was to provide the Department of Labor with a new tool to strengthen child labor enforcement, because the injunctive and criminal provisions of the prior law were found to be totally ineffective.
This congressional objective would obviously be frustrated if the entire civil penalty statute were struck down.
The last and best piece of evidence perhaps that Congress would have wanted the reimbursement provision severed, if it were found unconstitutional, is that in a number of similar civil penalty statutes, Congress has provided that the funds collected as civil penalty shall go into the United States Treasury.
And that's the result that would occur here if the last sentence of Section 16 (e) were severed from the rest of the statute.
So, for all these reasons, we believe that the District Court erred in declaring the civil penalty statute under the child labor laws unconstitutional and in enjoining its enforcement.
And we believe that the judgment below should be reversed.
Chief Justice Warren E. Burger: Very well, Mr. Geller.
Argument of Thomas W. Power
Mr. Thomas W. Power: Mr. Chief Justice and may it please the Court.
Our differences with the arguments of the Solicitor General can be summarized in, I believe, four very brief statements.
First, the most significant issue here in our judgment, is not actual bias, but rather and far more importantly, the potential for bias and the appearance of bias.
It does not matter how much money was actually collected or how much money was distributed to a given regional office.
The potential is here for these moneys to be used to increase salaries and to substantially increase the appropriation of the various offices involved.
Secondly, the Administrator and his assistant acting under Section 16 (e), are judges under the clear statutory language under Section 16 (e) and they cannot be likened to prosecutors.
Third, potential for bias and actual bias under Section 16 (e) is very substantial and not remote.
And finally, severance of the reimbursement provisions will not cure the potential for bias or the appearance of bias.I've made --
Justice William H. Rehnquist: Mr. -- Mr. Power, don't -- don't you concede that there's a good deal of attenuation here?
Mr. Thomas W. Power: I'm sorry Justice, I dont think --
Justice William H. Rehnquist: Don't -- don't you concede that there's a good deal of attenuation here between what in fact happens and what might be a genuinely undesirable and perhaps unconstitutional situation?
Mr. Thomas W. Power: Well, Your Honor, I think that what in fact actually happened was an unconstitutional situation and in fact, you had actual bias in this particular case.
But nevertheless, I see the potential as the far greater evil in here in this particular Section 16 (e) of the Fair Labor Standards Act, which is entirely unique in any civil money penalty section now in United States, but to the best of my knowledge in the country.
I cannot find anything anywhere near a life is in -- in any statute.
Justice William H. Rehnquist: Well, admittedly, it's unique, but a -- an entire series of steps would have to occur before the actual bias could be reached, wouldn't it?
Mr. Thomas W. Power: Well, the statute provides for example, Your Honor, that the fund shall be used to reimburse the assessor of the fines.
And those funds go directly to the salary and expense budget of the various offices involved.
Chief Justice Warren E. Burger: But do the particular individuals aren't going to get more money because they levy more funds?
Mr. Thomas W. Power: I think that that's entirely possible, if not likely.
If you read the statutory language, that is precisely what is provided.I think that's discretionary with the Secretary of Labor.And maybe --
Chief Justice Warren E. Burger: They'll get a raise -- you mean they'll get a raise in pay?
Mr. Thomas W. Power: I think that's entirely possible.
I think it's discretionary to the Secretary of Labor to give them that money, but why not?
The Act provides that they get the money and that it shall be used in the discretion of the -- of the Secretary of Labor to reimburse them for the ordinary expenses.
It further provides that the funds maybe used notwithstanding any other provision of the law to hire individuals as cited in United States Government, to effectuate the purposes of -- of this Act.
So I think moreover, the funds can be quite substantial as related to an individual office of -- of the assessor.
And frankly, I see no prohibition in the statutory language from the funds going directly to the so-called Administrative Law Judge.
That is in the office of the Department of Labor.
And although it's argued by the Solicitor General that we're entitled to a fair and impartial judgment at that level, we do not see it because we think that the ALJ or the Administrative Law Judge, rightly under the statute, not only could have, but the Secretary of Labor was required and mandated under the statute to reimburse the Administrative Law Judge for his expenses as well.
Now, I don't think they ever got around to it, because we raised the issue right at the outset at the administrative level and I guess this was really the first case that came up on the civil money penalties.
This was adopted in 1974 and regulations were issued more like 1975 and this was the first case that really become before the Administrative Law Judge.
And he never really did any works that would gain him a share of the split on the moneys that had been raised earlier.
But the statute provides that he shall receive the funds that he got.
He's responsible for determining the funds, he's part of the process and he should have got a proportionate share.
Chief Justice Warren E. Burger: Are you suggesting that the Secretary exercising this discretion could provide that annually, he would give awards of $1000 each to every Administrative Law Judge that sustained a fine?
Mr. Thomas W. Power: Pardon, Mr. -- Mr. Chief Justice, did you say could or he would?
Chief Justice Warren E. Burger: No.
Mr. Thomas W. Power: Could.
I -- because -- yes, I think he clearly could.
And there's nothing in the statutory language to prevent him and the statutory language says, “Notwithstanding any other provision of the law.”
So unless there's some subsequent law that would prohibit that kind of action from, I don't see why not and I believe he'd violate the Constitution.
But I think even the potential for that violates the Constitution.
Justice Thurgood Marshall: He could give it and he could be fired too, could --
Mr. Thomas W. Power: I would say that by virtue of Section 6 --
Justice Thurgood Marshall: He could be fired for doing it.
Mr. Thomas W. Power: That the -- the Secretary of Labor could be fined.
Justice Thurgood Marshall: Yes.
Mr. Thomas W. Power: Justice Marshall --
Justice Thurgood Marshall: That would stop him from doing, it would --
Mr. Thomas W. Power: It -- it --
Justice Thurgood Marshall: -- slow him down.
Mr. Thomas W. Power: Although I think that would be -- that would be sufficient to hold that he couldn't do it, if he was going to be subject to a fine.
But it seems to me --
Justice Thurgood Marshall: I say fired --
Mr. Thomas W. Power: I beg your pardon?
Justice Thurgood Marshall: -- discharged --
Mr. Thomas W. Power: Oh, he could be fired.
Justice Thurgood Marshall: -- permitted to resign.
Mr. Thomas W. Power: I'm sorry.
I thought you said, fine --
Justice Thurgood Marshall: Submitted to resign.
Mr. Thomas W. Power: Yes, he could but that would be -- that would be political consideration.
He could be -- he could be fired and I'm not suggesting that he would do it, but in this country we have had men in position that could take that kind of action.
It could be a very lucrative rewarding proposition.
Several millions of dollars could be raised.
In the instant case, the -- the respondent, the appellee had some 8000 minors in his employer over a period of two years and they found 169 to be in violation and assessed a fine of $103,000.
Now, you could multiply that into the billions in -- in United States.
So the potential is there.
We believe that the greatest issue of 16 (e) mandates that kind of --
Justice William J. Brennan: Excuse me, Mr. Power.
Mr. Thomas W. Power: Yes, Justice.
Justice William J. Brennan: Which is the provision of 9 (a), I guess it's 9 (a), but --
Mr. Thomas W. Power: I think both in --
Justice William J. Brennan: -- but you -- but which is it that covers the Administrative Law Judge?
Mr. Thomas W. Power: The Administrative Law Judge?
Justice William J. Brennan: Yes.
Mr. Thomas W. Power: The -- the Section 16 (e) of which 9 (a) is --
Justice William J. Brennan: Yes.
Mr. Thomas W. Power: -- a part.
And it provides that the funds shall be used to be -- to reimburse.
Justice William J. Brennan: Well, it says, “For the ordinary expenses of the agency and or to secure the special services of persons who are neither officers nor employees of the United States.”
But I don't see -- what is the language that covers the Administrative Law Judge?
Mr. Thomas W. Power: Well, the language that says that the money shall be credited to the appropriation of the office, let me see, this one of (Inaudible).
Justice William J. Brennan: Well, I'll read in 16 (e), “Sums collected shall be applied toward reimbursement of the cost of determining in violations -- violations in assessing, collecting such penalties.”
That's not it, isn't it?
Mr. Thomas W. Power: No, Justice, I -- I'm referring to the -- the language that says on this -- under --
Justice William J. Brennan: 29 (a)?
Mr. Thomas W. Power: -- 29 U.S. 9 (a), “All moneys --
Justice William J. Brennan: Oh, yes.
Mr. Thomas W. Power: -- here and after received by the Department of Labor in payment of the cost of such work and this would be the work of collecting the -- determining and assessing the fines shall, not may, shall be deposited to the credit of the appropriation of that bureau, service, office division or the agency of the Department of Labor.”
Of course, the Administrative Law Judge is an office of the Department of Labor, which supervise such work.
And then it goes on further and says, “Maybe used in the discretion of the Secretary of Labor and notwithstanding any other provision of law for the ordinary expenses of such agency.”
And as Judge Gasch found, those expenses including salary and include the other overhead items.
The ordinary expenses of such agency or to secure the special services of persons who are neither officers nor employees of the United States, so the Secretary of Labor could --
Justice William J. Brennan: Well, in any event, the Administrative Law Judge says within that language “Bureau, service, office, division or other agencies.”
Is that it?
Mr. Thomas W. Power: Yes, it would be.
Justice Byron R. White: But how -- how would he benefit from the collection of fines?
Mr. Thomas W. Power: Well, he would increase -- he would be reimbursed -- he would be reimbursed from --
Justice Byron R. White: Well, his salary is set, isn't it?
Mr. Thomas W. Power: Well, again, he -- his salary and the amount of work or the expenses of his office are definitely restricted by the budgets under which he operates both as recommended by the President and as approved by Congress.
Justice Byron R. White: Well --
Mr. Thomas W. Power: Now, he could substantially increase --
Justice Byron R. White: Don't all Administrative Law Judges get the same?
Or are they from bureau to bureau?
Mr. Thomas W. Power: I am not certain with that, Justice White.
Justice Byron R. White: Well, don't you have to be sure to the answer of that question?
Mr. Thomas W. Power: I beg your pardon?
Justice Byron R. White: Don't you have to be sure to the -- of the answer to that question?
Mr. Thomas W. Power: Well, when you -- when you get it --
Justice Byron R. White: Even if -- if what Administrative Law Judges get is set by statute.
Mr. Thomas W. Power: Yes.
Justice Byron R. White: And regardless to how many cases they hear or what the fines are collected.
Well, what's it -- what does it -- how does he benefit or not?
Mr. Thomas W. Power: Well, I think he expands his overall operation.
Justice Byron R. White: Well, how do you --
Mr. Thomas W. Power: It gets --
Justice Byron R. White: -- how do you -- just explain that.
Mr. Thomas W. Power: He gets an increased appropriation, if you will.
Let's assume --
Justice Byron R. White: How -- how do you know that?
Mr. Thomas W. Power: Well, I'm -- I'm sorry, Justice White.
I am suggesting that it's entirely potential with a knowing what is Section 16 (e), of the Fair Labor Standards Act.
Justice Byron R. White: It just -- it just goes into the -- it just goes into the -- into the -- into the entire -- it just goes to defray the overall budgetary expenses.
Mr. Thomas W. Power: If he went into the Treasury, I would not dispute.
Justice Byron R. White: No, no.
No, it goes to defray the budgetary expenses of the agency or whatever it is, but all it means is -- all it means is that maybe that agency will give back to the -- to the United States some of its budget.
Mr. Thomas W. Power: That's only a potential.
Maybe they will not.
Justice Byron R. White: Well, maybe they will not.
Mr. Thomas W. Power: But --
Justice William J. Brennan: Well, you must be saying Mr. Power that this authorizes something in the way of a -- of a bonus to the Administrative Law Judge.
Mr. Thomas W. Power: Yes.
It permits a bonus.
In other words, it permits the -- let's assume that the --
Justice Byron R. White: Well, surely you don't suggest that it's going to get -- increases his income for that year.
Mr. Thomas W. Power: I am suggesting very definite of that, Your Honor.
I think that is mandated that his income or at least his budget authorization is increased for that year and it should be in proportion to the --
Justice Byron R. White: The Administrative Law Judge's --
Mr. Thomas W. Power: Yes.
Justice Byron R. White: -- her own salary?
Mr. Thomas W. Power: Oh, I'm -- I'm sorry.
I don't know how the Secretary of Labor would handle it or -- but in the discretion, I think that's entirely permissible, because it says notwithstanding any other provision of the law.
Justice William J. Brennan: You don't suggest the Secretary has ever given at that interpretation, do you?
Mr. Thomas W. Power: No, sir.
Justice William J. Brennan: And you're just suggesting --
Mr. Thomas W. Power: But I am -- but I am --
Justice William J. Brennan: -- that that might happen under this language.
Mr. Thomas W. Power: That's -- that's correct.
Justice Thurgood Marshall: Are you --
Are you reading that the Secretary give it to himself?
Mr. Thomas W. Power: I -- I -- again, with the language, this is notwithstanding any other provision of law on discretion of the Secretary, can use it for -- to meet the ordinary expenses, I think perhaps he could.
Justice Thurgood Marshall: And he would then raise his salary above that of Congress?
I wouldn't like to see what would happen to him.
Mr. Thomas W. Power: Well, again, that's a -- that's a political consideration, but I don't know whether he'd be in --
Justice Thurgood Marshall: Well, you maybe he's talking about this broad -- that language, because you say, it's so broad.
It was broad enough to give the money to the judge, it's broad enough to give the money to himself.
Mr. Thomas W. Power: That's correct.
Justice Thurgood Marshall: And do you know of any statute that has ever been passed like that?
Mr. Thomas W. Power: No, sir.
No, Your Honor.
Justice Thurgood Marshall: And do you think Congress meant to do that?
Mr. Thomas W. Power: No, Your Honor.
I do not.
I think -- I think Congress has a bill pending right now to change the proposition.
But I don't think Congress really intended it at all.
I think it -- it -- because of the way the language was drafted, Congress never realized what the impact was.
I know myself I was working on the legislation at the time and I had no idea of the significance of it.
It comes from a very unique provision in the law where they -- the Department of Labor has a -- a division that gathers statistics called the Bureau of Employment or statistics I believe and labor statistics.
And under that -- under that provision of the law, it is permissible for the Secretary of Labor to have outside sources fund statistical research work.
In other words, while they're conducting one survey, they might pick up certain amount of money from a company to gather additional information that they're more efficient at gathering and can do more economically.
And in the process, they add to their appropriation.
But in this instance, as for example with respect to Administrative Law Judge, let's assume that Administrative Law Judge has an appropriation of one million dollars.
If he spends enough --
Chief Justice Warren E. Burger: Well, wait a minute.
An Administrative Law Judge has an appropriation?
Mr. Thomas W. Power: The office of the Administrative Law Judge.
Chief Justice Warren E. Burger: An Administrative Law Judge doesn't have an appropriation anymore than a law clerk that this Court has.
Mr. Thomas W. Power: I'm sorry.
He has -- he has a budget within the Department of Labor though.
Justice Thurgood Marshall: He has a line item.
Mr. Thomas W. Power: He has a line item.
Justice Harry A. Blackmun: Mr. Power, on your -- going back to the detail concerning the Administrative Law Judge, it would seem so have exercise some of the brother and up here, Judge Gasch was not with you on this point, was he?
Mr. Thomas W. Power: I think that Judge Gasch was responding to a --
Justice Harry A. Blackmun: Well, let me read to you -- this is from his findings.
“Thus, the interest of an Administrative Law Judge in assessing nor affirming the imposition of penalties is too remote to warrant the conclusion that due process requirements are not met at the Administrative Law Judge alone.”
Mr. Thomas W. Power: Well --
Justice Harry A. Blackmun: That seems to me to cut directly against your argument as to detail on his salary.
Mr. Thomas W. Power: Again, I -- I agree with you although I do not think that it was necessary for Judge Gasch in that proceeding to consider that question.
He reached -- he reached his decision based on the potential for bias at the lower level.
And he reached it on the motion for summary judgment.
Justice Harry A. Blackmun: That maybe true, but you're -- you're certainly arguing here.
Mr. Thomas W. Power: That -- that is correct.
And the argument has been made that he -- that -- that it's clear that he did -- that he is not potential for bias and I do not believe that issue was addressed by the Solicitor General so that is conceded and I do not agree that it was conceded at the lower level.
Justice William H. Rehnquist: Do you say that each Administrative Law Judge assigned to the Labor Department has a line item appropriation for his salary?
Mr. Thomas W. Power: Not for his individual salary.
I believe it's to the entire office.
I believe the salaries are -- are set.
Chief Justice Warren E. Burger: If they have a 150 Administrative Law Judges, there's a lump sum in the budget which is a line item compensation, but no Administrative Law Judge has any budget or any part of any budget allocated to him.
Mr. Thomas W. Power: That --
Chief Justice Warren E. Burger: More than any other branch of the Government.
Mr. Thomas W. Power: That -- that, I understand.
Again, on the question of the -- of the actual right to appeal to Administrative Law Judge, the argument being made that a -- a -- the Administrator or the Assistant Regional Administrator can be likened to a prosecutor rather than -- than to a judge.
We disagree with this contention.
First, the argument is made that we're entitled to de novo review by the Administrative Law Judge.
We do not believe the statutory language permits the Administrative Law Judge to give us a -- a judicial review or de novo review.
The language of the statute permits a party who is -- has been assessed to fine -- an employer assessed to fine with the right to a hearing only under very limited conditions, expressly limited to an objection by the employer to the determination that the violations actually occurred.
So for example, if an employer was charged with 169 violations of the child labor laws and in fact those violations occurred, he could not obtain a hearing before an Administrative Law Judge, as to the reasonableness of the penalty.
And this -- that is the clear and unequivocal reading of the language.
It is our contention that this is -- as was the argument that was made by the Department of Labor in this particular case before Judge Gasch, and it is our contention that it was made in other cases by -- by the Department of Labor.
And there is one specific Administrative Law Judge that did in fact, hold that in light of the fact of the employer only objected to the reasonableness of the penalties assessed, rather than the fact that the violations actually occurred, that he could not give him an administrative hearing.
And consequently, we -- we assert that we -- that the administrative -- the Administrator of the Fair Labor Standards Act and the Assistant Administrator is in fact a judge and under Section 16 (e) and not can -- not be likened to a prosecutor.
Also, I'd like to make the point that in the instance of -- unlike a prosecutor in this instance, the Assistant Regional Administrator sets the penalties.
He has the discretion and the mandate on the Congress to determine what -- how much of this $1000 fine should be set.
The prosecutor doesn't set the penalty.
The prosecutor moreover, doesn't get to keep the penalty.
The penalty goes to the Treasury of United States.
It doesn't go back to the office to reimburse the prosecutor for his expenses.
Again, as we see no reason why the prosecutor -- the prosecutor (Inaudible) could get the increase of salary.
I also like to make the point that -- that in -- in truth in fact, that it is not so much the Assistant Regional Administrator who assesses these fines, who raise the first charge in the first instance.
It really is the Employment Standards Administration of Washington D.C.
They approve all of these individual fines.
They negotiate or approve individual settlements and they get the benefits of the penalties that are actually assessed.
The argument was made --
Chief Justice Warren E. Burger: Is this the same -- is this the same pattern of assessing fines as under the Mine Safety Act, if -- if you know.
Mr. Thomas W. Power: No.
I -- I know not, Your Honor, because on -- for example, the OSHA Act with which I am familiar, the -- the fines assessed go directly to the Treasury of United States.
This is the only area where the fines go back to the assessor or the fines to reimburse him for his cost of assessment.
So this is unique.
Justice Byron R. White: Well, we had a case argued here last session two or three weeks ago in which they were not criminal fines, but they were as -- as here --
Mr. Thomas W. Power: Civil money (Voice Overlap) --
Justice Byron R. White: -- penalties.
And those went toward enforcement of that statutory scheme which was antipollution scheme.
Mr. Thomas W. Power: If it's an antipollution, I don't -- Your Honor, I don't believe they went back to the assessor of the fines.
I believe that act provides that the fine -- and I question the constitutionality of -- myself, but I think this is far more serious in this case.
Those -- those fines I believe were used to -- to provide a fund to clean up waters.But they didn't go back to reimburse --
Justice Potter Stewart: Of course not, it was (Voice Overlap) --
Mr. Thomas W. Power: -- the assessor of the fines.
That's about the closest --
Justice Potter Stewart: And that's not an issue in that case.
Mr. Thomas W. Power: I see.
Justice Potter Stewart: The question was whether there were civil penalties or criminal fines.
Mr. Thomas W. Power: I question the constitutionality even of that provision.
Oh, I think this is far more serious, because I think assessor of fines in the environmental protection agency is probably highly motivated for assuring adequate funds to clean waters and I think he could be readily biased by -- by his desire to increase the coffers to clean waters and I think that's properly a function of Congress.
But nevertheless, the fines in that instance do not go back to the -- to the party assessing the fines.
The argument was made that -- by the Solicitor General that the potential for bias and actual bias is not substantial and it's too remote.
We believe that this argument cannot be properly made.
The reimbursement of the actual cost including salaries and expenses go directly to the assessor, to the Administrator, to the Assistant Regional Administrator.
And I emphasize that this was the finding of Judge Gasch in his opinion.
Whether the fines were in fact used to increase salaries or not, they can be used under the clear statutory language.
In the instant case, $39,200 went to the Atlanta office.
That was two and a half times, what any other office got from fines collected that year.
Justice William H. Rehnquist: Mr. Power, are you suggesting that of that $39,000, the Regional Administrator in Atlanta could simply decide to put it in his own private bank account?
Mr. Thomas W. Power: No, I am not, Justice Rehnquist.
I -- I think that he would not have the discretion, but I do think that the Secretary of Labor has that kind of discretion under the Act.
Justice William H. Rehnquist: The -- the Secretary of Labor could --
Mr. Thomas W. Power: Could use the money.
Justice William H. Rehnquist: -- so the Regional Administrator in Atlanta.
You have collected so many fines this year that I'm going to give all of them to you.
Mr. Thomas W. Power: I -- it -- it appears to me, unless -- since the Act has such broad language and says notwithstanding any other provisional law that he has this kind of discretion.
Justice William J. Brennan: And did you suggest he could put it in his own pocket?
Mr. Thomas W. Power: The Secretary of Labor could --
Justice William J. Brennan: Yes.
Mr. Thomas W. Power: -- put it in his own pocket?
Justice William J. Brennan: Yes.
Mr. Thomas W. Power: I -- I think it's -- it's permissible either directly or indirectly, yes.
Chief Justice Warren E. Burger: Well, I suppose the Secretary of Labor could take all the furniture out of his office and take it home and -- and try to keep it, but he might run into some other problems (Voice Overlap) --
Mr. Thomas W. Power: Yes, I think that would be in violation.
I think that he would have to relay any enumeration to himself, to reimbursement for the cost of doing work in connection with child labor enforcement.
But, I think the -- the more significant thing is for example in the Atlanta regional office, if -- is the question -- is the Administrator or the Assistant Regional Administrator potential -- is or potential bias here.
And if the man has a budget -- let's assume of a $100,000 a year, to operate his office to employ his secretaries for travel and expense budget, and he can increase that budget by really slapping at two employers in -- by way of civil money penalty fines and increase that budget from $100,000 a year to operate it and get to $200,000, then I think he's got real potential for bias, without even looking into the question whether or not he can increase his salary.
Finally, the -- the question of severance, I would like to touch upon in my remaining couple of minutes.
Actual -- if -- if you were to sever -- if this Court were to sever the reimbursement provision of Section 16 (e) alone, we do not believe we would cure the potential for bias or appearance for bias.
Because severance of an unconstitutional section of or the language of 16 (e) would not, in fact, give actual notice to investigators of the Department of Labor or to Assistant Regional Administrators or to Administrators or for that matter of Administrator Law Judges or employers, the language would still read as it -- as it presently reads that the moneys shall be used to reimburse the assessor of the fine.
Also, severance who ignores the fact that all regulations currently adopted and schedule of fines and instructions to assistants at the Department of Labor in determining the amount of the fines, are predicated on the assumption that the home office, the Washington office, will get its share.
So what we are suggesting is that even the -- that we'd be back here in the Supreme Court, if you severed the -- the reimbursement provision because we would challenge the constitutionality of the regular -- regulations themselves because they were based on assumption that the Department of Labor was going to get its share of the funds.
And that they did not need the responsibility to set fines on the basis of the gravity of the offenses instructed by Congress.
And finally, we do not believe that severance would accomplish congressional intent.
Congress directed these moneys should be use to reimburse the Department of Labor and be used for child enforcement purposes.
If a speculation is going to be made that they'd be just as satisfied to have the moneys go into the Treasury of United States, we question that.
We think they might well have not intended that the existing child labor regulations be enforced.
They might well have intended that these funds be used to revise what we consider to be an unequated and -- and grossly inadequate set of child labor laws which are the primary responsibility in our judgment for the teenage and minor unemployment we have in United States today.
And it's our feeling that those -- that Congress as is actually the case, there is a bill pending in Congress right now that -- that would not only require that the civil money penalty is set and go to the Treasury of United States, but in -- in addition to and as part of the same piece of legislation, would require the Secretary of Labor to completely review existing child labor regulations so as to assure justice in -- in enforcement of this particular statute by having a -- a logical and reasonable set of child labor regulations.
Thank you, Mr. Chief Justice.
Chief Justice Warren E. Burger: Thank you, Mr. Power.
Mr. Geller, do you --
Rebuttal of Kenneth S. Geller
Mr. Kenneth S. Geller: Just a few --
Chief Justice Warren E. Burger: -- have anything further?
Mr. Kenneth S. Geller: -- just a few short points, Mr. Chief Justice.
First, I'd like to lie to rest this notion that Administrative Law Judges might be entitled to reimbursement under Section 16 (e).
There's absolutely nothing in the statute to backup that statement.
The Secretary of Labor has never construed the statute that way and as Mr. Justice Blackmun noted, Judge Gasch rejected that argument.
Section 16 (e) allows reimbursement only to those officers that have supervised the work of assessing and collecting civil penalties.
The office in the Department of Labor that supervises the enforcement of the child labor laws is the Employment Standards Administration.
The Administrative Law Judges are not part of the Employment Standards Administration.
Moreover, it would raise problems, I think, not only under the Fifth Amendment, but under the Administrative Procedure Act to construe the statutes so that any moneys went to the Administrative Law Judges.
And I think it would be a sort of bizarre form of statutory construction to construe a statute so as to make it unconstitutional.
Now, as to this notion that the Secretary --
Justice Potter Stewart: Administrative Law Judges get salaries, set salaries.
Mr. Kenneth S. Geller: They get set salaries set by law, can't be varied.
Justice Potter Stewart: And are they -- do they all get the same or does it (Voice Overlap) --
Mr. Kenneth S. Geller: I'm not -- I don't know but they --
Justice Potter Stewart: They get increases with seniority or --
Mr. Kenneth S. Geller: I assume they do just -- and once they hit the ceiling, they may not be able to get any --
Justice Potter Stewart: Article III judges don't.
Mr. Kenneth S. Geller: Excuse me.
Article III judges, well, that is an issue that maybe up in this Court soon.
The Sec -- the Secretary or the Assistant Regional Administrator cannot put the money in his pocket.
The statute is quite clear that the sums collected must be applied towards reimbursement of the costs of determining child labor violations.
And finally, as to appellee's point that de novo review is not available before the Administrative Law Judge solely on the question of the reasonableness of the penalty, this very case shows that that's false because appellee never challenged the violations in this case, conceded that it had violated the child labor laws before the Administrative Law Judge.
The Administrative Law Judge still reduced the penalty from $103,000 to $18,500.
Thank you very much.
Chief Justice Warren E. Burger: Thank you, gentlemen.
The case is submitted.
We'll hear arguments next in United --