1 See Notice of Determinations Regarding Eligibility to Apply for Worker Adjustment Assistance, 69 Fed. Reg. 2,621, 2,622 (Jan. 16, 2004) (“Notice of Initial Denial”); Notice of Negative Determination Regarding Applicati on for Reconsideration, 69 Fed. Reg. 20,644 (April 16, 2004) (“Notice of Denial of Reconsiderati on”); Notice of Negative Determination on Slip Op. 07-51

UNITED STATES COURT OF INTERNATIONAL TRADE



### F ORMER 

### E MPLOYEES OF 

### I NTERNATIONAL : 

### B USINESS 

### M ACHINES 

### C ORPORATION 

### , : Plaintiffs , : Court No. 04-00079 v. : 

### U.S. S ECRETARY OF 

### L ABOR , : Defendant.

[Action remanded to Defendant for further proceed ings not inconsistent with opinion. Judgement reserved as to consequences of Defendant’s failure to comply with court’s prior instructions.] Dated: March 30, 2007 King & Spalding LLP(J. Michael Taylor , Christine E. Savage , Tina M. Shaughnessy , and Stephen A. Jones ), for Plaintiffs. Peter D. Keisler , Assistant Attorney General; Jeanne E. Davidson , Director, and Patricia M. McCarthy , Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Michael D. Panzera ); Stephen R. Jones , Office of the Solicitor, U.S. Department of Labor, Of Counsel; for Defendant.

OPINION RIDGWAY, Judge: This action challenges the determinations of the U.S. Department of Labor denying the petition for trade adjustment assistance (“T AA”) filed by the plaintiff Former Employees, 1 whoCourt No. 04-00079 Page 2

Reconsideration on Remand, 69 Fed. Reg. 48,527 (Aug. 10, 2004) (“Notice of Second Negative Redetermination on Remand”); Notice of Ne gative Determination on Remand, 71 Fed. Reg. 10,709 (March 2, 2006) (“Third Negative Redetermination on Remand”).

2 As outlined in greater detail below, this ac tion has been remanded to the Labor Department three times to date. There are two separately -paginated administrativ e records – the initial Administrative Record (which includes the records of both the agency’s initial investigation and its first voluntary remand investigation), and the Suppl emental Administrative Record (which consists of the record of the second voluntary remand investigation, as well as that of the third remand investigation, which was ordered by IBM I ). Moreover, because c onfidential information is included in the file, there are two versions of each of the records – public and confidential. Citations to the public versions of the Administrative Record and the Supplemental Administrative Record are noted as “AR ____” and “SAR ____,” respectively. Citations to the confidential versions are, in turn, noted as “CAR ____” and “CSAR ____.” The administrative record of the most recen t remand proceeding – the third remand – begins at CSAR/SAR 270. A redacted, public version of the Labor Department’s most recent remand determination is published in the Federal Register, and is included in the record at SAR 1019-50. The complete, confidential version of that same determination appears in the record at CSAR 1019- 50. claim TAA benefits as “leased service workers, ” and who were employed for years by BP/Amoco, before being “outsourced” to the consulting serv ices group of Pricewaterhouse Coopers (“PwC”), which was – in turn – acquired by IBM, before the Former Employees’ termination. Pending before the Court is the Labor Department’s [Third] Notice of Negative Determination on Remand, 41 Fed. Reg. 10,709 (March 2, 2006) (CSAR 1019-50; SAR 1019-50) (“Third Negative Redetermination on Remand”), which was filed pursuant to Former Employees of Int’l Bus. Mach. Corp. , 29 CIT ____, 403 F. Supp. 2d 1311 (2005) (“IBM I ”). 2In its Third Negative Redetermination on Remand, the Labor Department announced a new Leased Worker Policy, establishing seven criteria to be applied in cases – like this one – involving leased workers, “to determine the extent to which a worker gr oup engaged in activities related to the production ofCourt No. 04-00079 Page 3

an article by a producing firm is under the operational control of the producing firm.” See Third Negative Determination on Remand, 41 Fed. Reg. at 10,712. Concluding that all seven criteria weighed against the Former Employees here, the Labor Department reaffirmed its denial of TAA certification. Id . at 10,712-14; CSAR 1035-50. The Former Employees challenge the Third Negative Redetermination on Remand, characterizing the Labor Department’s remand inve stigation as “a sham, which lacked transparency and was conducted to reach a predetermined negative result.” See Plaintiffs’ Comments Concerning the Department of Labor’s Negative Determination on Remand (“Pls.’ Brief”) at 1; see also Plaintiffs’ Reply to Defendant’s April 28, 2006 Response (“Pls.’ Repl y Brief”) at 1-5. The Former Employees further contend that, contrary to the ag ency’s determination, “substantial record evidence demonstrates that the Former Employees were unde r the operational control of BP,” and that the Labor Department “has failed to identify any other certification requirements not supported by substantial evidence on the record.” Pls.’ Brief at 3; see also Pls.’ Reply Brief at 8-9. Accordingly, the Former Employees urge the Court to reverse the Third Negative Redetermination on Remand, and to order the Labor Department to certify the Former Employees as eligible to receive TAA benefits. In the alte rnative, the Former Employees ask that the Court remand this matter to the Labor Department after explicitly finding that the agency’s determination as to operational control is not supported by subs tantial evidence and that the Former Employees’ satisfaction of all other requirements for certificati on has been conceded. Pls.’ Brief at 36; Pls.’ Reply Brief at 1, 11. For its part, the Government maintains that the Labor Department’s Third NegativeCourt No. 04-00079 Page 4

3 Except as otherwise noted, all statutory citati ons are to the 2000 edition of the United States Code. Redetermination on Remand is supported by substan tial evidence in the administrative record and is otherwise in accordance with law. The Government therefore contends that the agency’s negative determination should be sustained in all respects. See generally Defendant’s Response to Plaintiffs’ Comments Upon Labor’s Remand Determination (“Def.’s Brief”). Jurisdiction lies under 28 U.S.C. § 1581(d)(1) (2000). 3 For the reasons set forth below, this action is remanded to Defendant yet again, for furthe r proceedings not inconsistent with this opinion, and judgement is reserved as to the consequences of Defendant’s failure to comply with the Court’s instructions in IBM I

. See , e.g. , section IV.E, infra

. I. The Relevant Legal Framework Trade adjustment assistance has long served as the quid pro quo for U.S. national policies of free trade. See generally Former Employees of BMC Software, Inc. v. U.S. Sec’y of Labor , 30 CIT ____, ____, 454 F. S upp. 2d 1306, 1307-08 (2006) ( citing Former Employees of Chevron Prods. Co. v. U.S. Sec’y of Labor , 27 CIT 1930, 1943-44, 298 F. Supp. 2d 1338, 1349-50 (2003) (“Chevron III ”)) (summarizing policy underpinnings of TAA laws). As UAW v. Marshall explains, “much as the doctrine of eminent domain requires compensation when private property is taken for public use,” the TAA laws similarly reflect the c ountry’s recognition that “fairness demand[s] some mechanism whereby the national public, which reali zes an overall gain through trade readjustments, can compensate the particular . . . workers who suffer a [job] loss. UAW v. Marshall , 584 F.2d 390, 395 (D.C. Cir. 1978).Court No. 04-00079 Page 5

4 Specifically, the TAA statute provides fo r the certification of workers where: (1) a significant number or proportion of the worker s in such workers’ firm, or an appropriate subdivision of the firm, have become . . . separated . . . ; and (2) (A) (i) the sales or production, or both, of such firm or subdivision have decreased absolutely; (ii) imports of articles like or directly competitive with articles produced by such firm or subdivision have increased; and (iii) the increase in imports described in clause (ii) contributed importantly to such workers’ separation or threat of se paration and to the decline in the sales or production of such firm or subdivision; or (B) (i) there has been a shift in production by such workers’ firm or subdivision to a foreign country of articles like or di rectly competitive with articles which are produced by such firm or subdivision; and (ii) (I) the country to which the workers’ firm has shifted production of the articles is a party to a free trade agreement with the United States; (II) the country to which the workers’ firm has shifted production of the articles is a beneficiary country under the Andean Trade Preference Act . . . , African Growth and Opportunity Act . . . , or the Caribbean Basin Economic Recovery Act . . . ; or (III) there has been or is likely to be anincrease in imports of articles that are like or directly competitive with articles which are or were produced by such firm or subdivision. 19 U.S.C. § 2272(a) (Supp. II 2002). Trade adjustment assistance is generally designe d to assist workers who have lost their jobs as a result of increased import competition from – or shifts in production to – other countries, 4by helping those workers “learn the new skills nece ssary to find productive employment in a changing American economy.” Former Employees of Chevron Prods. Co. v. U.S. Sec’y of Labor , 26 CITCourt No. 04-00079 Page 6

5 As expanded in 2002, the TAA program entitles elig ible workers to receive benefits which may include employment services (such as career counseling, resume-writing and interview skills workshops, and job referral programs), vocational training, job search and relocation allowances, income support payments, and a Health Insurance Coverage Tax Credit. See generally 19 U.S.C. § 2272 et seq . (2000 & Supp. II 2002); BMC , 30 CIT at ____, 454 F. Supp. 2d at 1309-10.

6 See also BMC , 30 CIT at ____, 454 F. Supp. 2d at 1311 (and cases cited there); Former Employees of Ameriphone, Inc. v. United States , 27 CIT ____, ____, 288 F. Supp. 2d 1353, 1355 (2003) (citations omitted); Former Employees of El ectronic Data Sys. Corp. v. U.S. Sec’y of Labor , 28 CIT ____, ____, 350 F. Supp. 2d 1282, 1290 (2004) (“EDS I ”); Former Employees of Champion Aviation Prods. v. Herman , 23 CIT 349, 352 (1999) (citations omitted) (NAFTA-TAA statute is remedial legislation, to be construed broadly); Chevron I , 26 CIT at 1274, 245 F. Supp. 2d at 1318 (citations omitted) (same). 1272, 1273, 245 F. Supp. 2d 1312, 1317 (2002) (“Chevron I ”) ( quoting S. Rep. No. 100-71, at 11 (1987)). 5 As remedial legislation, the TAA laws are to be construed broadly to effectuate their intended purpose. UAW v. Marshall , 584 F.2d at 396 (recognizing the “general remedial purpose” of TAA statutes, and noting that “remedial statutes are to be liberally construed”). 6Moreover, both “because of the ex parte nature of the certification process, and the remedial purpose of [the TAA statutes], the [Labor Department] is obliged to c onduct [its] investigation with the utmost regard for the interests of the petitioning worker s.” Stidham v. U.S. Dep’t of Labor , 11 CIT 548, 551, 669 F. Supp. 432, 435 (1987) ( citing Abbott v. Donovan , 7 CIT 323, 327-28, 588 F. S upp. 1438, 1442 (1984) (quotation marks omitted)); see also BMC , 30 CIT at ____, 454 F. Supp. 2d at 1312 (and cases cited there). Thus, although the Labor Department is vested with considerable discretion in the conduct of its investigations of TAA claims, “there exis ts a threshold requirement of reasonable inquiry.” Former Employees of Hawkins Oil & Gas, Inc. v. U.S. Sec’y of Labor , 17 CIT 126, 130, 814 F.Court No. 04-00079 Page 7

7 See , e.g. , BMC , 30 CIT at ____ n.10, 454 F. Supp. 2d at 1312 n.10 (cataloguing numerous opinions criticizing Labor Department’s handling of TAA cases); see also id ., 30 CIT at ____, 454 F. Supp. 2d at 1352-54 (analyzing agency’s overall “track record” before the court). Supp. 1111, 1115 (1993). Courts have not hesitated to set aside agency determinations which are the product of perfunctory investigations. 7

II. Background As detailed in IBM I , the events leading to this action stretch back more than a decade, and include a corporate merger, the workforce reduction that followed that merger, the “outsourcing” of the Former Employees, the acquisition of thei r new employer by another firm, and, ultimately, their termination, followed by a growing line of determinations by the Labor Department denying their petition for TAA certification. See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319-23. A. The Facts of the Case In some cases for up to 30 or 40 years prio r to their termination, the Former Employees worked in the oil and gas industry – supporting exploration, drilling, and production from the same wells owned by the same oil company, doing the same tasks, day in and day out, seated at the same desks, inside the same facility in Tuls a, Oklahoma (the “Accounting Center”). See generally IBM
I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319. The Former Employees’ initial employer, Amoco Corporation, merged with The British Petroleum Company p.l.c. in December 1998, and – as a result – the Former Employees became employees of BP Amoco Group (now known as BP p.l .c., or simply “BP”). The Former EmployeesCourt No. 04-00079 Page 8

8 The Labor Department later determined that the workers laid o ff from the Accounting Center in 1998 had been “engaged in activities relate d to exploration and production of crude oil and natural gas,” and were therefore entitled to TAA certification. That certification, in turn, was amended to reflect new ownership and another name change to BP/AMOCO Production Company, Inc. See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319. survived the layoffs that followed the 1998 merger . Their colleagues who were less fortunate were later certified as eligible to apply for TAA benefits, in 1999. 8 See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319. In 2000, the Former Employees and others at the Accounting Center who had survived the post-merger reductions in force were struck by another wave of corporat e restructuring, when BP “outsourced” their unit to Pricewat erhouse Coopers (“PwC”). Two years later, IBM acquired PwC’s consulting services business, and the Form er Employees became employees of IBM. See generally
IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319. The Former Employees maintain that, although they were “outsourced” by BP, nothing ever really changed except the company signing their paychecks. The Former Employees attest that, even after their “outsourcing,” the workers at th e Accounting Center continued to work for BP – “managing oil and gas production and related leas es, managing BP’s production-related assets and equipment, accounting for various production plants, supporting division order operations, performing procurement functions, and submitting regulatory government reports on North American production.” Indeed, according to the Form er Employees, BP retained control over work done at the Accounting Center at all times, both as a matter of contract and as a matter of operational reality. See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319. Although the Former Employees had successfu lly weathered repeated corporate shake-upsCourt No. 04-00079 Page 9

9 The Labor Department initiated its inves tigation on November 26, 2003. By December 2, 2003, it had already made a negative determination. See Notice of Investigations Regarding Certifications of Eligibility to Apply for Worker Adjustment Assistance, 68 Fed. Reg. 74,973, 74,975 (Dec. 29, 2003); Notice of Initial Deni al, 69 Fed. Reg. 2,621 (Jan. 16, 2004); IBM I , 29 CIT at ____ n.14, 403 F. Supp. 2d at 1320 n.14. in the past, their luck ran out in 2003, when they were terminated – a development which they trace to surging imports of oil and natural gas, as we ll as BP’s shift from domestic to foreign production. See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319. According to the Former Employees, at the time of their termination, they were still sitting at the same desks in the same building doing the same work for the same company in support of the same production facilities as their former colleagues who were laid off in 1998. Just as their colleagues laid off in 1998 had done, the Former Employees here filed a TAA petition. But the Former Employees’ petition met a very different fate. See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319-20.
B. The Procedural History of the Case In mid-November 2003, the Former Employees filed a petition with the Labor Department, seeking TAA certification. Withina week of the initiation of the investigation, their petition had been denied. 9

1. The Initial Denial and The First Voluntary Remand Proceeding The Labor Department’s first negative determin ation rested on the agency’s conclusion that the Former Employees did not produce an “article” w ithin the meaning of the TAA statute. Notice of Initial Denial, 69 Fed. Reg. 2,621.Court No. 04-00079 Page 10

As IBM I explained, it is difficult to understate the superficial nature of the Labor Department’s initial investigation. Indeed, the entire “investigation” consisted of a single two-page questionnaire, sent to an IBM official. The ag ency posed two questions concerning whether IBM produced an article at the Accounting Center. Nowhere did the agency seek to elicit information concerning the Former Employees’ potential eligibility for certification as service workers. And nowhere did the agency probe IBM’s contractua l relationship with any other company – even though, on their petition form, the Former Employees listed “IBM/BP Amoco” in the space provided for “Company Name,” and explained elsewhere on the form that the “Accounting Center performs accounting services for BPAmerica/BP Amoco Oil.” Based on the scant information before it, the Labor Department sent a letter to the Former Employees, informing them that their TAA petition had been denied. See generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1321. The Former Employees filed both a request fo r reconsideration with the Labor Department and a letter with this Court seeking judicial review (later deemedthe Complaint). In light of the pendency of both a request for administrative reconsideration and a Summons and Complaint challenging the same TAA determination, the Government sought – and was granted – a voluntary remand. See generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1321.
2. The First Negative Redetermination on Remand One day after the case was remanded to the agen cy, the Labor Department issued the results of its investigation on remand – reaffirming its denial of the Former Employees’ TAA petition, but on different grounds. This time, the negative determination was based primarily on the Labor Department’s finding that the Former Employees were “service workers.” According to theCourt No. 04-00079 Page 11

10 The sole evidence cited to support the Labor Department’s determination was a statement by an IBM official based in North Carolina, w ho reportedly told the agency that there was no affiliation between the Accounting Center and BP , and that IBM “provide[d] accounting services to [BP] at many locations in the United States and abroad out of [the A ccounting Center].” Notice of Denial of Reconsideration, 69 Fed. Reg. at 20,644- 45. Significantly, that same IBM official later disclaimed “any firsthand knowledge of daily wo rk activities of the Former Employees,” and recommended that “someone else at IBM should be contacted for additional information.” See generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1321-22 (citation omitted). agency’s criteria then in place, service workers we re eligible for TAA certif ication only if they were either “in direct support of an affiliated fac ility currently certified for TAA or employed on a contractual basis at a location currently certified for TAA.” Notice of Denial of Reconsideration, 69 Fed. Reg. at 20,644; see generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1321. The Labor Department concluded that the Former Employees did not meet the applicable criteria. But the agency failed to consider wh ether the 1999 certification of the Former Employees’ colleagues at the Accounting Center constituted ev idence that the Former Employees – as service workers – had provided “direct support” to BP. Mo reover, the agency paid scant attention to the undisputed fact that the Former Employees were paid by BP prior to 1999, and that – notwithstanding their “outsourcing” – they had continued to perform the same work for BP up to the time of their discharge. Notice of Denial of Reconsideration, 69 Fed. Reg. at 20,644-45; see generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1321. 10

3. The Second Voluntary Remand Proceeding Less than a month after the results of the initial remand were published, the Government sought a second, 60-day voluntary remand, promptedby a letter from the Court inquiring about inconsistencies in the Labor Department’s articulation of the criteria for TAA certification of serviceCourt No. 04-00079 Page 12

workers. The Government explained that a second remand was necessary to permit the agency to apply a new interpretation of the service workers criteria, which clarified that service workers could be certified provided that the production workers that they supported were “certifiable” for TAA ( i.e. , eligible for certification) – even if the produc tion workers had not actually been certified. The Government further explained that, on remand, the Labor Department “intend[ed] to supplement the administrative record with additional evidence re garding the relationship” between the Accounting Center and BP. See generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1322. Over the course of the two months that followed, the Labor Department verified the existence of the Service Level Agreement (“ SLA”) between BP and PwC/IBM, under which employees at the Accounting Center continued to pr ovide services to BP even after the outsourcing (although the agency failed to obtain a copy of the contract itself). Among other things, the Labor Department also learned that, although some IBM employees at the Accounting Center served some other companies, most of the work done at that location was for BP. See generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1322-23.
4. The Second Negative Redetermination on Remand Ultimately, the Labor Department denied certif ication of the Former Employees yet again, citing three grounds for its determination. First, although the Former Employees had never even claimed to be production workers, the Labor Department concluded that they could not be so certified. In the course of explaining that determination, the agency dismissed as “immaterial” the 1999 certification of the Former Employees’ former colleagues at the Accounting Center. Second, and most relevant here, the Labor Department concluded that th e Former Employees could not beCourt No. 04-00079 Page 13

certified as service workers because they were not under the “control” of BP . And, third, the agency concluded that – even if the Former Employees ha d been under the control of BP – they still would not be eligible for TAA benefits because they we re not working in a BP production facility or in an appropriate subdivision of such a facility. No tice of Second Negative Redetermination on Remand, 69 Fed. Reg. 48,527; see generally IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1323. The Labor Department’s Second Negative Redetermination on Remand was the subject of IBM I

. Id

.

5. The Court’s Decision in IBM I Much of IBM I was devoted to the issue of “control.” As IBM Inoted, the Labor Department’s traditional test for TAA certification of service workers requires, in relevant part, that the petitioning workers’ separation be “caused importantly by a reduced demand for their services from a parent firm, a firm otherwise related to the subject firm by ownership, or a firm related by control .” See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1315 ( citing Chevron I , 26 CIT at 1285, 245 F. Supp. 2d at 1328) (emphasis added).
IBM I explained that the Labor Department historically had interpreted “control” as limited to “ownership and corporate voting control.” Id ., 29 CIT at ____, 403 F. Supp. 2d at 1315 ( citing Former Employees of Pittsburgh Logistics Systems, Inc. v. U.S. Sec’y of Labor , 27 CIT 1301, 1312 (2003) (“Pittsburgh Logistics II ”)). But, as IBM I noted, Pittsburgh Logistics ruled that “control” must be interpreted more expansively, to include not only corporate/legal control, but operational control as well. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1315-16 ( citing Pittsburgh Logistics
II , 27 CIT at 1314-16,1318-20). The workers in Pittsburgh Logistics had been terminated from their employment at an LTVCourt No. 04-00079 Page 14

Steel Company facility in Independence, Oh io, after LTV ceased production. The Pittsburgh Logistics (“PLS”) workers petitioned for TAA certification, asserting that they were a “PLS subdivision” of LTV consisting of former LTV workers who had b een “outsourced” to PLS; “that they were under the de facto control of LTV”; and that their du ties were essential to the production of steel at LTV facilities. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1316 ( quoting Former Employees of Pittsburgh Logistics Syst ems, Inc. v. U.S. Sec’y of Labor , 27 CIT 339, 341 (2003) (“Pittsburgh Logistics I ”)). Although the Labor Department had certified wo rkers at LTV’s Cleveland plant (as well as certain workers at LTV’s Independence facility), th e agency initially denied the petition of the PLS workers, based in part on its finding that they we re service workers and that their employer – PLS – was not related to LTV by ownership or “control.” See IBM I , 29 CIT at ____, 403 F. Supp. 2d
at 1316 ( citing Pittsburgh Logistics I , 27 CIT at 340). But, base d on the Pittsburgh Logistics court’s more expansive interpretation of the term “control,” and its determination that the PLS workers were indeed under the operational control of LTV, the La bor Department was ordered to certify the PLS workers as eligible for TAA benefits. Pittsburgh Logistics II , 27 CIT at 1318-20. Wackenhutraised basically the same issues presented in Pittsburgh Logistics

. See Former Employees of Wackenhut Co rp. v. U.S. Sec’y of Labor , Court No. 02-00758. As IBM Iexplained, the Wackenhut Corporation had supplied BHP Copper, Inc. with workers who had provided security services at a BHP production fac ility in Arizona. Following lay-offs due to increased imports of copper cathodes and closure of the facility, the Labor Department certified BHP workers at the facility as eligible for TAA. But the agency twice denied the petition filed by the WackenhutCourt No. 04-00079 Page 15

workers. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1316.
As IBM I explained, applying the same narrow defin ition of “control” that it had applied in Pittsburgh Logistics , the Labor Department had concluded in Wackenhut that the workers could not be certified as service workers, because “Wackenhut and BHP are not controlled or substantially beneficially owned by the same persons.” See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1316-17 ( citing The Wackenhut Corporation, San Manuel, AZ: Notice of Negative Determination on Reconsideration on Remand, 68 Fed. Reg. 47,097, 47,098 (Aug. 7, 2003) (“Wackenhut Notice of Denial on Reconsideration”); Notice of Determin ations Regarding Eligibility to Apply for Worker Adjustment Assistance and NAFTA Transitiona l Adjustment Assistance, 67 Fed. Reg. 67,421 (Nov. 5, 2002)).
But – as IBM Inoted – the issuance of Pittsburgh Logistics II turned the tide for the Wackenhut workers, resulting in their certification. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1317 ( citing The Wackenhut Corp., San Manuel, AZ: Noti ce of Revised Determination, 69 Fed. Reg. 26,623 (May 13, 2004) (“Wackenhut Notice of Revised Determination”)). In January 2004, in response to Pittsburgh Logistics and similar cases, the Labor Department revised its policy on certification of so-called “leased” workers. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1317 ( citing Labor Department Internal Memo re: New Leased Workers Policy (Jan. 23, 2004) (CSAR 261-62)). It was that January 2004 policy which was at issue in IBM I

. According to the Labor Department’s January 2004 memorandum, which specifically referenced Wackenhut , “the existence of a standard contract between the contractor firm [ i.e. , the leased workers’ employer] and the subject firm [ i.e. , the company producing the trade-impactedCourt No. 04-00079 Page 16

11 As IBM I noted, the January 2004 memorandum said little about the concept of a “joint employer” relationship – other than the passing re ference quoted above – except to incorporate by reference another memorandum (missing from the record of this case) which apparently discusses that concept at greater length. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1318 (citation omitted).

12 As an aside, IBM I observed that, although both the Labor Department and the Former Employees apparently assumed that the Former Em ployees are eligible for certification only if they were under the control of BP, th e January 2004 Leased Worker Polic y did not identify “control” as a certification requirement. IBM I further noted that it is unclear whether, as a matter of practice, article] . . . should be considered sufficient evidence to prove the existence of a joint employer relationship.” See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1317 ( quoting Labor Department Internal Memo re: New Leased Workers Policy (CSAR 261-62)). 11 Significantly, however, the January 2004 memorandum did not identify operational (or other) “control” as a requirement for certification of leased workers. Moreover, although the January 2004 memorandum specified that – to be eligible for certification – leased workers “must perform their duties onsite at the affected location,” no rationale for that requirement was stated. See IBM I , 29 CIT at ____ & n.10, 403 F. Supp. 2d at 1317-18 & n.10 ( citing Labor Department Internal Memo re: New Leased Workers Policy (CSAR 261-62)).
IBM I observed that the Labor Department’s Second Negative Redetermination on Remand denied the Former Employees’ claim in part because they were not under the control of BP. See
IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1325-26 ( citing Notice of Second Negative Remand Determination, 69 Fed. Reg. 48,527). Noting that the Labor Department had applied a restrictive definition of control, IBM I affirmed that – in light of Pittsburgh Logistics – the Labor Department was required to define control more br oadly, to include operational control. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1325-28. 12Court No. 04-00079 Page 17

the agency consistently required evidence of control in cases in which the January 2004 policy was applied. See IBM I , 29 CIT at ____ n.18, 403 F. Supp. 2d at 1327 n.18. Moreover, IBM I found that the then-existing record included “relatively ample evidence supporting the Former Employees’ claims that – as a practical matter – BP continued to exercise management and operational control over their wo rk up to the time of their termination.” See IBM
I , 29 CIT at ____, 403 F. Supp. 2d at 1329; see generally id ., 29 CIT at ____, 403 F. Supp. 2d at 1328-37. In contrast, IBM I noted, there was at best “only minima l evidence that, at the time of their determination, the Former Employees were under the operational control of IBM.” Id ., 29 CIT at ____, 403 F. Supp. 2d at 1329. IBM I further observed that “the relatively little evidence that support[ed] the agency’s position [on control] consis t[ed] of mere conclusory assertions (generally by IBM officials) and/or statements . . . contradicted by other record evidence that the Labor Department . . . failed to address.” Id

. Accordingly, IBM I directed: On remand, the Labor Department shall r eevaluate the existing record evidence on the issue of “control” . . . , and shall conduct such further investigation of the relevant facts as is necessary to fully develop the evidentiary record (including solicitation of additional information from the Former Employees, among others).
IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1335-36. IBM I further required the agency, on remand, to “clearly articulate and apply a standard for ‘control’ . . . consistent with [the] opinion (clarifying and updating that set forth in its [January 2004] L eased Workers Policy),” and to detail the rationale for its standard. Id ., 29 CIT at ____, 403 F. Supp. 2d at 1336-37. Finally, IBM I emphasized that the facts of the cas e at bar are “particularly compelling, because – much like Pittsburgh Logistics , and in contrast to the more typical ‘leased workers’ caseCourt No. 04-00079 Page 18

like Wackenhut(where the workers had no pre-existing relationship with the company producing the trade-impacted article) – the Former Employees in this case were employed directly by BP until they (and their work) were ‘outsourced.’” IBM I , 29 CIT at ____ n.20, 403 F. Supp. 2d at 1328
n.20. IBM I therefore mandated that, on remand: [I]n both its articulation and its applicati on of its policy vis-a-vis TAA certification of leased workers, the Labor Department should recognize and reflect (for purposes of its analysis of “control”) the differe nce between standard, run-of-the-mill leased workers cases (where there was no pre- existing relationship between the leased workers and the company producing the trade-impacted article) versus cases – like this one – where the petitioning workers we re “outsourced” by their initial employer and then immediately leased directly back to that company, as part of an outsourcing strategy.
IBM I , 29 CIT at ____ n.38, 403 F. Supp. 2d at 1336 n.38. As an alternative ground for denying certification, the Second Negative Redetermination on Remand concluded that – even if BP exercised control over the Former Employees – they nevertheless could not be certified, because they were not “co-located with BP workers at a BP facility that produces an article.” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1337 ( citing Notice of Second Negative Redeterminati on on Remand, 69 Fed. Reg. at 48,528); see generally id ., 29 CIT at ____, 403 F. Supp. 2d at 1337-42. Therefore, in addition to analyzing the issue of “control,” IBM
I also reviewed the Labor Department’s treatme nt of the location of the Former Employees’ workplace.
IBM I found that the Labor Department’s “so-called ‘location requirement’” defied “meaningful judicial review,” both because the agen cy had “failed to articulate the legal and policy bases for its position (or, frankly, even to adequately explain exactly what that position [was]),” and because the evidentiary record that the agency had compiled on the issue was “anemic.” IBM I , 29Court No. 04-00079 Page 19

13 IBM I also expressed the view that – rather than constituting a distinct criterion, separate and apart from “control” – location might be moreproperly treated as an indicia of “control.” See IBM I , 29 CIT at ____ n.44, 403 F. Supp. 2d at 1339 n.44. CIT at ____, 403 F. Supp. 2d at 1338. 13 IBM I therefore required that: [O]n remand, the Labor Department shall (1) clearly articulate and explain the significance of any “co-location” criterion for TAA certification (and its relationship to other elements of any “location requireme nt”), as well as the distinctions – if any – that the agency draws between different classes of workers . . .; (2) adequately justify its position as a matter of law and policy (bearing in mind, inter alia , the remedial purpose of the TAA statute); and (3 ) explain whether, and to what extent, the agency’s actual practice in the application of the “co-location” criterion – in this and other cases – has been consistent with the position that it is espousing here.
IBM I , 29 CIT at ____ & n.39, 403 F. S upp. 2d at 1337-38 & n.39. IBM Ifurther directed that, “to the extent that the Labor Department continues to adhere to the ‘co-location’ criterion, the agency shall – on remand – reconsider its [negative] findi ng on ‘co-location’ in this matter and ensure that its determination is supported by substantial evidence in the record.” Id

. IBM I concluded by observing that, in its Sec ond Negative Redetermination on Remand, the Labor Department had failed to reach determinati ons on all applicable criteria for certification. See
IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1345. Noting the existence of “confusion as to precisely how the agency’s classic test for certification as ‘service workers’ [was] to be interpreted and applied in light of the agency’s [January 2004] Leased Worker Policy,” IBM I directed that: On remand, the Labor Department shall spell out with precision all criteria applicable to the Former Employees’ potential certification as leased service workers . . . (including any revisions or clarifications of that policy in the course of the remand). In addition, the Labor Department shall explain the origins of and legal bases for all such criteria.
IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1345-47; see also id ., 29 CIT at ____ n.38, 403 F. Supp.Court No. 04-00079 Page 20

14 See generally CSAR 730-32 (first set of questions), 720-24, 753 (first set of responses), 750-52 (second set of questions), 733-37 (second set of responses), 767-68 (third set of questions), 754–57 (third set of responses), 758-60 (fourth set of questions), 972-76 (fourth set of responses), 781-83 (fifth set of questions), 788- 92 (fifth set of responses). In addition, the Labor Department asked IBM several supplemental or follow-up questions. See , e.g. , CSAR 764 (not clear whether response is included in the record), 793.

15 See generally CSAR 808-09 (first set of questions), 812-14 (first set of responses), 826-28 (second set of questions), 814-18 (second set of responses), 839-42 (third set of questions), 843-46, 848 (third set of responses). The Labor Departme nt also posed supplemental or follow-up questions to BP. See CSAR 837-38. 2d at 1336 n.38 (mandating that agency include in the record on remand “a complete, self-contained statement articulating all agency criteria for T AA certification of leased workers”). IBM I further instructed the Labor Department to “make determinations as to whether each of the criteria [for certification of leased workers] is satisfied in th is case,” and encouraged the agency “to engage in full and candid consultations with the Former Employees on all issues.” Id ., 29 CIT at ____, 403 F. Supp. 2d at 1347.
6. The Third Remand Proceeding In the course of the third remand proceeding, the Labor Department began – incredibly, for the first time – to seriously probe the merits of the Former Employees’ petition for TAA certification. As the Former Employees candidl y acknowledge, “Labor dedicated much more time to contacting and questioning IBM and BP represen tatives during this remand investigation than it had in any of the prior investigations undertaken in this case.” Pls.’ Brief at 7. The Labor Department obtained a copy of th e contract between BP and PwC/IBM. See CSAR 396-719. The agency also sent a tota l of five sets of questions to IBM, 14and three sets to
BP. 15 The agency’s questions focused primarily on the issue of control, though a few wereCourt No. 04-00079 Page 21

16 As discussed in greater detail below, the Fo rmer Employees expressed concern at the time about the form of the agency’s questions, and the l ack of context for questions seeking to probe the issue of control. See , e.g. , CSAR 859 (expressing concern that responses of IBM and BP may be affected “as a result of the way in which Labor framed the questi ons”), 946 (criticizing agency for failure to provide context/definition of “control” in questions), 995 (“As we have discussed by telephone, we believe that most of the inconsistenc ies are the result of the record not reflecting the definition of control that Labor provided to IBM and BP for purposes of answering Labor’s questions.”); s ee generally n.56, infra (discussing Former Employees’ objections to agency’s use of “leading” questions); section IV.D.2.b, infra (discussing lack of definition of “control” in agency questions). There is thus no truth to the Government’s assertion that “at no time during the administrative proceeding did plaintiffs contend thatany of the questions Labor asked was irrelevant or misleading.” See Def.’s Brief at 25.

17 From the record, it is not clear precisely wh at the Labor Department transmitted to IBM. Nor is it clear from the record whether IBM ever responded. addressed to the circumstances that led to the termination of the Former Employees. See , e.g. , CSAR 732, 809. 16In addition, the Labor Department provi ded IBM with “the statements of the workers and their responses,” and requested IBM’s comments concerning “the accuracy of the[] [Former Employees’] statements and whether there are actual facts supporting [the Former Employees’] allegations.” CSAR 786. 17 Further, the Labor Department held two confer ence calls with IBM officials to discuss issues raised in the investigation, and convened at least one such call with officials of BP. See generally CSAR 742, 761-62, 993-94; see also CSAR 852. Although counsel for the Former Employees asked to participate in the agency’s teleconferences with BP and IBM, they were never included. See CSAR 997 at n.1. The teleconferences were memo rialized for the administrative record by the agency investigator in summary memoranda; but the completeness of those memoranda is in doubt. See generally section IV.D.2.a(3), infra

.Court No. 04-00079 Page 22

18 See generally CSAR 853-54 (first set of questions), 859-61 (first set of responses), 899J903 (second set of questions), 913-21 (second set of responses), 995-1000 (third set of questions, with responses); see also CSAR 864 (transmitting BP-PwC/IBM contract), 922 (transmitting BPPwC/IBM Service Level Agreement).

19 Though the events largely speak for themselves , the Government and the Labor Department strive to cast a rather different light on th e chronology of, and certain developments in, the investigation. See , e.g. , Def.’s Brief at 25-27 and attached de clarations of agency investigators. Whatever may have been the agency’s intent, th e effects on the Former Employees were the same. In the course of the remand investigation, the Labor Department sent questions to the Former Employees as well, and provided their counsel with a copy of the contract between BP and
PwC/IBM. 18 In addition to responding to the agency’s inquiries, the FormerEmployees took the initiative to provide the Labor Department with other information relevant to their claims. See , e.g. , CSAR 913-14, 942-51. The agency investigator also had several phone conversations with counsel for the Former Employees, discussing the substan tive merits of the Former Employees’ case. See , e.g. , SAR 904. However, the record reveals that the Labor Department never truly embraced IBM I ’s recommendation to “engage in full and candid consultations with the Former Employees on all issues.” See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347. 19 For example, although the Labor Department contacted IBM and BP as early as th e week of December 7 and forwarded questions to the two companies as early as December 12 ( see , e.g. CSAR 730, 808), the agency did not engage counsel for the Former Employees for the first time until December 23 – the Friday before Christmas. See CSAR 853; see generally CSAR 851, 856-57, 859 (docum enting early efforts by counsel for the Former Employees to reach out to agency); Pls.’ Brief at Exh. 1 (same). Then, at 3:30 p.m. on December 23, with virtually no advan ce notice to the Former Employees or theirCourt No. 04-00079 Page 23

20 Although the Labor Department provided counsel for the Former Employees with copies of the questionnaire responses of IBM and BP, the agency instructed counsel that those responses were confidential and therefore could not be sharedwith the Former Employees themselves. Thus, while IBM and BP had free access to the statements of the Former Employees, the Former Employees had no opportunity to review and commenton the factual representations made by their former employers, and counsel for the Former Employees was deprived of that potentially critical input. See generally Pls.’ Brief at 26 n.9. counsel, the agency forwarded questions to beanswered by the Former Employees, imposing a deadline of December 30. See CSAR 853, 859. Moreover, the Labor Department agreed to forward for review by counsel for the Former Employees copies of the agency’s questions to IBM and BP, as well as the companies’ answers. But, although it later relented, the agency initiallytook the position that it would provide counsel for the Former Employees withcopies of the companies’ answers only after all information had been obtained from those sources. See CSAR 855, 857, 859. Further, particularly in the early stages of the investigation, the agency was slow to forward even copies of the BP and IBM questions to counsel for the Former Employees. See generally Pls.’ Brief at 9. 20 But what the Former Employees found most tr oubling was that the Labor Department never identified for them the criteria that it would apply to decide their fate until the agency issued its Third Negative Redetermination on Remand denying certification once again. See generally section IV.C, infra

. 7. The Third Negative Redetermination on Remand The Labor Department’s Third Negative Redetermination on Remand both articulated a new, seven-criteria test for the “control” of leased worker s, and applied that test to the Former Employees,Court No. 04-00079 Page 24

reaffirming the agency’s prior denials of TAA certification. See Third Negative Redetermination on Remand, 71 Fed. Reg. 10,709-14, CSAR 1019-50. According to the Labor Department, it sought on remand to “focus on articulating and applying objective criteria” for the exercise of ope rational control. Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. After reviewing th e agency’s prior Leased Worker Policy (set forth in its January 2004 memorandum), the agency determined that it was “appropriate to revise that policy, as an interim response to the issues raised in [the instant] proceeding, so that DOL policy more fully reflects potential real-world situations.” Id . The Labor Department nevertheless noted that it expressly “retains the discretion to further revise [the] policy, so that the subject of ‘operational control’ can continue to receive close scrutiny as DOL undertakes rulemaking to update the regulations implementing the eligibility requirements of the Trade Act.” Id

. The Labor Department advised that, “in respons e to the CIT’s remand instructions,” it had “re-evaluated the significance of a standard contr act between the contractor firm and the subject firm.” Third Negative Redetermination on Re mand, 71 Fed. Reg. at 10,712. The agency reasoned that, “[g]iven the Department’s focus on ascertaining operational , rather than formal, control,” “the existence of a contract between the employer (such as a staffing agency, leasing agency or contractor) of a worker group and a producing firm is not an essential pre-requisite for the Department to determine that the workers in que stion are, in effect, joint employees or leased workers of the producing firm.” Id . Under the agency’s new rationa le, “[t]he presence or absence of a contract would simply be one element, albe it an important one, in the Department’s analysis.”Court No. 04-00079 Page 25

21 According to the Labor Department: “While a contract, where one exists, may provide strong evidence about the intended nature of the employment relationships between two firms, the Department will also review the operational conditions in which workers of an independent firm perform their functions for a producing firm.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712.

22 In the Third Negative Redetermination on Remand, the Labor Department noted that – although the January 2004 Leased Worker Policy provided for the certification of on-site leased workers only – “there may be circumstances where off-site leased workers . . . who provide support for production at a trade-impacted facility can satisfy the ‘operational control’ criteria to be eligible for TAA benefits.” Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712-13 (emphasis added). The Labor Department determined that “co-location, while an important consideration [in determining control] . . . , is not the conclusive factor.” Third Negative Redetermination on Id

. 21 The agency also emphasized that, “[i]n all situations,” terminated leased workers “must still have been engaged in activities related to production of an article produced by a firm” to be eligible for certification. Id

. The Third Negative Redetermination on Remand stated that the Labor Department had reviewed various relevant legal authorities, to develop seven criteria to be applied “to determine the extent to which a worker group engaged in activ ities related to the production of an article by a producing firm is under the operational control of the producing firm.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. No ting that “[t]he body of law involving joint employment or independent contractor status is complex and difficult to apply,” the agency explained that it had “sought to distill that body of law into some basic principles, thus creating a test that is useable within the short statutory timeframes that govern TAA investigations.” Id

. The seven criteria outlined in the Third Negative Redetermination on Remand are: 1. Whether the subject workers were on-site or off-site of a facility of a production firm. 22Court No. 04-00079 Page 26

Remand, 71 Fed. Reg. at 10,713. According to the agency, under the newly-articulated policy, “colocation” in effect “create[s] a strong presumption of control, so long as the workers are not engaged in activities completely unrelated to the work of the facility, such as selling extraneous items ( e.g. , food) on-site and so long as other evidence do es not demonstrate th at the workers worked independently of the producing firm.” Id .; see also 71 Fed. Reg. at 10,711 n.2 (employment at a production facility no longer a requirement for TAA certification).

23 The Labor Department highlighted “[t]he disc retion to hire, fire and discipline workers” as a “strong indicator of the level of control exercised by a producing firm on the employees of another firm.” Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713.

24 According to the Labor Department, the fifth criterion – whether “workers of the subject group perform work that supports other clients” – is “another strong indicator” of control. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713-14.

25 The Third Negative Redetermination on Remand identifies the seventh criterion – the provision of training – as yet “another strong indicator” of control. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,714. 2. Whether the subject workers performed tasks that were part of the producing firm’s core business functions, as opposed to independent, discrete projects that were not part of the producing firm’s core business functions. 3. Whether the production firm has the di scretion to hire, fire and discipline subject workers. 23 4. Whether the production firm exercises the authority to supervise the subject workers’ daily work activities, including assigning and managing work, and determining how, where, and when the work of individual workers takes place. Factors such as the hours of work, the selection of work, and the manner in which the work is to be performed by each individual are relevant. 5. Whether the services of the worker group have been offered on the open market ( e.g. , do workers of the subject gr oup perform work that supports other clients?). 24 6. Whether the production firm has been re sponsible for establishing wage rates and the payment of salaries to individual workers of the subject worker group. 7. Whether the production firm has provided skills training to subject workers. 25Court No. 04-00079 Page 27

Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712 (footnotes added). According to the Labor Department, none of the seven factors is “dispositive.” Third Negative Redetermination on Remand, 71 Fed. Re g. at 10,712. Moreover, the agency recognized “that there may be cases in which evidence of every one of the criteria is not available.” Id . Thus, the Labor Department indicated, in applying the new test, it intends to “look at such evidence as there is that goes to all these factors and . . . determine whether, on balance, the evidence supports a level of control by the producing firm that demonstrates that the workers of the contractor or secondary firm are, in fact, leased workers or joint employees of both firms.” Id

. After setting forth its new, seven-criteria test for control, the Labor Department applied that test to the Former Employees. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712-14, CSAR 1035-50. Accordi ng to the Third Negative Redetermination on Remand, the agency “made every effort to explore whether the [Former Employees] were under the operational control of BP as the first step in determining if they are entitled to certification.” Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711. “In order to determine who exercised actual, operational control” over the Former Employees, the Labor Department looked to the BP -PwC/IBM contract “as a starting point, not the endpoint, for its inquiries.” Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711. The agency stated that, through its inquiries, it “s ought to develop a true understanding of the ‘realworld’ relationship between [the Former Employees], IBM management, and BP employees/management.” Id

. The Labor Department thus “sought to determine what constitute the ‘practical realities’ .Court No. 04-00079 Page 28

. . of the relationship between [the Former Em ployees] and BP,” by “[a] pplying the [seven, newlyestablished] criteria [for contro l] to the record evidence.” Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. The Labor Depa rtment acknowledged that “the petitioners, but not necessarily all former IBM employees at the Tulsa facility, had been BP employees prior to being outsourced in 2000 and that the outsourcing did not result in changes to their work assignments.” Id ., 71 Fed. Reg. at 10,711. The agency further conceded that “IBM’s acquisition of PwC had no impact on the petitioners’ work assignments.” Id . In addition, the agency noted that “in 1999, the Department certified accountants formerly employed by BPin Tulsa as eligible for TAA because their work had been performed in support of trade-impacted production activity at BP facilities.” Id

. Nevertheless, reviewing each of its seven new criteria for control in turn, the Labor Department concluded that all of them weighed against the Former Employees. Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712-14, CSAR 1035-50. The agency therefore “affirm[ed] [its] original notice of negative determination of eligibility,” denying certification of the Former Employees. Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,714. Although IBM I expressly instructed the Labor Department on remand to “spell out with precision all criteria applicable to the Former Employees’ potential certification as leased service workers” (IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1345-47 (emphasis added); see also id ., 29 CIT at ____ n.38, 403 F. Supp. 2d at 1336 n.38), the Th ird Negative Redetermination on Remand addressed only the test for “control.”
IBM I similarly directed the Labor Department on remand to “make determinations as toCourt No. 04-00079 Page 29

whether each of the criteria [for certification of leas ed workers] is satisfied in this case.” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347. The Third Ne gative Redetermination on Remand stated in passing that IBM’s 2003 Annual Report “documented the manner in which IBM ‘rebalanced’ its staffing after acquiring PwC,” and asserted that the information in the annual report “corroborates other record evidence which indicates that the st affing reductions at IBM’s Tulsa Accounting Center had nothing to do with BP.” Third Negativ e Redetermination on Remand, 71 Fed. Reg. at 10,711 n.3. And, elsewhere, the Third Negative Redetermin ation on Remand stated that “[t]he reasons that led to the layoffs [of the Former Employees’ ex-colleagues] in 1999 [were] simply different from those present in 2003,” so that “even if [the Former Employees] were deemed to be under BP’s control, they could not be certified.” Id ., 71 Fed. Reg. at 10,711. Howe ver nowhere did the Labor Department make a formal determination on any criteria for certification other than control. Instead, immediately following the analysis of the seven newly-articulated criteria for control of leased workers, the Third Negative Redetermination on Remand reaffirmed the agency’s denial of the Former Employees’ TAA petition. Thus, as discussed in greater detail below, in these and other major respects, the Labor Department’s Third Negative Redetermination on Remand failed to comply with the mandate of
IBM I

.

III. Standard of Review Judicial review of a Labor Department dete rmination denying certification of eligibility for trade adjustment assistance benefits is confined to the administrative record. See , e.g. , Former Employees of Chevron Products Co. v. U.S. Sec’y of Labor , 27 CIT 1135, 1142, 279 F. Supp. 2dCourt No. 04-00079 Page 30

1342, 1350 (2003) (“Chevron II ”) (citations omitted). The agency’s determination must be sustained if it is supported by substantial ev idence in the record and is othe rwise in accordance with law. 19 U.S.C. § 2395(b); Former Employees of Sh aw Pipe, Inc. v. U.S. Sec’y of Labor , 21 CIT 1282, 1284- 85, 988 F. Supp. 588, 590 (1997) (citations omitted); Former Employees of Merrow Mach. Co. v. U.S. Sec’y of Labor , 18 CIT 17, 18-19, 843 F. Supp. 1480, 1481 (1994) (citations omitted). The Labor Department’s findings of fact ar e thus conclusive if they are supported by substantial evidence. See Former Employees of Galey & Lord Indus., Inc. v. Chao , 26 CIT 806, 808-09, 219 F. Supp. 2d 1283, 1285-86 (2002) (citations omitted); Merrow Mach. Co. , 18 CIT at 19, 843 F. Supp. at 1481 ( citing 19 U.S.C. § 2395(b)). “However, substantial evidence is more than a ‘mere scintilla’; it must be enough to reasonably support a conclusion.” Chevron II , 27 CIT at 1143, 279 F. Supp. 2d at 1349 ( citing Galey & Lord Indus. , 26 CIT at 808, 219 F. Supp. 2d at 1286 (citations omitted)). Moreover, the evidence on which the agency relies does not exist in a vacuum. Thus, to determine whether substantial evidence exists, the record compiled by the agency must be reviewed “in its entirety, including all evidence that ‘fairly detracts from the substantiality of the evidence.’” Consol. Bearings Co. v. United States , 412 F.3d 1266, 1269 (Fed. Cir. 2005) (citations omitted); see also Gerald Metals, Inc. v. United States , 132 F.3d 716, 720 (Fed. Cir. 1997) (“[T]he substantiality of evidence must take into account whatever in the record fairly detracts from its weight.” (citations omitted)); Chevron II , 27 CIT at 1143, 279 F. Supp. 2d at 1350 (“[A]n assessment of the substantiality of record evidence mu st take into account whatever else in the record fairly detracts from its weight.” (citations omitted)).Court No. 04-00079 Page 31

26 See also United Electrical, Radio and Machine Workers of America v. Martin , 15 CIT 299, 308-09 (1991) (ordering certification of workers wher e agency used “protean reasoning to force its negative determination to fit whatever new facts co me to light”); Former Employees of Hawkins Oil & Gas , 17 CIT at 130-31, 814 F. Supp. at 1115-16 (order ing certification where “another remand . . . would be futile”); Former Empl oyees of Barry Callebaut v. Herman , 26 CIT 1044, 1058, 240 F. Supp. 2d 1214, 1228 (2002), rev’d on other grounds , 357 F.3d 1377 (Fed. Cir. 2004) (ordering certification where agency “failed to conduct an adequate investigation after four opportunities”); Finally, all rulings based on the agency’s findings of fact must be “i n accordance with the statute and not . . . arbitrary and capricious”; to that end, “the law requires a showing of reasoned analysis.” Former Employees of Ge n. Elec. Corp. v. U.S. Dep’t of Labor , 14 CIT 608, 611 (1990) ( quoting UAW v. Marshall , 584 F.2d at 396 n.26). In short, although it is clear that the scope of j udicial review is narrow, and that a court is not free to substitute its judgment for that of the agency, it is equally clear that “the agency must examine the relevant data and articulate a satisf actory explanation for its action including a ‘rational connection between the facts found and the c hoice made.’” Former Employees of Alcatel Telecomms. Cable v. Herman , 24 CIT 655, 658-659 (2000) ( quoting Motor Vehicle Mfr.’s Ass’n
v. State Farm Mut. Auto. Ins. , 463 U.S. 29, 43 (1983) (citations omitted)). Where good cause is shown, a case may be rema nded to the Labor Department for further investigation and analysis. 19 U.S.C. § 2395(b); see also Former Employees of Motorola Ceramic Products v. United States , 336 F.3d 1360, 1362 (Fed. Cir. 2003) (citations omitted). Moreover, where circumstances warrant, the agency may be or dered to certify a group of workers, as “a remedy of last resort.” See Pittsburgh Logistics II , 27 CIT at 1310, 1320 (ordering certification where agency “continue[d] to adhere to a discredited position . . . at odds withthe developed facts of record”). 26Court No. 04-00079 Page 32

Former Employees of Marathon Ashland Pipeline LLC v. Chao , 27 CIT 820, 837, 277 F. Supp. 2d 1298, 1312-13 (2003), rev’d on other grounds , 370 F.3d 1375 (Fed. Cir. 2004) (ordering certification after multiple remands, where “[n]othing inthe record indicates that [the company] will be more forthcoming if the court were to remand again” and “[n]othing in the record indicates that Labor has the resources or willingness to conduct an investigation beyond making inquiries” of the company). The Government has argued in recent years th at the Court lacks th e authority to order certification. See Def.’s Brief at 14, 63-65; BMC , 30 CIT at ____ n.67, 454 F. Supp. 2d at 1347 n.67. To date, the Court of Appeal s has side-stepped the issue. See Former Employees of Marathon Ashland Pipe Line LLC v. Chao , 370 F.3d 1375, 1386 (Fed. Cir. 2004) (finding, under the circumstances, “no occasion to address the govern ment’s argument that the remedy ordered by the [Court of International Trade] was outside [its] authority”); Former Employees of Barry Callebaut v. Chao , 357 F.3d 1377, 1383 (Fed. Cir. 2004) (deeming moot “the question of the Court of International Trade’s authority to order Labor to certify [workers]” for TAA benefits). Indeed, the workers in Barry Callebaut specifically cautioned the Court of Appeals against writing the Labor Department a “blank check”: “If Labor were correct that the Court of International Trade could do nothing other than affi rm or remand, . . . the court would be powerless to do anything more than order a potentially endl ess series of futile remands, no matter how many times Labor failed to perform an adequate inves tigation” – “an ‘absurd result.’” 357 F.3d at 1382-83. Cf . Nippon Steel Corp. v. United States , 458 F.3d 1345, 1359 (Fed. Cir. 2006) (pointedly declining to endorse Government’s claim that 19 U.S.C. § 1516a precludes Court of International Trade from reversing agency determinations in international trade cases and allows Court only to affirm or remand; emphasizing that “[i]t may well be that, inanother situation, the trade court may be faced with [an agency] determination that is unsupporte d by substantial evidence, and for which a remand would be ‘futile.’”). IV. Analysis The Former Employees challenge the Labor De partment’s Third Negative Redetermination on Remand – including its new Leased Worker Policy – on a number of grounds, substantive and procedural. The threshold question is whether the Former Employees’ TAA petition is properly subject to the Labor Department’s new Leased Worker Policy. The validity of that new policy, and the sufficiency of the agency’s articulated rationale, are also at issue.Court No. 04-00079 Page 33

27 IBM I did not instruct the Labor Department to develop an entirely newLeased Worker Policy or an entirely new definition of “control.” Indeed, the st arting point of the analysis in IBM Other arguments go to the Labor Department’s s ubstantive analysis of the specific facts of this case. The Former Employees claim that the remand investigation was lacking in transparency, and designed to reach a predetermined outcome. Th ey also dispute the reliability of much of the evidence on which the agency relies, and they maintain that the agency simply ignored evidence contrary to its determination. In addition, the Former Employees contend that a criterion-by-criterion review of the existing record under the Labor Department’s new policy demonstrates that they were indeed subject to BP’s “operational control,” and that the agency’s determination to the contrary is unsupported by substantial evidence in the record. The Former Employees further contend that, because the agency failed to make determinations on any certification criteria other than control, their satisfaction of those criteria should be deemed conceded. The Former Employees conclude that – under the circumstances presented here – a fourth rema nd would be inappropriate, and court-ordered certification is the only just remedy. Each of the Former Employees’ challenges to the Labor Department’s Third Negative Redetermination on Remand is considered below, in turn.
A. The Potential Applicability of the Agency’s Prior Leased Worker Policy As a threshold matter, the Labor Department apparently takes it as a given that the Former Employees’ TAA claim is subject to the seven newl y-articulated criteria for “control” set forth in the agency’s latest Leased Worker Policy. But the issue is far from clear. 27Court No. 04-00079 Page 34

I was the observation that – although both the Labor Department and the Former Employees appeared to assume that BP must have had “control” over the Former Employees for them to be eligible for TAA certification – the Labor Departme nt’s then-existing Leased Worker Policy did not identify “control” as a criterion fo r leased workers’ certification. See IBM I , 29 CIT at ____ & n.10, ____ n.18, 403 F. Supp. 2d at 1317 & n.10, 1327 n.18 ( citing Labor Department Internal Memo re: New Leased Workers Policy, CSAR 261-62).
IBM I also noted that it was not clear “whether – as a matter of practice – the Labor Department ha[d] consistently and uniformly requi red evidence of ‘control’” in cases where it had applied its then-existing Leased Worker Policy. See IBM I , 29 CIT at ____ n.18, 403 F. Supp. 2d at 1327 n.18 ( quoting , inter alia , a 2005 Fed. Reg. notice (stating that service workers eligible for TAA certification include “leased workers who pe rform their duties onsite at the TAA certifiable location on [an] established contractual basis”)). IBM I further pointed out that, if indeed “control” was a criterion for leased workers’ certification, Pittsburgh Logistics required the Labor Department to “define ‘control’ more broadly [than simply corporate ownership or affiliation], to include operational reality.” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1327. IBM I therefore directed the Labor Department, on remand, to “explain, inter alia , both its policy and its practice concerning ‘control’ as a criterion for certification of leased workers,” and to explain “the precise meaning and significance” of various key terms used in the agen cy’s then-existing Leased Worker Policy. IBM I , 29 CIT at ____ n.18, 403 F. Supp. 2d at 1327 n.18. Similarly, IBM I noted that “there [was] much room for confusion as to precisely how the agency’s classic test for certification as ‘service wo rkers’ [was] to be interpreted and applied in light of the agency’s [then-existing] Leased Workers Policy.” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1346. Accordingly, IBM I instructed that, on remand, the Labor Department was to “spell out with precision all criteria applicable to the Former Employees’ potential certification as leased service workers,” “explain[ing] the origins of and legal bases for all such criteria.” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347. The end product was to be “a complete, self-contained statement articulating all agency criteria for TAA certificati on of leased workers,” which was to be “a public document.” IBM I , 29 CIT at ____ n.38, 403 F. Supp. 2d at 1336 n.38. In sum – read properly, in context – the thrust of IBM Iwas to require the Labor Department to specifically identify, clarify and explain all criteria for certification of leased workers under its existing policy (as it was then being applied by the agen cy), to articulate the bases for that policy, to commit that policy to writing, and to publish it (to make it publicly available). As a matter of simple fairness and equal protec tion (if nothing else), it would seem clear that the Labor Department should not hold the Former Employees to a higher standard than similarlysituated worker groups who sought – and were gr anted – TAA certification during the same generalCourt No. 04-00079 Page 35

28 The Labor Department also must take care to en sure that it is not – in effect – holding some workers to a de facto higher standard than others, by subjecting some workers’ claims to significantly greater scrutiny. For example, the Labor Department seeks to di stinguish the facts of the instant case from those in Pittsburgh Logistics , asserting that the Former Employees here “were not part of a subdivision that was ‘integrated into the [BP] co rporate structure’ and did not report ‘directly to [BP] employees on all operational matters.’ . . . Fu rther, BP personnel did not manage ‘all job tasks, direct[] which employees could work at specific locations and specifically relocate[] the [IBM] subdivision along with certain [BP] facilities * * * to [BP’s] facilities, evaluate[] [IBM] employee job performance, and advise[] which [IBM] employ ees should receive merit salary increases.’” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,714. But that argument is specious. The Labor Department is not quoting from the agency’s own findings in Pittsburgh Logistics

. Rather, the quotes are simply the claims of the workers in that case. See Pittsburgh Logistics I , 27 CIT at 352 (“The plaintiffs also cl aim . . . .”). Moreover, the Former Employees in the case at bar make virtually identical claims. There can be little doubt that – if the Labor Department had subjected the claims of the Pittsburgh Logistics workers to the kind of microscopic scrutiny accorded the claims of the Former Employees here – the agency would have found the relationship between the workers and the production fi rm at issue in Pittsburgh Logistics to be rather more nuanced (less clear-cut) than the agency now seeks to depict it. Similarly, the Federal Register in which the Notice of Third Negative Redetermination on Remand was published included notices of several TAA investigations in which leased workers were certified – and, presumably, there have been other cases as well. See , e.g. , Cranford Woodcarving, Inc., Hickory, NC: Amended Certification Regard ing Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance, 71 Fed. Reg. 10,709 (March 2, 2006); Lexel Co., Hutsonville, IL: Amended Certificati on Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Tr ade Adjustment Assistance, 71 Fed. Reg.10,714-15 (March 2, 2006). There is no indication that these and other such cas es have been subjected to the degree of agency scrutiny evidenced in the record of this case. In addition, there is no indication that the Labor Department and its investigators recognize that – as a practical matter, particularly in leas ed worker cases – the more closely the facts of a particular case are scrutinized, the more ambiguous the case is likely to become ( i.e. , the more likely it is that the agency will identify facts adverse to the petitioning workers). Whenever a denial of certification is appealed to the court, the facts of that case are (naturally) subjected to greater scrutiny by the agency. If the Labor Department fails to properly “discount” the evidence identified through its enhanced scrutiny in such cases (as compared to the cases where certification was granted) – that is, if the agency implicitly assume s that there were few orno adverse facts in the timeframe. 28 See Former Employees of Merrill Corp. v. United States , 31 CIT ____, ____, Slip Op.Court No. 04-00079 Page 36

cases where it granted certification with relativel y little investigation – then the Labor Department is, in effect, unfairly applying a higher standard to leased workers who appeal the denial of their petitions. The situation is only exacerbated if, when a deni al of certification is appealed to the court, the Labor Department (consciously or unconsciously) seeks to elicit evidence to buttress its prior determination, rather than evaluating the case as a neutral, even-handed fact-finder charged with administering a remedial statute, conducting its investigation with the “utmost regard” for the interests of petitioning workers. See Pls.’ Brief at 1 (charging thatagency’s remand investigation “was conducted to reach a predetermined negative result”), 5-7 (asserting that “Labor took the position of an advocate seeking to defend its prior d ecision, rather than the neutral fact-finder it was supposed to be”); Pls.’ Reply Brief at 1-3 (argui ng that agency’s remand investigation was “outcome oriented,” “intended to derive information aimed at supporting a predetermined outcome,” and “designed to reach a negative determination”). It would be problematic, to say the least, if the Former Employees (or any other group of petitioning workers) were to show that the level of agency scrutiny varies greatly from one leased workers case to another, and that the difference in the level of scrutiny is a major factor in determining whether or not a particular group of wo rkers is certified. The watchword is consistency. 07-46 at 27 (Mar. 28, 2007) (“It goes without saying that similarly-situated claimants should be treated similarly under the law. ”) (citation omitted). Neither the Labor Department nor the Government has addressed this point directly. Bu t, in a different context, the Government has asserted that – compared to other, prior iterations of the agency’s LeasedWorker Policy – the new Leased Worker Policy is more liberal, because it “ lowers the burden for establishing eligibility [for TAA certification of leased workers] by e liminating the co-location requirement.” See Def.’s Brief at 35. At least in the case at bar, however, there is a powerful argument that, in fact, the Former Employees were “co-located” with the production firm at issue, BP. See generally section IV.D.3.a, infra . If the Former Employees indeed were eff ectively “co-located” with BP, then they may beCourt No. 04-00079 Page 37

eligible for certification “under the former leasedworker policy, which looked only at whether there was a contract and whether th e workers were on-site.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,714 (seeking to distinguish the case at bar from “the situation of the petitioners in Former Employees of Wackenhut Corp. v. USDOL , Ct. No. 02-00758” on the grounds that Wackenhut “was decided under the former leased wo rker policy, which looked only at whether there was a contract and whether the workers were on-site”). Accordingly, this matter must be remanded to permit the Labor Department to determine – following consultation with the Former Employees – whether the Former Employees’ TAA claim should be “decided under the former leased worker policy, which looked only at whether there was a contract and whether the workers were on-site” (o r, for that matter, some other prior formulation of the policy), or whether their claim is properly s ubject to the agency’s latest Leased Worker Policy (or some variation of it). See Third Negative Redeterminati on on Remand, 71 Fed. Reg. at 10,714. The Labor Department shall set forth its rationale in the remand results, detailing all relevant legal and policy considerations, as well as the relevant facts.
B. The Validity of the Agency’s New Leased Worker Policy Even if the Former Employees’ TAA claim is not subject to “the former leased worker policy, which looked only at whether there was a contract and whether the workers were on-site” ( see Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,714), or some other prior version of the policy, it does not necessarily fo llow that their claim is subject to the Labor Department’s new Leased Worker Policy. The validity of that new policy has yet to be established. As the Former Employees note, the Labor Department failed to provide the requisiteCourt No. 04-00079 Page 38

29 See also Atchison, Topeka & Santa Fe Ry. v. Wichita Bd. of Trade , 412 U.S. 800, 808 (1973) (agency changes in policy “must be clearly set forth so that the reviewing court may understand the basis of the agency’s action and so may judge the consistency of that action with the agency’s mandate”), 817 (agency “must make [its] reasons known to a reviewing court with sufficient clarity to permit it to do its job”).

30 Because the new policy deals only with the i ssue of control (and does not speak to any other requirements for TAA certification of leased workers), it is a misnomer to refer to the policy as the “Leased Worker Policy.” However, that is the terminology used by the Labor Department, and so – to avoid confusion – it is used here as well. reasoned analysis explaining and justifying its new policy. See Pls.’ Brief at 18-19. It is black letter law that, although an agency is permitted to cha nge its methodology in appropriate circumstances, the agency must nevertheless articulate a reasoned basis for the change. See , e.g. , British Steel PLC v. United States , 127 F.3d 1471, 1475 (Fed. Cir. 1997). 29 Moreover – quite apart from that generally-applicable tenet of administrative law – IBM Ispecifically directed that, on remand, the Labor Department was not only to “spell out with precision all criteria applicable to the Former Employees’ potential certification as leas ed service workers,” but also to “ explain the origins of and legal bases for all such criteria.” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347; see also 29 CIT at ____n.38, 403 F. Supp. 2d at 1336 n.38 (emphasis added). Contrary to the instructions in IBM I (quoted above), the new Leased Worker Policy embodied in the Third Negative Redetermination on Remand is limited to the issue of control. 30 And, even as to control, the Labor Department’s te rse explanation leaves much to be desired. For example, the Labor Department stated that – in formulating its new seven-criteria test for “control” – it referred “to pertinent case law; to the Internal Revenue Code (26 U.S.C. § 3121(d)); to Revenue Ruling 87-41 and to the Restatement (Second) of Agency § 2, Master ; Servant ; Independent Contractor and § 220, Definition of Servant (1958).” See Third NegativeCourt No. 04-00079 Page 39

31 According to the Government, the Restatement (Second) § 220 alone lists more than 10 criteria, and the IRS Revenue Ruling “includes a list of 20 factors.” See Def.’s Brief at 33-34. The Government further asserts that the seven criteri a set forth in the Labor Department’s new policy “correspond to the factors used by the IRS as a guide and approved by the Supreme Court,” and explains: Labor’s first criteria corresponds to Factor 9 of the Revenue Ru ling and Factor (e) of the Restatement. Labor’s second criteria corresponds to Factor (h) of the Restatement. Labor’s third criterion corresponds to Factors 19 and 20 of the Revenue Ruling. Labor’s fourth criterion corresponds to Factor 1 of the Revenue Ruling and Factor (h) of the Restatement. Labor’s fifth criterion corresponds to Factors 17 and 18 of the Revenue Ruling. Labor’s sixth criterion corresponds to Factors 12 and 13 of the Revenue Ruling. Lastly, Labor’s seventh criterion corresponds to Factor 2 of the Revenue Ruling Def.’s Brief at 35. The Government’s amplifi cation of the Labor Department’s new policy is arguably post hoc rationalization, however; and – more importantly – it simply underscores the fact that, for reasons that remain unexplained, the new Leased Worker Policy does not incorporate numerous criteria from the sources on which the agency says it relied. Redetermination on Remand, 71 Fed. Reg. at 10,712. The Labor Department represented that it found “the case law related to the ‘economic realities’ test particularly useful.” Id . However, the agency specifically cited only a single cas e – Nationwide Mut. Ins. Co. v. Darden , 503 U.S. 318, 323-24 (1992) – and failed to identify any other “pertinent case law” that it consulted. Similarly, the Labor Department did not explain why it chose to rely on certain legal authorities and not others, much less why it adopted only some of the criteria set forth in the authorities on which it chose to rely and rejected other criteria set forth in those same authorities. 31 Thus, for instance, the Labor Department proffe red no explanation for its decision not to include among its seven criteria “the duration of the relati onship between the parties” – one of the criteria listed in the excerpt from Nationwidethat the agency quoted in outlining its new policy (and one that would appear to weigh heavily in favor of the Former Employees). See Third NegativeCourt No. 04-00079 Page 40

32 Contrary to the Government’s assertion, th e Former Employees emphatically do not “agree that . . . Labor’s [seven newl y-articulated] criteria for determining control are satisfactory.” Compare Def.’s Brief at 32 with Pls.’ Reply Brief at 5 n.4. Notwithstanding their dissatisfaction with the seven criteria, however, the Former Employees maintain that they can demonstrate that they meet them. Id

.
33 The Third Negative Redetermination on Remand does pay lipservice to “the remedial purposes of the Trade Act.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. But the sole reference to the remedial natu re of TAA is in the context of explaining the Labor Department’s “review[] [of] all record evid ence” in reaching its determination in the Former Employees’ case. Id . The reference has nothing at all to do w ith the agency’s formulation of its new Leased Worker Policy. And, in any event, it is but a passing reference. Redetermination on Remand, 71 Fed. Reg. at 10,712. 32 The Labor Department’s statement of rationale is lacking in numerous other respects as well. For example, in citing Nationwide , the Labor Department noted that it was “a case arising under the Employee Retirement Income Security Act,” intimating that the agency may have been cognizant that the differing public policies underlying different, but related, areas of the law may influence the substance of the law. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. But the agency’s sparse rationale includes no discussion whatsoever of the subject. Certainly there is no indication that, in distilling principles from disparate bodies of law into its seven criteria, the Labor Department was mindful of the remedial nature of the TAA laws and its own obligation to act with the “utmost regard” for the interests of the nation’s displaced workers. 33 Moreover, ignoring the explicit instructions in IBM I , the Labor Department’s new criteria fail to provide for consideration of whether the l eased workers in a particular case were previously employed directly by the production firm at issue (as they were in the case at bar). IBM I unequivocally directed that: [I]n both its articulation and its applicati on of its policy vis-a-vis TAA certificationCourt No. 04-00079 Page 41

34 See also Pittsburgh Logistics I , 27 CIT at 355 (noting that the fact that a particular group of leased workers had been “outsourced” by th e production firm which now leased them “would strengthen the[ir] argument for eligibility” for TAA certification). This highlights the problem at the heart of this case – the Labor Department’s continuing failure to come to grips with the relatively unusual facts of this case. In the typical outsourcing, a company outsources a particular function to a services firm at some other location. The outsourcing company’s ex isting in-house staff who formerly handled the function are terminated, and are not necessarily hi red by the services firm that assumes responsibility for the outsourced work. In this case, to ensure continuity , BP not only outsourced a function, it also outsourced the Former Employees and other BP staffers who ha d been handling that function in-house for years (and, in some cases, for decades). Moreover, th e outsourcing did not even result in a change of workplace for the Former Employees and the other outsourced workers. They did not move into PwC/IBM offices at some other location. Instea d, for the convenience of BP, the Former Employees remained where they had always been located – near the BP Treasury, at the same desks, in the same building, doing the same work for BP that they had been doing for years. What BP wanted in the PwC/IBM outsourcing – and what BPgot – was access to the same workers (the Former Employees and other outsourced BP staffers) without carrying them on the BP payroll. In the course of the investigation, the Labor De partment inquired as to the extent to which it is possible “for an[] employer to outsource em ployees and continue to receive the workers’ services without being considered the outsourced workers’ employer.” See CSAR 919. As a threshold matter, the agency’s question implicitly assu mes an “either/or” situation – that is, that the workers either become “employees” of the servi ces firm to which they are outsourced, or the workers effectively remain “employ ees” of their former employer. But that is a false choice. As the Labor Department has previously acknowle dged, the concept of “joint employment” is of leased workers, the Labor Department should recognize and reflect (for purposes of its analysis of “control”) the differe nce between standard, run-of-the-mill leased workers cases (where there was no pre-existing relationship between the leased workers and the company producing the trade-impacted article) versus cases – like this one – where the petitioning workers we re “outsourced” by their initial employer [the production firm] and then immediately l eased directly back to that company, as part of an outsourcing strategy.
IBM I , 29 CIT at ____ n.38, 403 F. Supp. 2d at 1336 n.38; see also 29 CIT at ____ n.20, 403 F. Supp. 2d at 1328 n.20. 34The Labor Department’s rationale is inexplicably silent on the subject. 35Court No. 04-00079 Page 42

recognized in numerous areas of the law. Further, there seems to be a value judgment inherent in the Labor Department’s question. In other words, the question seems to assume that it must be possible for an employer to outsource its employees and yet continue to use their servi ces but – at the same time – be deemed to have relinquished all “control” over them (so that they could never be eligible for certification as “leased workers”). But the basis for the Labor Department’s inherent value judgment is unstated, and unclear. There appears to be no obvious reason why it would do violence to the TAA program to extend benefits to a group of workers who were outsourced by a production firm, but who continued to work exclusively for the former employer and whose livelihoods were tied to the health of the production firm. In any event, the direct answer to the Labor Department’s question is this: Not only are all outsourcing cases not the same ( i.e. , most involve the outsourcing of only a function, not personnel as well), but it is also true that distincti ons can be drawn even among the less common cases of outsourcing, where companie s outsource both a function and the personnel who used to handle that function in-house. The Former Employees’ case is at one extreme, and can be readily distinguished from other similar cases where (for example) th e outsourcing results in a change of workplace location for the outsourced personnel, where the out sourcing results in fundamental changes in the nature of the workers’ duties or their interactions with their former employer, or where – as a result of the outsourcing – the workers regularly handle wo rk for a number of clients in addition to their former employer (so that their former employer becomes “just another client”).

35 Similarly, in its new Leased Worker Policy, the Labor Department states that – while it “has determined that the existence of a contract between the employer (such as a staffing agency, leasing agency or contractor) of a worker group and a producing firm is not an essential prerequisite” for certification – the presence or abse nce of such a contract would be an “important” element in its analysis. It is thus somewhat pu zzling that the existence (or non-existence) of a contract is not included among the agency’s criteria. Again, the Labor Department’s rationale sheds no light on the matter. The new Leased Worker Policy also suffers from a lack of clarity. For example, the policy includes numerous references to “operational control” as the key concept. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711-13. And, in at least one place, the language of the policy suggests that shared control of leased workers is su fficient to justify certification. See Third Negative Redetermination on Remand, 71 Fe d. Reg. at 10,711 (referring to a situation where “a ‘client’ shares or has exclusive operational control over workers”). The policy also refers (withCourt No. 04-00079 Page 43

36 As IBM I explained, the Labor Department’s then -existing Leased Worker Policy provided that “the existence of a standard contract between the contractor firm [ i.e. , the leased workers’ employer] and the subject firm [ i.e. , the company producing the trade-impacted article] . . . should be considered sufficient evidence to provethe existence of a joint employer relationship .” IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1317 ( quoting Labor Department Internal Memo re: New Leased Workers Policy, CSAR 261-62) (emphasis added). IBM I further noted: Other than the [quoted] statement . . ., the Labor Department memorandum says little about the concept of a “ joint employer” relationship , except to incorporate by reference another memorandum – missing from the record . . . – which apparently discusses that concept at greater length. See Labor Department Internal Memo re: New Leased Workers Policy (CSAR 261-62) (referring to a “memorandum, dated November 21, 2003, requesting [a] decision on the issue of leased production vs. service workers” that apparently outlines options including a “‘ joint employer ’ option (Option 1),” which the new Leased Workers Policy purports to adopt with certain “important differences”).
IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1318 (emphases added). The Labor Department was expressly instruct ed, on remand, to “clarify not only its position on ‘control,’ but also on ‘ joint employer ’ relationship s.” IBM I , 29 CIT at ____ n.38, 403 F. Supp. 2d at 1336 n.38 (emphasis added). seeming approval) to “joint employment,” “joint employees,” and “joint employees of both firms” – though the policy fails to define or otherwise e xplain those terms (for example, to explain how they relate to “shared control”). 36 See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. Elsewhere, however, the language of the policy seems to indicate that leased workers may be certified only where the production firm has exclusive control. See , e.g. , Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711 (“DOL has made every effort to explore whether the plaintiffs were under the operational control of BP”), 10,712 (“For the former IBM employees to be found eligible, the Department mu st be able to establish that ‘client’ BP, notCourt No. 04-00079 Page 44

37 IBM I previously criticized the Labor Department and the Government for similar inconsistencies in their statements of the applicable standard. See generally IBM I , 29 CIT at ____ n.19, 403 F. Supp. 2d at 1327 n.19 (noting that the Government’s brief “variously restates the test for certification as whether IBM ‘abdicated’ contro l over the Former Employees or whether “IBM’s role was relegated to mere ‘nominal staffing,’ ” and contrasting such language with the Labor Department’s then-existing Leased Worker Po licy, which “expressly endorse[d] certification of leased workers where there [was] a ‘joint employer’ relationship”) (citations omitted).

38 The new revised policy shall also expressly address the extent to which that policy applies to leased production workers, as well as leased service workers. Cf . IBM I , 29 CIT at ____ & n.43, 403 F. Supp. 2d at 1339-40 & n.43 (discussing leased se rvice workers vs. leased production workers, including citations to the Government’s prior brief, which addressed the subject). See also Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711 (“Thus, the client’s exercise of some control does not establish that a ‘client’ shares or has exclusive operational control over workers employed by an unaffiliated service provider . . .”) (third emphasis added). ‘employer’ IBM, exercised effective operational c ontrol over the workers’ performance of their duties. In essence, DOL must determine whether the outsourcing of BP workers effectively transferred control over those workers to PwC/IBM. ”). These and other instances of the confusing use of critical terminology render the Labor Department’s new policy substantially flawed. 37 On remand, the Labor Department shall clarif y and expand its new Leased Worker Policy, to address – at a minimum – the points outlined a bove, in addition to other points raised in IBM I which the policy does not presently address. 38 Finally, the revised policy shall be a public, “standalone” document (separate and apart from the agency’s redetermination on remand analyzing the facts of the case at bar, but filed with it).
C. The Timing of the Agency’s Issuance of Its New Leased Worker Policy The Former Employees characterize the Labor Department’s standard for TAA certification in this case as “a constantly moving target.” Pls.’ Brief at 15. As they see it, “[a]s soon as the Former Employees submit evidence establishing their eligibility for certification pursuant to Labor’sCourt No. 04-00079 Page 45

39 The Former Employees express fear that, on remand, the Labor Department will “once again change the rules for certification, continui ng to make it impossible for the Former Employees to demonstrate their eligibility for certification.” See Pls.’ Brief at 17. The Former Employees point with particular concern to the Third Negative Redetermination on Remand, where the Labor Department states that it expressly “retains the discretion to further revise [its Leased Service last articulated standard, Labor determines th at the Former Employees are not eligible for certification based upon an entirely di fferent certification standard.” Id .; see also Pls.’ Reply Brief at 2 (asserting that “Labor’s ‘moving target’ approach is fundamentally unfair to the Former Employees and is inconsistent with Labor’s mandateto conduct TAA investigations with the ‘utmost regard’ for the petitioning workers”). The Former Employees maintain that the most recent remand proceeding was no different. The Former Employees assert that – notwithstanding their repeated requests during the course of the remand proceeding – the Labor Department “refused to explain the control standards upon which its decision would be based.” Pls.’ Reply Brief at 2, 4 & nn.1-2; see also Pls.’ Brief at 10, 17. They point out that “[o] nly after Labor’s [most recent] negative remand determination was filed with the Court did the Former Employees learn th e test that determined their fate.” Pls.’ Reply Brief at 5. According to the Former Employ ees, “[b]ecause Labor did not notify the Former Employees of the existence of [its new] seven fact or test until Labor issued its [most recent] decision denying the Former Employees’ request for certification, it was impossible for the Former Employees to bring to Labor’s attention pertinent information addressing each of the seven factors of the test.” Pls.’ Reply Brief at 6. Instead, th e Former Employees “were left to submit information and analysis on control based on what became a supe rseded standard.” Pls.’ Brief at 17 (citation omitted). See also Pls.’ Brief at 15-16 & n.7; Pls.’ Reply Brief at 2, 4. 39Court No. 04-00079 Page 46

Worker Policy], so that the subject of ‘operational control’ can continue to receive close scrutiny as DOL undertakes rulemaking to update the [relevant] regulations.” See Pls.’ Brief at 17-18 ( quoting Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712). However, as section IV.A above notes, it is not clear that the Former Employees are necessarily subject to certification standards that were not in place at the time of their termination. Moreover, any risk associated with potential fu ture rulemaking is limited. “Retroactivity is not favored in the law.” Bowen v. Georgetown University Hospital , 488 U.S. 204, 208 (1988). Thus, as a general principle, regulations – like statutes – are not construed to have retroactive effect. Anticipating the tandem problems of a standardthat is a “moving target” and the resulting need for repeated remands, IBM Iinstructed the Labor Department both to identify all applicable criteria for certification (not just the criteria for control), and to make determinations on all such criteria. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347 (directing agency to “spell out with precision all criteria applicable to the Former Employees’ potential certification” and to “make determinations as to whether each of the criteria is certified in this case”); see also BMC , 30 CIT at ____ & n.65, 454 F. Supp. 2d at 1339-52 & n.65 (highlighting problem of “‘ping-pong’ phenomenon, where a case repeatedly bounces back and forth between the Labor Department and the court as a result of the agency’s standard ‘piecemeal’ approach to the investigation of TAA petitions”). Unfortunately, as discussed elsewhere in greater detail, the Labor Department’s Third Negative Redetermination on Remand failed to comply with either of those two Court directives.

40 Besides arguing that the newly-articulated crite ria for control were not finalized until the Third Negative Redetermination on Remand issued, th e Government also contends that the Former Employees “cannot reasonably claim to have been blindsided,” because the criteria “merely formalized the factual inquiry that Labor had c onducted” in the course of the remand proceeding. See Def.’s Brief at 35-36. However, as the Fo rmer Employees note, particularly under the circumstances presented here, it is far too much to expect that they “should have divined Labor’s The Government emphasizes, in turn, that the Labor Department’s new Leased Worker Policy “evolved as the [remand] investigation pr oceeded,” and that “the policy was not finalized until the investigation was completed and the determination was being written.” Def.’s Brief at 36; see also id . at 25 (the new policy “evolved as the inves tigation proceeded”). But that is no answer to the Former Employees’ complaint. Even assu ming that the Labor Department did the best that it could under the circumstances, 40the Former Employees nevertheless had a right to know – inCourt No. 04-00079 Page 47

test from questions that it was asking of BP and IBM.” See Pls.’ Reply Brief at 3-4. Moreover, the Government can’t have it both ways. The Government cannot fairly argue that the Former Employees were effectively on notice of the seven criteria, and also argue that it was not possible to give the Former Employees notice of the criteria because they were not finalized “until the investigation was completed and the determination was being written.” See Def.’s Brief at 36. advance – the standard by which their claim would be judged, so that they might proffer relevant evidence before the agency rendered its decision. On remand, the Labor Department shall ensurethat the Former Employees have proper advance notice of the specific criteria to be applied to their claim, and that they have adequate opportunity to marshal relevant evidence and fr ame arguments tailored to those criteria for the consideration of the agency.
D. The Agency’s Analysis of “Operational Control” in This Case In its Third Negative Redetermination on Rema nd, the Labor Department first set forth its new seven-criteria test for operational control, and then applied those seven criteria to the facts of this case. The Labor Department concluded that each of the seven criteria weighed against the Former Employees, and reaffirmedits denial of certification. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712 (listing seven criteria), 10,712-14 (agency’s application of criteria to facts of this case); see also CSAR 1035-50 (unredacted version of agency’s application
of criteria to fact s of this case). In contrast, the Former Employees maintain that, although they were deprived of proper advance notice of the Labor De partment’s newly-articulated criteria, the record evidence as a whole nevertheless demonstrates that the agency’s latest seven-part test for controlCourt No. 04-00079 Page 48

41 The Former Employees assert that – although the Labor Department describes its new seven-criteria test for control as a “balancing test” and states that none of the seven criteria is “dispositive” – all criteria are satis fied in this case. See Pls. ’ Brief at 19; Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712.

42 Other considerations also counsel against a criterion-by-criterion “substantial evidence” review of the Labor Department’s determination at the present time. For exam ple, it is possible that, in consultation with the Former Employees, the agency will conclude on remand that the Former Employees’ claim should be subject to some prior iteration of the agency’s Leased Worker Policy. See section IV.A, supra . It is also possible that, on reflec tion, the agency may modify its standard for control. See section IV.B, supra . Similarly, even if the Former Employees’ claim is not subject to some prior version of the Labor Department’s Leased Worker Policy, and even if the agency does not modify its standard for control, the agency mu st evaluate and reflect in its determination any additional evidence that the Former Employees may seek to adduce based on proper notice of the criteria by which their claim will be judged. is satisfied in this case. See Pls.’ Brief at 16 n.7, 19-31; Pls.’ Reply Brief at 5 n.4. 41 As discussed in greater detail below, the Labor Department’s compilation and analysis of the record on remand was plagued with a numbe r of overarching methodological problems whichmust be remedied by the agency, and which largely obviate the need to conduct a criterion-bycriterion review of the agency’s determination at this time. 42

1. The Transparency and Fairness of the Remand Proceeding The Former Employees argue that the remand i nvestigation was lacking in transparency, and that it was designed “to reach a predetermined nega tive result.” Pls.’ Brief at 1, 5-7, 8-11; Pls.’ Reply Brief at 1-3. Indeed, as outlined above, it is fair to say th at the Labor Department never truly embraced
IBM I ’s encouragement to “engage in full and candi d consultations with the Former Employees on all issues” on remand. See section II.B.6, supra ; IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347.Court No. 04-00079 Page 49

43 See , e.g. , section IV.B, supra (addressing the Former Employees’ argument that the Labor Department failed to adequately explain and justify its new policy); section IV.C, supra (addressing the Former Employees’ criticism of the timing of th e agency’s issuance of its new policy); section IV.D.2.a(3), infra (addressing the Former Employees’ exclusion from agency teleconferences, as well as their concerns about the accuracy of agency memoranda documenting those teleconferences). A number of the Former Employees’ specific complaints are addressed elsewhere herein. 43 But the Former Employees’ most serious charge is that the Labor Department has prejudged their case. Specifically, the Former Employees assert that , on remand, the agency failed to “act[ ] as a neutral fact-finder, gathering f acts for a later, reasoned analysis,” and – instead – “took the position of an advocate seeking to defend its prior decision.” See Pls.’ Brief at 6. The Former Employees contend that the agency’s actions were “outcome oriented, with a policy [on operational control] being crafted around record evidence rather than r ecord evidence being evaluated against an existing policy.” Pls.’ Reply Brief at 1. Pointing to the Labor Department’s representation that its new policy on control “was not finalized until the investigation was completed and the determination was being written” ( see Def.’s Brief at 36), the Former Employees assert that the agency thus “admits that only after it gather evidence and finalized the record did it develop a policy.” Pls.’ Reply Brief at 2-3. According to the Former Employees: Labor “put the cart before the horse,” framing its policy around the existing evidence. Indeed, Labor should have articulated its policy [and only] then, in consultation with all interested parties, inve stigated whether the facts of this case fit into that framework. Id . at 3. The Former Employees c onclude that “[t]he only explan ation for Labor’s investigative methodology on remand is that it was designed to reach a negative determination.” Id

.Court No. 04-00079 Page 50

The sequence of events on remand – with the Labor Department formulating its policy in parallel with its investigation of the facts of th is case – is unfortunate, and did nothing to dispel whatever concerns the Former Employees might otherwise have harbored about the agency’s ability to reconsider its prior determinations fairly and impartially. As the Government emphasizes, however, agencies are generally entitled to the benefit of a presumption of regularity, which is rebutted only by proof that the decision maker is “ not ‘capable of judging a particular controversy fairly on the basis of its own circumstances.’” See generally Def.’s Brief at 20-21 ( quoting Hortonville Joint Sch. Dist. v. Hortonville Educ. Ass’n , 426 U.S. 482, 493 (1976) (citation omitted)); see also NEC Corp. v. United States , 151 F.3d 1361, 1373 (Fed. Cir. 1998) (standard is met “when the challenger demonstrates, for exampl e, that the decision maker’s mind is ‘irrevocably closed’ on a disputed issue”) (citation omitted). The fact that the Labor Department’s new L eased Worker Policy was developed in parallel with the agency’s investigation of the facts of th is case does not alone sufficeas the type of nearly “irrefragable” proof required to rebut the presumption of regularity. See Sanders v. U.S. Postal
Serv. , 801 F.2d 1328, 1331 (Fed. Cir. 1986). But there ar e other factors that call the agency’s impartiality into question even more directly. For example, a comprehensive review of the administrative record reveals that, in its Third Negative Redetermination on Remand, the Labor Department uniformly credited the information supplied by corporate sources over that provided by the Former Employees, and that – in those instances where corporate sources provided conflic ting information – the agency virtually always accepted the version most adverse to certification of the Former Employees. These facts, which areCourt No. 04-00079 Page 51

44 This is not the first time that the Labor Department has found itself on the receiving end of such criticism. See , e.g. , Pittsburgh Logistics I , 27 CIT at 349 n.13 (where th e court refers to the agency’s “foregoing (or foregone) conclusion”); Pittsburgh Logistics II , 27 CIT at 1310, 1313 (where the court found that the agency’s consider ation of TAA petition was “results-oriented” and that agency’s reasoning made its negative determination “appear predetermined”); Former Employees of Murray Engineering, Inc. v. Chao , 28 CIT ____, ____n.7, 358 F. Supp. 2d 1269, 1273 n.7 (2004) (where court found it “simply disingenuous for the agency, upon learning that the HTSUS does not provide the result the agency appears to have already chosen, to now argue that it is inappropriate to refer to the HTSUS”); United Elec., Radio & Mach. Workers , 15 CIT at 309 (where court found that agency used “protean reasoning to force its negative determination to fit whatever new claims come to light”). unexplained by the agency, legitimately raise the spectre of bias and cast a long shadow over the agency’s findings and determinations, particularly in light of the ex parte nature of TAA investigations and the Labor Department’s obligation to act with the “utmost regard” for the interests of petitioning workers. 44

2. The Agency’s Compilation and Analysis of the Record The Labor Department’s Third Negative Re determination on Remand reflects a number of methodological problems in the agency’s compilation and analysis of the record on remand. As explained below, the most significant problems concern the agency’s failure to take necessary measures to ensure the reliability of the evid ence on which it relied, and the agency’s failure to properly take into account countervailing evidence.
a. The Reliability of Evidence In compiling the record on remand, the Labor Department failed to take adequate measures to ensure the reliability of the evidence on whic h it based its determination, in contravention of express instructions in IBM I , other relevant precedent, and sound administrative practice.Court No. 04-00079 Page 52

45 See also BMC , 30 CIT at ____, 454 F. Supp. 2d at 1328-37 (discussing “The Labor Department’s Over-Reliance on Employer-Provided Information”; noting that “just as the Labor Department seems to impute to petitioning workers a motivation to stretch the truth in an effort to secure TAA benefits, so too employers have certain inherent incentives to be less than candid and fully forthcoming as well”; surveying relevant caselaw; and highlighting some of the various motivations that might influence corporations’ responses to TAA investigations). (1) The Notices to BP and IBM Officials Mandated by IBM I In light of concerns about the reliability of information provided by corporate executives (in this case, as well as other TAA cases), 45 IBM Iinstructed the Labor Department to take measures to help ensure the accuracy of evidence obtained on remand: To help ensure the completeness and accuracy of information obtained on remand, the Labor Department shall expressly advise and assure all its contacts at IBM and BP that – unlike regular unemployment compensation, for example – the TAA certification of the Former Employees w ould involve no expense whatsoever on the part of the companies. To the same end, the Labor Department shall caution all contacts that they will be held personally accountable by the Court for all information that they provide in the course of the agency’s investigation, whethe r their statements are oral or in writing, and even if they are not made under oath. See , e.g. , 18 U.S.C. § 1001 (federal material false statements statute).
IBM I , 29 CIT at ____ n.37, 403 F. Supp. 2d at 1336 n.37. See generally BMC , 30 CIT at ____ n.51, 454 F. Supp. 2d at 1331-36 n.51 (noting, inter alia , that Labor Department has elsewhere warned corporate executives, in writing, that they “will beresponsible for the accuracy and completeness of the information” supplied in TAA investigation; and also noting that U.S. Department of Agriculture, Form FSA-229, “Application for Trad e Adjustment Assistance (TAA) for Individual Producers” includes a notice cautioning applicants that “[t]he provisions of criminal and civil fraudCourt No. 04-00079 Page 53

46 Contrary to the Government’s brief, there is nothing to indicate that “ BPhad been informed by . . . plaintiffs’ counsel that the companie s would not incur any expense in the event of certification.” See Def.’s Brief at 22 (emphasis added) . Instead, the agency investigator’s declaration states that “petitioners’ counsel brought the cost issue to [the] attention [ of the agency’s primary contact at IBM ] during one of their conversations.” Declaration ¶ 14. statutes, including 18 USC 286, 287, 371, 641, 651, 1001; 15 USC 714m; and 31 USC 3729, may be applicable to the information provided”). In their opening brief post-remand, the Former Employees pointed out that – notwithstanding the unequivocal language of IBM I– “[t]he record [on remand] de monstrates no effort by Labor to clarify [to representatives of BP and IBM] that TAA certification would not involve any expense to the companies.” See Pls.’ Brief at 7. In response, the Government filed a declaration by the agency investigator who was responsible for the remand investigation. Citing that declaration, the Government argues that, “[i]n Labor’s discussions with the companies, it was apparent that they understood the effect of certification,” and that “the senior attorney for BP confirmed that BP had been informed . . . that the companies would notincur any expense in the event of certification.”
See Def.’s Brief at 22 ( citing declaration of agency investigator). 46 The declaration of the Labor Department investig ator is not part of the administrative record, however. Thus, the fact remains that there is no evidence on the record that the agency complied with IBM I ’s mandate requiring the agency to “expressly advise and assure all its contacts at IBM and BP that . . . the TAA certification of th e Former Employees would involve no expense whatsoever on the part of the co mpanies.” Moreover, it is no answer that the agency investigator “inferred from [her] conversation that IBM was already fully aware that any benefits provided . . . would be covered by Department, not IBM, funds.” Declaration ¶ 2 ( cited in Def.’s Brief at 22).Court No. 04-00079 Page 54

47 The agency investigator’s declaration actually gives no indication whether or not she gave the mandated notice to the IBM attorney. In relevant part, she states only that: I informed the legal departments of IBM and BP of the upcoming investigation and asked for their cooperation in providing re sponses to questionnaires and document requests. At BP, I spoke with . . . a BPattorney, describing the TAA program and BP’s connection with this case. In particular, as required by the Court’s Opinion, I told [the BP attorney] that TAA certification of IBM workers would not cost BP anything. At IBM, I left a message with Mr. [ name of lawyer] , an attorney for IBM

. Declaration ¶ 2 (emphasis added). It is not for the agency to deci de that compliance with certain judicial directives is unnecessary under the circumstances. More substantively, the agency investigator’s declaration establishes that, in the course of the remand proceeding, the agency gave the notice at issue – at most – to a BP attorney and to an IBM attorney. 47 See Declaration ¶¶ 2, 14. The agency investigator’s sole conversation on this issue with the agency’s primary IBM contact did not take place until the Government was preparing its post-remand brief ( see Declaration ¶ 14) – well after the agency had obtained all evidence from IBM, well after the remand proceeding had been concluded, and well after the Third Negative Redetermination on Remand had been filed with th e Court. To serve the purpose of ensuring the reliability of information provided by corporat e representatives, the notice mandated by IBM Ihad to be given to them before the agency requested evidence. Post hoc notice is simply ineffective. Further, IBM I required the Labor Department to give the mandated notice to “ all [ the agency’s ] contacts at IBM and BP” – not just to its initial contacts. IBM I , 29 CIT at ____ n.37, 403 F. Supp. 2d at 1336 n.37 (emphasis added). Thus, to the extent that the Labor Department had contact with company representatives other than the lawyers who were its initial contacts at IBMCourt No. 04-00079 Page 55

and BP, the agency did not merely fail to document its compliance with IBM I– the agency substantively failed to comply with the mandate of the Court. See , e.g. , SAR 846 (identifying five BP officials who provided information for re sponses to agency questions); CSAR 758, 761, 977 (listing three IBM officials who participated inteleconference with agency), 787 (noting that information in IBM’s responses to agency’s thir d set of questions was “primarily” provided by two IBM officials), 788 (naming two IBM officials who provided information for responses to agency’s fifth set of questions), 792 (identifying two IBM officials who provided information for responses to agency questions), 972 (specifying two IBM o fficials who provided information for responses to agency’s fourth set of questions), 993 (listing four BP officials w ho participated in teleconference with agency). However ham-handed they may have been, the Labor Department apparently made at least some efforts to comply with IBM I ’s requirement that the agency assure contacts at IBM and BP that TAA certification of the Former Employees would involve no expense on the part of the companies. In contrast, there is no indication whatsoever that the agency complied with IBM I ’s requirement that the agency “caution all [IBM and BP] contacts that they will be held personally accountable by the Court for all information that they provide inthe course of the agency’s investigation.” See IBM
I , 29 CIT at ____ n.37, 403 F. Supp. 2d at 1336 n.37. On remand, the Labor Department shall expressly advise and assure all of its contacts at IBM and BP, in advance, that – unlike regular unemployment compensation, for example – the TAA certification of the Former Employees would invol ve no expense whatsoever on the part of the companies. Further, to the exte nt that the agency’s contacts at IBM and BP solicit information fromCourt No. 04-00079 Page 56

other individuals within the companies in order to respond to the agency’s inquiries, the agency shall ensure that all other such individuals receive the same advance notice and assurances. To the same end, on remand, the Labor Department shall caution all of its contacts at IBM and BP, in advance, that they will be held pe rsonally accountable by the Court for all information that they provide in the course of the agency’s i nvestigation, whether their statements are oral or in writing, and even if they are not made under oath. Fu rther, to the extent that the agency’s contacts at IBM and BP solicit information from other indi viduals within the companies in order to respond to the agency’s inquiries, the agency shall ensurethat all other such individuals receive the same advance warning. The Labor Department’s compliance with thes e requirements shall be fully documented in the record of the remand proceeding.
(2) The Agency’s Assessment of the Reliability of Evidence In this case – as in many others – the Labor Department has displayed what is either an unwillingness or an inability to critically evaluate the reliability of evidence compiled in the course of its TAA investigations. See generally n.45, supra . Time and time again, the Third Negative Redetermination on Remand expressly cites to and relies on information that is, on its face, suspect. For example, in reaching a determination in this case on the first of the seven new criteria for control, the key piece of evidence cited by the Labor Department is that – when asked whether IBM employees worked alongside BP personnel in Tulsa – an official of one of the companies responded: “There may have been times when a BP employee came to IBM’s office in Tulsa . . .” See CSAR 1037 (citations omitted) (emphasis added).Court No. 04-00079 Page 57

48 See generally BMC , 30 CIT at ____, 454 F. Supp. 2d at 1335 n.51 (“The reliability of information depends, in equal measure, both on th e knowledge and authority of the source of the information, and on that source’s honesty. If th e Labor Department believes that BMC’s Senior Manager for Human Resources actually did not know th at her statements were false, it is entirely unclear (based on its experience in this and many other such cases) why the agency persists in treating employers’ human resources executives as authoritative , knowledgeable sources in TAA investigations. If – on the other hand – the Labor Department believes that BMC’s Senior Manager for Human Resources intentionally prevaricated, it is not only unclear why the agency continues to treat employers’ human resources executives as presumptively honest sources, but it is also unclear why the agency apparently routinely permits them to lie with impunity.”).

49 In the course of the remand investigation, the Labor Department itself (quite properly) expressed concern about corporate officials’ use of hedged, equivo cating language in their responses to agency questions, noting that such language raises questions about whether the responses are However, speculation is not reliable evidence. Moreover, the reason for the speculative nature of the corporate official’s statement is unclear. Either the official was – for some unknown reason – playing coy, and deliberately seeking to downplay orminimize the facts of the situation (suggesting, for example, the possibility of bias), or the offi cial lacked personal, first-hand knowledge of the relevant facts. But, either way, the statement is inherently unreliable. 48 Similarly, in reaching its determination on a nother criterion, the Labor Department relied on a corporate official’s statement that “BP employ ees in Tulsa did not share office space with IBM, though BP may have had office space on other floors in the same Tulsa office building.” See CSAR 1046 (citation omitted) (emphasis added). In fact, the record is clear that BP and IBM were located in the same Tulsa office building. The reason for the speculative nature of the official’s representative’s statement, on the other hand, is entir ely unclear. Again, either the official was – for some reason – playing coy, and deliberately seeking to obscure the facts of the situation, or the official lacked personal, first-hand knowledge of the relevant facts. Either way, however, the statement cannot be credited. 49Court No. 04-00079 Page 58

“reasonably complete.” See , e.g. , CSAR 779 (agency noted that “[w]ords like ‘primarily’ and ‘typically’ [in company’s responses] suggest that th ere are other duties that have not been included in the [company’s] response. Please consider those (and any similar) responses and revise them as necessary to include reasonably complete information.”). As discussed above, the agency nevertheless expressly relied on questionable responses in reaching its determination.

50 In the Third Negative Redetermination on Remand, the Labor Department stated: “As documented in the [Supplemental Administrative R ecord], DOL obtained cooperation from multiple The Third Negative Redetermination on Remand – and the administrative record in general – are replete with other comparable circumlocutions, which the Labor Department blindly and uncritically accepted at face value. See , e.g. , CSAR 1040 (stating that representatives of both IBM and BP acknowledged that “there may have been some interaction between IBM and BP employees”) (emphasis added); CSAR 791 (source stat ed that, “during the course of the agreement,
BP might have provided feedback on [IBM] employees ( e.g. , BP might have requested that an employee [of IBM] be removed from its account if BP was not satisfied with such employee’s performance)”) (emphases added); CSAR 736 (source stated that “ it is possible that the IBM workers assigned to perform services for BP would have been assigned to perform services for other clients”) (emphasis added). Statements such as those listed above should cause the Labor Department not only to discount the specific statements at issue, but al so – more generally – to question the fundamental veracity of the quoted sources and the reliability of all information provided by them. Particularly given the remedial nature of the TAA statute, the ex parte nature of the Labor Department’s investigative process, and the agency’s obligation to act with the “utmost regard” for the interests of petitioning workers, the agency seems remarkably unconcerned as to whether or not the sources on which it relies are in a position to have persona l, firsthand knowledge of the relevant facts, 50andCourt No. 04-00079 Page 59

IBM and BP officials, whose responsibilities and access to pertinent information made them sufficiently informed to be proper sources for the investigation. SAR 742, 761-764, 846.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711. It is noteworthy, however, that the information provided by the corporate contacts on which the Labor Department relied was not submitted under oath. See generally BMC , 30 CIT at ____ n.51, 454 F. Supp. 2d at 1334–36 n.51 (discussing range of potential means to help ensure reliability of information provided in TAA investigation) ( citing , inter alia , Barry Callebaut , 357 F.3d at 1383 (sustaining agency’s denial of TAA certification, largely on the strength of sworn employer affidavits, which – the Court of Appeals emphasized – were submitted under solemn oath acknowledging liability for perjury; “those affidav its were sufficiently trustworthy to constitute substantial evidence”)). Moreover, contrary to the agency’s implication, the agency did not consistently inquire as to the duration of its sources’ employment with BP and/or PwC/IBM, or their position titles (much less their actual job responsibilities and the bases for their knowledge of relevant facts, particularly their familiarity with the situation of the Former Employees). Nor, in most instances, is there any indication in the record as to the locations of the agency’s corporate sources. The Labor Department’s principal contact at IBM appears to be located in New York – halfway across the continent from Tulsa. See , e.g. , CSAR 733. The locations of most of the agency’s other corporate contacts are not clear. See generally IBM I , 29 CIT at ____ n.15, 403 F. Supp. 2d at 1322 n.15 ( quoting Pittsburgh Logistics I , 27 CIT at 348 (“The Court does not presume that the [corporate] Employment Development Specialist . . . located in Rochester [New York] who responded to the [agency] investigator’s questions about the petiti oners was ‘in a position to know’ the extent of the petitioners’ jobs in Independence [Ohio].”)).

51 The Labor Department deprives itself of a valuable means of testing the credibility and reliability of evidence when it fails to allow petitioning workers to review and comment on information provided by company representatives. See , e.g. , Pls.’ Brief at Exh. 2 (Labor Department fax coversheet warning that “all information and documentation submitted by companies in connection with this investigation is [to be] held in strict confidence and [s hall] only be seen by the DOL, the Court and the lawyers involved in this matter”); Pls.’ Brief at 26 n.9 (although agency provided counsel for Former Employees with copies of companies’ responses to agency questions, agency stated that those responses included confidential information and therefore could not be shared with Former Employees themselves). whether or not they have some bias that might undermine any evidence they provide. 51 The Government emphasizes that the Court of Appeals has held that the Labor Department “is entitled to base an adjustment assistance elig ibility determination on statements from companyCourt No. 04-00079 Page 60

52 IBM I noted that there was evidence in th e record to “cast[] some doubt” on IBM’s motivation to be fully candid and forthcoming in the TAA investigation, citing both to a statement by one of the representative Former Employees th at “IBM is avoiding publicity as this type of situation (moving U.S. jobs overseas) has become a serious political issue,” and to a copy of a New York Times article reporting on a conference call in which “two senior I.B.M. officials told their corporate colleagues around the world . . . that I.B.M. needed to accel erate its efforts to move whitecollar . . . jobs overseas even though that mightcreate a backlash among politicians and its own employees.” See generally IBM I , 29 CIT at ____ n.26, 403 F. Supp. 2d at 1322 n.26. The Government asserts that “suspicion that IBM company officials have an interest in misrepresenting facts merely because of a fear of bad publicity is unwarranted where the shift in production at issue would be at BP.” See Def.’s Brief at 60. But there are at least two flaws in the Government’s argument. First, as the Third Negative Redetermination on Remand itself notes, the Former Employees have asserted in the past that IBM “was transferring the accounting services performed at the [Tulsa] facility to India and that ‘Indians had been training at the [Tulsa] center all summer.’” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,710. And, second, and more importantly, even if the only alleged shift in production was at BP, it would be naive in the extreme to think that IBM would have no interest at all in protecting a major client – BP – from adverse publicity and other potentially negative consequences. See generally BMC , 30 CIT at ____, 454 F. Supp. 2d at 1331-37 (noting that Labor Department’s views on reliability of company statements in TAA investigations are “simplistic and naive, at best”). The Labor Department’s assessments of the cr edibility and reliability of evidence cannot be deemed “reasonable” and deserving of deference if the agency is as unsophisticated as it sometimes appears to be. In addition to the broad spectru m of corporate motivations and incentives outlined in BMC , supra , it is also significant that the Labor Department is a pervasive regulator, with wideranging jurisdiction over matters from wages and hours to occupational health and safety. Major officials if the Secretary reasonably concludes th at those statements are creditworthy and are not contradicted by other evidence.” See Def.’s Brief at 59 ( quoting Marathon Ashland , 370 F.3d at 1385). But the key word there is “reasonably.” In the case at bar, there is no apparent basis on which certain key evidence can “reasonably” be deemed “creditworthy.” See generally IBM I , 29 CIT at ____ n.27, 403 F. Supp. 2d at 1332 n.27 (cataloguing caselaw on evaluating the credibility and reliability of evidence in TAA investigations). 52Court No. 04-00079 Page 61

multinational corporations such as IBM and BMC thus have a clear interest in “keeping the Labor Department (and other federal regulators) happy,” and at least some incentive to “say whatever it is that the agency wants to hear.” (In this cas e, for example, company representatives might well have logically inferred that their corporate interests would be best served by providing information to support the agency’s prior determination denying the Former Employees’ petition for TAA certification. Accordingly, “IBM’s and BP’s c onsistent cooperation and responsiveness to the Department’s inquiries” ( see Third Negative Redeterminati on on Remand, 71 Fed. Reg. at 10,711) is not necessarily the hallmark of credibility and reliability that the Labor Department here suggests.) And corporations may have additional, unique motivations and incentives in “leased workers” cases such as this. They may be leg itimately concerned about the collateral consequences – for purposes of taxes, health and retirement benefits, tort liability, and other areas of the law (above and beyond TAA certification) – of full disclo sure of the true nature and extent of their “control” over workers who are not “employees” on their payroll. See , e.g. , CSAR 895-96 (BP-PwC contract provision specifically addressing such concerns ). In the course of the remand investigation, in at least one instance, the Labor Department prefaced a question to BP with the comment: “The former IBM employees have characterized themselves as de facto employees of BP.” See CSAR 817. Now that is a statement guaranteed to strike fear in the heart of any BP employment or tax lawyer. On remand, the Labor Department shall accord no weight to evidence which is based on “speculation” (such as that outlined above), and shall specifically consider whether – in light of the speculation – all other evidence offered by the source is similarly unreliable. In addition, the agency shall specifically evaluate the credibility and re liability of each piece of evidence on which it relies (including realistic assessments of the potential motivations and incentives of all sources), in accordance with the principles outlined above and the authorities cited there. The agency’s determination on remand shall be based solely on evidence that is reasonably deemed credible and reliable pursuant to those principles.
(3) The Accuracy of Agency Memoranda Summarizing Teleconferences The Former Employees note that the Labor Department’s determination relies, in part, onCourt No. 04-00079 Page 62

53 A review of one such summary makes it apparent to anyone with a solid command of the facts of this case that – at a bare minimum – the Labor Department investigator oversimplified the Former Employees’ position in documenting a teleconference for the record. See SAR 904. Similarly, the agency elsewhere oversimplified (indeed, arguably misrepresented) the Court’s position on the agency’s procurement of th e contract between BP and PwC/IBM. See , e.g. , CSAR 742 (“Judge Ridgeway specifically referred to contract, and it is DOL has the agreement on the record.”), 744 (“As I indicated, Judge specifically re quested the copy of the contract to be included in the files as it is very crucial for our investigation.”); compare IBM I , 29 CIT at ____ n.36, 403 F. Supp. 2d at 1335 n.36 (“The Labor De partment would be wise to obtain a copy of the [contract] between BP and PwC/IBM on remand here. If it fails to do so and nevertheless reaches a determination on ‘control’ that is adverse to th e Former Employees, it must explain why it failed to obtain the document(s) in question . . .”). See also Def.’s Brief at Declaration ¶ 12 (attesting that, in teleconference with agency, counsel for Former Employees offered “to write the new policy [on control], because international trade re gulation is his field of expertise”); compare Pls.’ Reply Brief at Taylor Declaration ¶ 11 & Shaughnessy Declaration ¶ 5 (indicating that, in teleconference with agency, counsel for Former Employees never made such an offer, but did inquire whether Labor Department intended to issue draf t determination for comment before issuing its final determination, as Commerce Department does in the international trade regulation cases with which counsel for Former Employees is familiar). Of course, short of making verbatim records of its teleconferences with investigative sources memoranda prepared by the Labor Department investigator, which summarize teleconferences between agency personnel and other interested par ties, including officials at IBM and BP, as well as counsel for the Former Employees. The Former Employees express concern that, “[u]pon receipt of the record, counsel for the Former Employees discovered inaccuracies in summaries of conversations they had with Labor.” See generally Pls.’ Brief at 11-14. The Former Employees acknowledge that “it is possible for parties to have different recollections of the minor details in conversations,” but emphasize that “Labo r’s summaries contain errors involving significant details and call into question the reliability of all the summaries prepared by Labor – particularly because counsel for the Former Employees were denied th e opportunity to participate in Labor’s discussions with representatives from BP and IBM.” Pls.’ Brief at 13 (emphases added). 53Court No. 04-00079 Page 63

( see n.54, infra ), the Labor Department faces a challengein documenting such teleconferences in an efficient fashion, while – at the same time – ensuring that the summaries it prepares are fair , accurate , and complete . But the agency’s determinations can withstand judicial scrutiny only if the fundamental integrity of the agency’s administrative record is beyond serious question. The thrust of the Government’s response is th at the Former Employees “do not allege that any of the statements in the su mmar[ies] [are] factually wrong,” butonly argue “in essence . . . that the information [in the summaries] is incomplete .” See Def.’s Brief at 27-29. And, according to the Government, the Former Employees cannot claim to have been harmed, because “to the extent the investigator did not transcribe every aspect of the telephone conversation [with counsel for the Former Employees], there is no danger of misinter preting plaintiffs’ position because all of their letters were subsequently placed in the record.” Def.’s Brief at 28. The Government’s argument completely misses the point. Counsel for the Former Employees are not concerned about omissions inthe Labor Department’s memoranda summarizing the agency’s teleconferences with them . They are concerned that there may well be similar omissions – potentially significant omissions – from the agency’s memoranda memorializing its teleconferences with representatives of IBM and BP . And those memoranda are the only evidence of the teleconferences between the agency and the representatives of IBM and BP that is available to the Former Employees and to the Court. As the Government pointedly observes, there is no authority for the proposition that private parties are entitled to participate in the Labor Department’s teleconferences with company representatives. See Def.’s Brief at 13, 21. But that simply underscores the agency’s obligation to ensure that those teleconferences are fully and accu rately memorialized – with appropriate detail andCourt No. 04-00079 Page 64

54 The means of documenting such teleconferences is left to the discretion of the Labor Department. In lieu of preparing detailed summary memoranda, of course, the agency may tape record its teleconferences, or allow counsel for the Former Employees to participate. However, even if counsel for the Former Employees are include d as participants, all teleconferences must be memorialized for the administrative record insome reasonable fash ion – whether by written memorandum, audiotape, or other appropriate mean s – to provide a basis for judicial review. As an aside, it is worth noting that most, if not all, of the Labor Department’s summary memoranda included in the record here fail to indicate the date on which those memoranda were prepared, and – instead – state only the dates (and, in at least a couple of instances, the time) of the subject teleconferences. See , e.g. , CSAR 742, 761, 852, 904, 993. But such memoranda cannot be presumed to be accurate, complete, and free of bias unless their preparation was reasonably contemporaneous with the teleconferences that they ostensibly document. Cf

. Def.’s Brief at 27 (arguing that “Labor is not precluded from gathering information by telephone, and Labor reasonably memorializes these conversations by transcribing the conversation by hand and subsequently typing them [presumably, the handwritten notes] for placement in the record.”). (The disposition of the handwritten notes taken by agency personnel is unclear; they are not included in the administrative record.) nuance – for inclusion in the administrative record. In short, the written summaries prepared by the agency investigator must be much more than mere aides memoires designed to later jog the recollections of those who participate in teleconf erences; instead, the summaries must also serve to document all potentially relevant details of the conversations for the petitioning workers and the Court, who are not parties to the teleconferences. On remand, the Labor Department shall not re ly on information contained in any of the summary memoranda presently in the record, except to the extent that such information is expressly and specifically confirmed in writing (or on audiotape) by a representative of BP, IBM, or the Former Employees. Further, the agency shall takeall measures necessary to ensure that future teleconferences between the agency and other parties (particularly representatives of BP and IBM) are fully and accurately preserved for the administrative record. 54Court No. 04-00079 Page 65

55 The Former Employees expressed their concerns during the course of the remand proceeding, both in phone conversations with the Labor Department and in a follow-up letter to the agency. See Pls.’ Brief at 17; CSAR 996.

56 The Former Employees also criticize the Labor Department for “ask[ing] leading questions of IBM and BP that were intended to derive information aimed at supporting a predetermined b. The Context of Questions Posed to Corporate Officials Because control was a key issue to be ev aluated in the remand proceeding, the Former Employees criticize the Labor Department for “as k[ing] questions about ‘control’ without ever defining the term.” Pls.’ Brief at 16. Thus, the Former Employees note, “Labor left it to the discretion of whomever was answering the que stions to define this critical term.” Id . As the Former Employees cautioned the Labor Department during the course of the remand proceeding, 55 absent a definition by the agency, “it was impossible for Labor to obtain reliable information [from respondents, including BP and IBM] that was based on the correct definition of control.” Pls.’ Brief
at 7. The Former Employees illustrate thei r point with several examples. See generally Pls.’ Brief at 16-17. For example, in one questionnaire direct ed to IBM, the Labor Department asked a series of questions about control, introduced by a statement that “The following questions cover the issues of ‘control’ and ‘joint employer.’” However, no definition of “control” was provided by the agency.
See CSAR 782. Even more problematic are those instances when the Labor Department simply asked company officials who controlled the Former Employees. See , e.g. , CSAR 731 (“Who had control over the workers of the subject firm at IB M’s Tulsa, OK location? Please explain the nature and extent of that control.”); CSAR 812 (“What control does BP exercise over workers of IBM Corp. in Tulsa, OK?”). 56Court No. 04-00079 Page 66

outcome.” However, the Former Employees cite no examples of such questions. See Pls.’ Reply Brief at 2; see also Pls.’ Brief at 6. It is therefore unclear whether the “leading” questions at issue are the Labor Department’s questions concerning “control” (discussed above), or whether the Former Employees are objecting to a different set of questions.

57 The Government’s Brief notes: [I]n Former Employees of IBM Corp., Global Services Div. , 387 F. Supp. 2d 1346, 1351-52 (2005), the Court rejected Labor’s reliance upon the company’s response that it did not produce an “article.” The Court reasoned that the term “article” had legal significance and, therefore, Labor could not incorporate the company’s representation without making a factual i nquiry, and that to do otherwise would constitute an improper substitution of the company’s opinion for the agency’s. Id

. The Government asserts that “at every stage in the investigation, Labor asked multiple questions as to various aspects of the respective roles of the companies that relate to the issue of operational control,” and maintains that “the factual questions [asked by the agency] provided the necessary context.” Def.’s Brief at 22-23. Unfortunately, although Labor Department pe rsonnel may have fully appreciated the “context” of the questions they posed, it is impossible to definitively say that representatives of BP and IBM necessarily would have done so. Nor is it clear why the agency did not limit itself to “the factual questions” that the Government now empha sizes, to avoid the confusion that the Former Employees fear and to avoid any claim that the “ultimate question” as to “control” of the Former Employees was decided not by the Labor Department but instead by IBM and BP. Cf . IBM I , 29 CIT at ____ n.33, 403 F. Supp. 2d at 1334 n.33 (emphasizing the importance of “the actual facts as to the practical realities of the exercise of day-to-day management and operational control over the Former Employees”). As the Government appears to acknowledge in its brief, 57 the Labor Department has beenCourt No. 04-00079 Page 67

Def.’s Brief at 22.

58 See also , e.g. , EDS I , 28 CIT at ____, 350 F. Supp. 2d at 1292-93 (in relying on company official’s statement that company “did not produce articles, but provided computer related services,” agency improperly “substituted one . . . employee’s opinion that the company did not produce ‘articles’ for [the agency’s] own legal inquiry”); Former Employees of Ericsson, Inc. v. U.S. Sec’y of Labor , 28 CIT ____, ____, 2004 WL 2491651 at * 7 (2004) (agency erred in relying on company official’s ‘essentially legal conclusion’ that workers “[ did] not produce a product !”); Ameriphone , 27 CIT at 1617, 288 F. Supp. 2d at 1359 ( citing Former Employees of Marathon Ashland Pipeline LLC v. Chao , 26 CIT 739, 744-45, 215 F. Supp. 2d 1345, 1352-53 (2002) (agency’s reliance on employer’s conclusory assertions concerning ‘p roduction’ constituted impermissible abdication of agency’s duty to interpret TAA statute and to define terms used in it)).

59 The Former Employees argue that the Labor De partment’s failure to affirmatively define “control” essentially “permitted BP and IBM to presume that control meant exclusive control,” which is a standard “much stricter than the join t control [apparently] allowed for under Labor’s new repeatedly chastised for its use of the types of conclusory questions that the Former Employees object to here, which may arguably – in effect – delegate to company officials the power to determine whether former employees are eligible for TAA benefits. See generally BMC , 30 CIT at ____, 454 F. Supp. 2d at 1228-29. 58 But “it is Labor’s responsib ility, not the responsibility of the company official, to determine whether a former employee is eligible for benefits.” Former Employees of Federated Merch. Group v. United States , 29 CIT ____, ____, 2005 WL 290015 at * 6 (2005) (citation omitted). Indeed, IBM Iwarned the Labor Department about this very point. See generally IBM I , 29 CIT at ____ n.25, 403 F. Supp. 2d at 1331 & n.25. On remand, the Labor Department’s determination shall rely only on evidence that is consistent with the jurisprudence outlined above. Moreover, to the extent that any respondent uses the term “control,” the agency shall not rely on that evidence unless the meaning of the term as used by the respondent is clear beyond doubt on the record ( e.g. , if the agency obtains clarification of the use of the term). 59Court No. 04-00079 Page 68

seven-factor control test.” Pls.’ Brief at 33 (e mphasis added). The Former Employees contend that the effect of the agency’s failure was to contamin ate the entire record, becau se “it is now impossible for Labor to unwind the mistaken control concepts that BP and IBM were permitted to adhere to without any guidance” throughout the most recent remand proceeding. Id . The Former Employees argue that another remand therefore would be futile. Id

. The restrictions imposed above are designed to address the Former Employees’ legitimate concerns. To that end, the LaborDepartment also shall ensure that, on remand, all contacts at BP and IBM are affirmatively and specifically advised in advance – before any information is solicited from them – that, for TAA purposes, there are degrees of control (in other words, that “control” does not necessarily mean “exclusive control,” that it is possible for two companies to exercise “joint control,” and that it is possible for employees to be “joint employees,” etc. – or whatever it is that the relevant Labor Department standard recognizes). In addition, in reaching its determination on remand, the Labor Department would be well advised not to rely on any evidence previously obtained that is arguably “tainted” by potential conf usion as to the meaning of “control.” Following the remand, the Former Employees will be free to argue that a particular finding is unsupported by substantial evidence, because of such potential confusion. c. The Consideration of Countervailing Evidence Perhaps the most troubling aspect of the Th ird Negative Redetermination on Remand is the Labor Department’s failure to even acknowle dge – much less address – the significant body of record evidence that weighs against its negativ e determination. As the Court of Appeals has emphasized, “the substantial evidence standard requires more thanmere assertion of evidence which in and of itself justified [the agency’s determination], without taking into account contradictory evidence or evidence from which conflicting inferen ces could be drawn. . . . Rather the substantiality of evidence must take into account whatever in the record fairly detracts from its weight.” Gerald Metals , 132 F.3d at 720. Indeed, in reversing the Labor Department’s prior determination in this matter, IBM Isought to impress upon the agency its obligation on remand to consider the record as a whole and to confront countervailing evidence:Court No. 04-00079 Page 69

60 See also IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1324 ( citing Gerald Metals and Consol. Bearings , and emphasizing that “the evidence on which the agency relies does not exist in a vacuum”).

61 See also , e.g. , Pls.’ Brief at 20 (asserting that agency ignored various pieces of evidence related to BP’s control of physical facilities of Former Employees’ workplace), 21 (arguing that agency ignores evidence indicating that Former Em ployees’ work activities were part of BP’s core business functions, “presumably because [the evidence] was contrary to its predetermined conclusion”), 22 (stating that agency “ignored evid ence contained in the Service Level Agreement”), 24 (arguing that, “in concluding that [BP] had no discretion over hiring, firing and discipline of To be sure, it is not the role of the Court in reviewing the Labor Department’s determinations to re-weigh the evidence and substitute its judgment for that of the agency. But the Court is charged with determining whether or not the agency’s determination is supported by “substantial evidence” in the record. See 19 U.S.C. § 2395. That analysis necessarily require s a review of the evidence on which the agency relies in the context of the entirety of the administrative record as a whole (including “whatever in the record fairly detracts from” that evidence). . . . Thus, evidence that – standing alone – might otherwise constitute “substantial evidence” may not measure up where, for example, the agency has taken the evidence out of context, or where (as here) there is subs tantial contradictory evidence in the record that the agency has failed to address.
IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1330-31 ( quoting Gerald Metals , 132 F.3d at 720; Consol. Bearings , 412 F.3d at 1269); see also id ., 29 CIT at ____, 403 F. Supp. 2d at 1336-37 (ordering agency – in reaching remand determination on “control” – to “ensure that its redetermination is supported by substantial evidence, taking into consideration all other evidence that fairly detracts from its weight”) (citations omitted) (emphasis added). 60 In its Third Negative Redetermination on Re mand, the Labor Department ignored IBM I ’s admonition. As the Former Employees succinctly put it, “for each of the seven factors of Labor’s new control test, Labor cherry-picked the record for evidence that supports its decision and did not attempt to explain record evidence contrary to its position.” Pls.’ Reply Brief at 7; see generally Pls.’ Brief at 1, 31; Pls.’ Reply Brief at 1, 6-8. 61Court No. 04-00079 Page 70

workers, Labor blatantly ignored not only the provisions of the Outsourcing Agreement but also failed to consider the context of statements ma de by BP, IBM, and the Former Employees”), 24-26 (surveying relevant evidence, and asserting that, “i n concluding that BP did not supervise the Former Employees’ daily activities, Labor failed to ‘tak[e ] into account contradictory evidence or evidence from which conflicting infere nces could be drawn’”) ( quoting Gerald Metals , 132 F.3d at 720), 28 (noting that “Labor failed to address evidence placed on the record by the Former Employees” which tends to contradict the agency’s finding that th ey performed work on the open market), 29 (stating that “Labor reaches its conclusion [that IBM was responsible for matters such as establishing the Former Employees’ wage rates] only after ignori ng contradictory record evidence”), 29 (asserting that agency “fail[ed] to address contradictory r ecord evidence” in concluding that BP did not train the Former Employees). According to the Former Employees, the Labor Department’s obligation to support its determinations with substantial evidence based on the record as a whole is properly viewed in the context of the remedial purpose of the TAA statut e and the agency’s obligation to act with the “utmost regard” for the interests of petitioning workers: Labor seemingly fails to recognize the reme dial purpose of the statute in TAA cases. Not only must Labor support its determination with substantial evidence based on the whole record, including whatever in the record fairly detracts from the weight of the evidence, Labor must make its determination with the “utmost regard” for the petitioning workers. Former Employees of Chevron Prods. Co. v. United States Sec’y of Labor , 26 CIT 1272, 1274, 245 F. Supp. 2d 1312, 1318 (2002). In its third remand proceeding, rather than weighing recordevidence with the utmost regard for the petitioning workers, Labor ignored evidence that fairly detracted from its negative determination. . . .[E]ven disreg arding the remedial nature of the TAA statute (which is what Labor certainly did in this case), Labor’s determination is unsupported by substantial evidence. If Labor had properly accounted for the remedial nature of the statute, however, it would have weighed the record evidence and resolved any factual uncertainties in favor of the workers . Thus, Labor’s failure to take into account contradictory evidence is even more egregious when examined in light of the remedial purpose of the statute. Pls.’ Reply Brief at 7-8 (footnote omitted) (emphasis added). A determination that fails to take into account contradictory evidence – like the Third Negative Redetermination on Remand here – cannot withstand scrutiny under the “substantialCourt No. 04-00079 Page 71

62 In the relatively few instances where it acknowle dges evidence that weighs in favor of the Former Employees, the Labor Department tends to reflexively minimize or dismiss the evidence, asserting simply that it would be “typical of any service provider-client relationship.” See , e.g. , Third Negative Redetermination on Remand, 71 Fe d. Reg. at 10,713 (“As is normal in a service provider-client relationship . . . ,” “in any service provider-client relationship . . . ,” “where the relationship was that of client and independent service provider . . . ,” “typical of what one might expect in a service provider-client relationship . . . ”). But the agency’s mantra does not suffice to expl ain away the evidence, as a matter of logic or law. As IBM I observed (contrary to the Labor Department ’s implication), there is no truth to the notion that a “service provider-client” relationship is somehow inherently incompatible with – and fundamentally different from – an “agency” relationship. See IBM I , 29 CIT at ____ n.32, 403 F. Supp. 2d at 1334 n.32. Thus, that a particular piece of evidence might be “typical of any service provider-client relationship” does not mean that it is inconsistent with an agency relationship. Indeed, many service provider-client relationships are agency relationships. And many agency relationships have all (or at least most) of the i ndicia of a service provider-client relationship. In a sense, the difference is a matter not of kind but of degree

. Further, if the new Leased Worker Policy on c ontrol is going to be th e kind of line-drawing exercise that it appears it may be , it will not suffice for the Labor Department to tell workers (in effect), “No, that’s not it, but try again. We know it when we see it.” Cf . Jacobellis v. State of Ohio , 378 U.S. 184, 197 (1964) (Stewart, J., concurring) (noting, of obscenity, “I know it when I see it”). Admittedly, an analysis of control in a context such this is, by definition, “fact intensive,” and necessarily requires that the agency “engage in a case-by-case analysis.” See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1333. However, fundamental due process requires that the agency give prospective petitioning workers some reasonable idea of where the line is – what constitutes “enough.” evidence” standard. 62There is, of course, no requirement that an agency’s written determination dissect the record before it, adopting or explai ning away each and every single piece of evidence, one by one. But the Labor Department must do much more than it has done in any of its determinations to date in this case, to satisfy its obligations under Gerald Metals , 132 F.3d at 720, and to provide a basis for judicial review.Court No. 04-00079 Page 72

3. The Agency’s Application of the Seven Criteria in This Case Because the overarching methodological problem s in the Labor Department’s compilation and analysis of the record, among other reasons , mandate remand of this matter once again, a comprehensive, exacting, criterion-by-criterion “subs tantial evidence” review of the Third Negative Redetermination on Remand is unnecessary. The observations below may nevertheless inform the remand proceeding, and advance the resolution of this case.
a. The Location of the Former Employees The first criterion for control set forth in the Labor Department’s new Leased Worker Policy is “[w]hether the subject workers were on-site or off-site of a facility of a production firm.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. On remand, the Labor Department concluded that “the former IBM employees were not located at a BP facility of any kind.” Id . at 10,713; see generally CSAR 1035-37. The Labor Department reasoned: The fact that IBM employees worked in the same location as they had when employed by BP and that BP maintained staff ( e.g. , the BP Treasury unit) at the same street address where the former IBM empl oyees had worked did not constitute colocation, because the IBM and BP facilities were completely separate, both physically (they were in different parts of the building) and functionally (for example, they had different telephone, computer and e-mail service). Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713. To put it bluntly, the Labor Department’s pinche d, formalistic analysis verges on intellectual dishonesty. The agency’s determination turns a blind eye to critical matters including the history of the Former Employees’ relationship with BP, the legal relationships between PwC/IBM and BPCourt No. 04-00079 Page 73

63 The Labor Department’s statement that th e facilities of IBM and BP were “completely separate, . . . in different parts of the building” also appears to be a distortion of the facts. Cf . IBM I , 29 CIT at ____ & n.34, 403 F. Supp. 2d at 1334-35 & n.34 (taking agency to task for “spinning” information to obscure facts of this case, and cataloguing various other TAA cases in which agency has been criticized by courts for distorting and misrepresenting inform ation to detriment of petitioning workers). As a threshold matter, it is far from clear that – for purposes of ascertaining “control” – offices “in different parts of the [same] building” could ever be fairly characterized as “completely separate.” It is not as though th e offices of IBM and BP are on diffe rent coasts of the U.S., or even in different parts of the city of Tulsa. Cf . IBM I , 29 CIT at ____ n.47, 403 F. Supp. 2d at 1341 n.47 at the time of the Former Employees’ termination, the physical realities of the space at issue, and the seemingly obvious reason for the proximity of the offices of the two companies. The Labor Department’s analysis seems calculated to leave the impression that it is pure happenstance that IBM and BP at the time were (and perhaps still are) located in the same Tulsa office building. Nothing could be further from the truth. It is undisputed that – in some cases for d ecades – the Former Employees were essentially “seated at the same desks, inside the same f acility,” throughout the time of their employment by BP, continuing through their outsourcing to PwC/IBM, and that they were“still sitting at the same desks in the same building doing the same work for the same company” at the time of their termination.
See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1313. The Labor Department fails to explain why – when BP outsourced the Former Employees and their work to PwC/IBM – the Former Employees’ location did not change (and why it did not change thereafter). In addition, the agency’s analysis fails to acknowledge that not only did BP contr act with IBM for the supply of services by the Former Employees (and other IBM personnel), but BP also subleased to IBM the physical premises where the Former Employees delivered the services. See , e.g. , CSAR 742. 63Court No. 04-00079 Page 74

(referring to fact that companies often have a number of different buildings on a corporate “campus”). Indeed, the record evidence indicates only that the offices of IBM and BP were on different floors

. See CSAR 843. Further, there is no indication in th e record that the offices of the Former Employees and other PwC/IBM personnel were any more physically distant from ( i.e. , “separate from”) the relevant BP offices after the outsourcing than they were before the outsourcing, when the Former Employees were employed directly by BP. The numerous other relevant facts greatly diminish the significance of the Labor Department’s finding of “different te lephone, computer and e-mail service.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713. Even so, the agency apparently overstates the case at least a bit on that finding too. See , e.g. , CSAR 812 (discussing operation of BP server).

64 See also Third Negative Redetermination on Remand, CSAR 1045-46 ( quoting CSAR 843) (indicating that convenience of BP was key factor in location of BP Treasury and certain other BP units in close proximity to offices of Former Employees and other relevant PwC/IBM personnel). The Labor Department’s analysis of this crite rion similarly ignores the percentage of the IBM/Tulsa office’s work that was devoted to BP, as well as the fact that the Former Employees worked exclusively for BP. See , e.g. , CSAR 735, 777-78, 800, 1047 (percentage of IBM’s Tulsa workload devoted to BP); IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1320 (Former Employees worked exclusively for BP). Taken together, these undisputed facts constitute compelling circumstantial evidence that the location of the Former Employees was primarily for the convenience of BP, 64and that the offices of the two companies were effectively “co-locate d.” The Labor Department’s tortured, form-oversubstance analysis in the Third Negative Rede termination on Remand does nothing to dispel such a conclusion, and evinces a striking disregard for both the agency’s obligation to act with the “utmost regard” for the interests of petitioning worker s, and the remedial nature of the TAA statute.Court No. 04-00079 Page 75

65 Nor can the Former Employees’ work for BP fa irly be characterized as mere “discrete projects” for the company. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. The record indicates that, at the time of their termination, the Former Employees were still sitting b. The Nature of the Former Employees’ Work The Labor Department’s second newly-articulat ed criterion for control is “[w]hether the subject workers performed tasks that were part of the producing firm’s core business functions, as opposed to independent, discrete projects that were not part of the producing firm’s core business.”
See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. On remand, the Labor Department concluded that “[t]he former IBM workers performed tasks that were not part of BP ’s core business functions.” Id . at 10,713; see generally CSAR 1037- 38. The agency further stated: While undeniably important, the accounting services performed by the workers in question are not part of BP’s core busine ss activities of oil and gas exploration and production, petroleum refining and marke ting, and petrochemicals production, and are exactly the kind of non-core activities that many production firms have successfully outsourced or have performed by independent firms. Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713. It is unclear how the Labor Department could have determined that the Former Employees “performed tasks that were [not] part of the producing firm’s core business functions,” however, since the agency has made no finding on the nuts-a nd-bolts reality of the Former Employees’ actual duties (instead characterizing them broadly as “accounting services”). In fact, record evidence indicates that the Former Employees’ responsibilitie s included such tasks as “managing oil and gas production and related leases” for BP and “managing BP’s production-related assets and equipment.” See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1319-20 (citations omitted). 65Court No. 04-00079 Page 76

at the same desks in the same building doing the same work for BP that they had been doing for years (and, in some cases, decades). See generally IBM I , 29 CIT at ____, ____, 403 F. Supp. 2d at 1313, 1319-20. Indeed, in its remand determinati on, the Labor Department notes that the Former Employees were previously employed directly by BP, and candidly concedes that “the outsourcing did not result in changes to their work assignments.” See Third Negative Redetermination on Remand at 10,711. Instead of seeking a working understanding of the true nature of the Former Employees’ actual responsibilities and their real-world relations hip to BP’s “core business functions,” the Labor Department predicated the entirety of its analys is of this criterion (however brief) on such “evidence” as quotes from a paid advertising section from Business Week magazine and other general articles about outsourcing. See generally Third Negative Redetermination on Remand, CSAR 1037-38; SAR 1001-02 (“Outsourcing the Finan ce Function,” Finance Direct Europe), 1003- 08 (Special Advertising Section, “Outsourcing fo r Strategic Advantage,” Business Week), 1009-11 (“Savings Tip: Don’t Do It Yourself,” Business Week), 1012-16 (“Organizing for Performance: How BP Did It,” Stanford Business Magazine ), 1017-18 (“BP Amoco and PricewaterhouseCoopers Sign Canadian Outsourcing Contract,” Alexander’s Gas & Oil Connections). But information of that nature, without more, does not constitute substantial evidence.
c. Hiring, Firing, and Discipline of the Former Employees The third criterion for control set forth in the Labor Department’s new Leased Worker Policy is “[w]hether the production firm has the discretion to hire, fire and discipline subject workers.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. On remand, the Labor Department found that “BP had no discretion to hi re, fire or discipline the IBM workers,” adding that “[t]his finding . . . does not appear to be a matter of contention.” Id . at 10,713.Court No. 04-00079 Page 77

66 The traditional formulation of this test focuses not on the actual exercise of authority, but – rather – on the right to exercise authority. To the contrary, the Former Employees vigorously dispute the agency’s findings, maintaining that – “[a]lthough IBM was the prin cipal employer of the Former Employees ( i.e. , it cut their paychecks)” – BP retained a central role in personnel decisions. See generally Pls.’ Brief at 22-24; cf . IBM I , 29 CIT at ____ n.21, 403 F. Supp. 2d at 1329 n.21 (noting previous instance in which Government boldly – and wrongly – claime d that Former Employees did not dispute a particular point). The Labor Department’s analysis of this criterion fails to address any of the Former Employees’ major arguments. See Third Negative Redetermination on Remand, CSAR 1038-39. Nor does the agency address specific contractual pr ovisions on point, or their real-life, practical implications for the Former Employees and others at PwC/IBM who worked exclusively on BP

matters. See , e.g. , CSAR 895-97 (Art. 12.2.2 (detailing terms and conditions of PwC/IBM’s employment of outsourced BP employees); Ar t. 12.4 (concerning removal of PwC/IBM workers from BP’s account)); Pls.’ Brief at 23 (emphasizing practical implications of contract provisions); CSAR 756 (concerning requests for reassignment of PwC/IBM employees from BP account). The Labor Department’s finding on this criterion thus is not supported by substantial evidence. See generally section IV.D.2.c, supra . d. Supervision of the Former Employees’ Daily Work Activities The fourth of the Labor Department’s seven new criteria for control is “[w]hether the production firm exercises the authority 66to supervise the subject workers’ daily work activities,Court No. 04-00079 Page 78

including assigning and managing work, and dete rmining how, where, and when the work of individual workers takes place. Factors such as the hours of work, the sel ection of work, and the manner in which the work is to be performed by each individual are relevant.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712 (footnote added). On remand, the Labor Department concluded that “BP did not exercise the authority to supervise IBM workers’ daily activities during the relevant period.” Id . at 10,713; see generally CSAR 1039-46. According to the Labor Department: BP did not manage the individual IBM em ployees’ work, nor did BP determine how, where, and when the work of the individual workers took place. Moreover, the investigation confirmed that while IBM pe rsonnel did interact with BP personnel to some degree, that interaction was limited and not managerial in nature. As is normal in a service provider-client relationship, BP outlined the work requirements, and IBM decided when, where, and who would do the work. Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713. But, yet again, there is no indication in the reco rd that the Labor Department considered “the elephant in the room” – the Former Employees’ long history of service in th e direct employ of BP. Even though the record makes it clear that continuity was one of BP’s main concerns in the outsourcing, the Labor Department failed to consider the extent to which the Former Employees’ day-to-day responsibilities were established while they were still employed directly by BP. In addition, as with other criteria, the Labor Department here failed to take into account relevant contractual provisions and other significant evidence that contradicts its findings. See generally Pls.’ Brief at 24-26; section IV.D.2.c, supra . Further, although the agency’s analysis of this criterion is longer than its analysis of other criteria, it is no less superficial. For example, the agency’s finding that BP did not determine where the Former EmployeesCourt No. 04-00079 Page 79

67 The frequency and form of interactions be tween the Former Employees and BP personnel are similarly probative of BP’s influence over both where andwhen its work was done. Taken as a whole, the record facts belie any suggestion that the location and hours of the Former Employees were immaterial to BP, and that BP would have been just as happy to have the Former Employees and their PwC/IBM colleagues located in some far distant city. The record suggests that the opportunity for relatively frequent face-to-face contact and proximity to units such as BP Treasury were important. See , e.g. , SAR 843 (noting that BP Treasury wa s located in proximity to relevant PwC/IBM employees, for convenience of BP); CS AR 993-94 (location of BP Treasury driven by “the frequency of the interaction” with PwC/IBM personnel).

68 Note 62 above observes that the Labor Department’s determination tends to reflexively dismiss evidence that weighs in favor of a fi nding of control by characterizing the evidence as merely “typical of any service provider-client relationship.” As explained there, however, it is not enough to conclude that some behavior is “typical of any service provider-client relationship.” The fact that some behavior might be “typical of any service provider-client relationship” does not mean that it is not also indicative of “agency,” and thus supportive of a finding of “control.” The issue is less a matter of the nature of behavior or conduct, and more a matter of degree. Here, and elsewhere, the Labor Department repeatedly fails to consider the extent or degree of the behavior in question, in order to reach a reasoned determin ation as to whether or not it warrants a finding of control. Similarly, in the finding quoted above, the Labor Department concluded that certain behavior ( i.e. , holding regular meetings and corresponding by e-ma il) is not “in itself” indicative of control. However, the question is not wh ether any single piece of evidence alone indicates control, but – and their PwC/IBM colleagues did BP’s work is – as a practical matter – in tension with a number
of the facts outlinedin section IV.D.3.a( above), including the fact thatBP sublet the office space at issue to IBM, and the fact that BP located certain of its facilities in close physical proximity to the Former Employees for BP’s own convenience. Those facts arguably constitute persuasive circumstantial evidence that, in reality, BP strongly in fluenced “where . . . the work of the individual workers took place.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713. 67 The Labor Department’s analysis also states that “the apparent fact that BP and IBM personnel held regular meetings and corresponded by e-mail is not, in itself, indicative of ‘control.’” Third Negative Redetermination on Remand, CSAR 1043. 68 But the relative frequency and the formCourt No. 04-00079 Page 80

rather – whether all the eviden ce taken as a whole does so. Logically, if the Labor Department proceeds to dismiss each piece of potentially signifi cant evidence as insufficient “in itself,” then – by definition – the agency cannot ever possibly fi nd that BP exercised operational control over the Former Employees at the time of their termination.

69 In some types of “leased worker” cases, it may be difficult for the Labor Department to gauge what constitutes a run-of-the-mill service provider-client relationship and what constitutes something more. In the case at bar, however , the norms of the Former Employees’ direct employment by BP provide a “baseline.” If (as to this criterion, and others) the Former Employees can establish that – as a practical matter – thei r experience post-outsourcing was little different from their experience while they were in the direct employ of BP, that would seem to constitute persuasive evidence that their post-outsourcing re lationship with BP was no mere service providerclient relationship. of such contact might well be probative. It might well be significant, for instance, if the Former Employees and their contacts in the BP Treasury met and otherwise communicated with the same frequency after the outsourcing as they did before – just as it might well be significant whether those communications were of a frequency and/or form to distinguish them from PwC/IBM’s communications with the firm’s other “clients.” However, the record gives no indication that the Labor Department considered whether the Former Employees’ outsourcing had any impact on the frequency and form of the communications they ha d with their contacts at BP, or whether life postoutsourcing was just “business as usual.” 69 The frequency and form of contact between the Former Employees and BP might bear as well on BP’s influence over how its work was done. Similarly, the fact that the Former Employees were previously employed directly by BP (in some cases, for decades) is not irrelevant, because it effectively ensured (at least to some degree) how BP’s work would be done. The Labor Department gave no consideration to these points either. The Labor Department’s analysis of this criterion did address the fact that the FormerCourt No. 04-00079 Page 81

Employees were instructed to identify themselv es as IBM employees acting on behalf of BP. See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,713; CSAR 1044-45. But the agency emphasizes that the instruction was to ensu re that the former BP employees did not continue to represent themselves as BP employees. Id . But the agency’s anal ysis misses the two most important points. First, the Former Employees’ duties post-outsourcing were not limited to internal contacts; to the contrary, the Former Employees con tinued to represent BP’s interests vis-a-vis third parties, just as they had done before the outsour cing. And, second, the instructions given to the Former Employees did not direct them to introdu ce themselves simply as IBM employees. Rather, they were instructed to introdu ce themselves as IBM employees acting on behalf of BP

. See CSAR 817. For these reasons, and others, the Labor Department’s findings on BP’s role vis-a-vis the day-to-day work of the Former Employees cannot be sustained on the existing record.
e. The Exclusivity of the Former Employees’ Work for BP The fifth criterion for control set forth in the Labor Department’s new Leased Worker Policy is “[w]hether the services of the worker group have been offered on the open marked ( e.g. , do workers of the subject group perform work that supports other clients?).” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. On remand, the Labor Department concluded th at “the services performed by IBM workers were performed for clients other than BP.” Id . at 10,713-14; see generally CSAR 1046-47. The agency acknowledged that “[t]he petitioners themse lves may have worked only for BP,” but stated that “this is not the case for the entire worker group.” Id . at 10,714.Court No. 04-00079 Page 82

70 The Government states that “the relevant question is whether the separated workers . . . were exclusively working on the BP account.” See Def.’s Brief at 55. But the point of the Government’s argument is not clear. Surely neither the Government nor the Labor Department contends that all of the separated workers must have worked only for BP. Surely they do not contend that, if even a mere handf ul of the separated workers once did a few hours’ work for a client other than BP, the agency would be entitled to find against certification of the petitioning workers as to this criterion. At least at first blush, it would seem to be very difficult to reconcile such an extreme interpretation with the remedial purpose of the statute – as well as agency practice on other similar issues of interpretation. Thus, for example, wh en the Labor Department certifies worker groups, it does not first conduct a worker-by-worker investigation into the bases for each individual’s termination. It is likely that in many – if not most – cases, at least some individuals terminated within the period at issue were terminated for pe rformance issues or other non-trade related reasons. Yet that fact does not serve to preclude certification of the worker group; indeed, it doesn’t even preclude an award of TAA benefits to individual workers who were terminated for non-trade related reasons. In any event, as noted above, it appears to be undisputed that the representative Former Employees worked exclusively on BP matters. Moreover, the agency determination here under review includes no finding as to whether any of the other potentially certifiable former employees did any work for companies other than BP. Cf . IBM I , 29 CIT at ____ n.35, 403 F. Supp. 2d at 1335 n.35 (noting that “there is no evidence in the record . . . that any of the displaced IBM workers were among those who did work for companies inaddition to BP”). Indeed, the only concrete evidence on point suggests that the vast majority of the PwC/IBM employees terminated in the relevant period were then working solely on BP matters. See CSAR 780. However, the Labor Department fa iled to explain the relevance of its reference to “the entire worker group” – which, read in context, apparen tly means all IBM workers at the Tulsa facility at the time of the Former Employees’ termination (incl uding those who were not terminated). It is not clear why the agency’s focus extends beyond the work done by the Former Employees and other members of the petitioning worker group. And ther e seems to be no dis pute that the petitioning Former Employees worked solely on BP matters. 70 The only other piece of evidence that the Labor Department relied on in reaching itsCourt No. 04-00079 Page 83

determination on this criterion was cited to support the proposition that it is “quite clear” that PwC/IBM was free to reassign its employees away from BP’s account at any time. See Third Negative Redetermination on Remand, CSAR 1047. Howe ver, the agency fails to address relevant contractual provisions and other contrary evidence on point. See , e.g. CSAR 896 (contract provision concerning removal of certain PwC/IBM personnel assigned to BP’s account); see generallyPls.’ Brief at 26-28. Nor does the agency address the actual course of conduct of PwC/IBM and BP in the implementation of their contract – that is, the extent to which PwC/IBM employees who worked on BP’s account in fact did (or did not) do work for other companies as well. Like its findings on the other criteria, the Labor Department’s findings on this criterion also fail the substantial evidence test.
f. The Wages Paid to the Former Employees The Labor Department’s sixth criterion is “[w]hether the production firm has been responsible for establishing wage rates and the payment of salaries to individual workers of the subject worker group.” See Third Negative Redeterminati on on Remand, 71 Fed. Reg. at 10,712. On remand, the Labor Department concluded that “BP was not responsible for establishing wage rates or paying salaries to individual IBM workers.” Id . at 10,714. The Labor Department further
stated: This issue does not appear to be a matter of contention. The petitioners have indicated that PwC/IBM, not BP, set their wage rates and paid their salaries, once they were outsourced. Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,714. However, contrary to the Labor Department’s assertion, the Former Employees in fact doCourt No. 04-00079 Page 84

dispute the agency’s finding on this criterion. Th e Former Employees maintain that, although IBM cut their paychecks, BP retained a certain degree of control over personnel matters even after the Former Employees’ outsourcing, and played a signifi cant role in their perf ormance reviews and in determining their compensation (including salary as well as bonuses). See generally Pls.’ Brief at 28-29. Indeed, there are relevant contractual provisions and other record evidence that tend to support the Former Employees’ claims; but the agency once again simply ignored it. See , e.g. , CSAR 895 (Art. 12.2.2, concerning salaries and benefits); Pls.’ Brief at 28-29 (and evidence cited therein).
g. Training of the Former Employees The seventh – and final – criterion for control set forth in the Labor Department’s new Leased Worker Policy is “[w]hether the produc tion firm has provided skills training to subject workers.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,712. The Labor Department concluded on remand that “BP did not provide skills training to the workers of IBM.” Id . at 10,714. That conclusion rested, inturn, on two findings – a finding that BP provided no training to the Former Employees, and a finding of “evidence that PwC/IBM provided training” to them. See Third Negative Redetermination on Remand, CSAR 1048-49. But neither finding can be sustained on the existing record. The evidence cited to support the Labor Department’s first finding strains credulity. See Third Negative Redetermination on Remand, CSAR 1048 ( citing CSAR 777; SAR 844). It would be inherently incredible for BP to claim that it provided no skills training whatsoever to the outsourced workers even during the years that they were directly in BP’s employ – in some cases,Court No. 04-00079 Page 85

71 Contrary to the Labor Department’s implication, there is no apparent reason why, as a matter of pure logic – even if PwC/IBM did provide training for them – the PwC/IBM workers might not also have received trai ning from BP. As discussed above, however, the record evidence as a whole suggests that the knowledge and expe rience that the outsourced workers acquired while in the direct employ of BP ensured that they al ready had the skills needed to do the work that BP continued to require of them, rendering further training unnecessary. for decades. And the Former Employees were re tained after the outsourcing precisely because they already possessed the knowledge and the skill set needed to understand the requirements of BP’s business. See CSAR 777. In making its finding, the Labor Department thus ignored both common sense and record evidence explaining why BP provided no training to the Former Employees and their colleagues after they were outsourced to IBM. The relevance of the Labor Department’s s econd finding – that PwC/IBM provided training to the outsourced workers – is in doubt. 71 But, in any event, like the agency’s first finding, this second finding too is unsupported by the existing record. The sole evidence cited is a very basic PwC handout addressing“Frequently Asked Questions ,” apparently prepared for the BP employees who were being outsourced to PwC. See Third Negative Redetermination on Remand, CSAR 1048- 49 ( citing SAR 69). It simply cannot bear the weight of the agency’s finding. In short, as the examples above illustrate, the Labor Department’s findings applying its seven newly-announced criteria for control to the facts of this case are not supported by substantial evidence in the record. Therefor e, even leaving aside the numerous other deficiencies in the agency’s Third Negative Redetermination on Remand, that determination could not be sustained.
E. The Agency’s Failure to Make Determinations on Other Criteria for Certification

As discussed elsewhere above, the Third Ne gative Redetermination on Remand includes noCourt No. 04-00079 Page 86

formal findings by the Labor Department on any crit eria for certification of leased workers other than control, notwithstanding the Court’s e xpress directive to the contrary in IBM I , and the sound policy and practical reasons underpinning that directive. See IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347 (instructing agency to “make determinations as to whether each of the criteria [for certification of leased workers] is satisfied in this case”); n.39, supra (explaining that IBM I directive requiring agency to make determinati ons on all criteria was intended to avoid “ping-pong” phenomenon, where TAA case repeatedly bounces back and forth between agency and court as result of agency’s typical piecemeal approach to TAA investigations). The Former Employees initially sought to interp ret the absence of agency findings on other certification criteria to mean that their satis faction of those criteria was not disputed. See Pls.’ Brief at 31-32 (caption of section of brief); see also id. at 3, 34-36; Pls.’ Reply Brief at 1, 8-9, 11. The Government quickly disabused the Fo rmer Employees of that notion. See Def.’s Brief at 14, 61-63. But the Government never even acknowledged – much less tried to explain – the Labor Department’s wholesale failure to make the findings that IBM I expressly required. Instead, in the words of the Former Employ ees, the Government “embarks on an analysis of the record evidence in an effort to demons trate that the remaining statutory criteria for certification have not been satisfied” – focusing, in particular, on the requirement for a “causal nexus” between workers’ separation and either increased imports or a shift in production. See Pls.’ Reply Brief at 8-9; Def.’s Brief at 14, 61-63 ( citing , inter alia , Former Employees of HewlettPackard Co. v. United States , 17 CIT 980, 985 (1993)). But the ar guments of litigation counsel are no substitute for the Labor Department’s own reas oned analysis on the record. The Government’sCourt No. 04-00079 Page 87

72 As explained above, the Third Negative Rede termination on Remand’s two brief, off-hand references to the reasons for the Former Empl oyees’ termination do not constitute formal findings by the Labor Department. See section II.B.7, supra . Among other things, the agency’s remand determination is utterly devoid of any analysis of the relevant evidence of record. Moreover, even if the Labor Department had made a negative determination on “causal nexus” on remand, and even if the agency had sought to support that determination by itself articulating the analysis set forth in the Government ’s brief, it still would not pass muster, for several reasons. First, and most importantly, in reaching its determinations, the Labor Department is obligated to take into consideration all record evidence, including that which weighs against the agency’s conclusion. See , e.g. , CSAR 736 (IBM’s response to question 16); SAR 913 (stating that Former Employees “were originally outsourced by BP as a cost-saving measure and . . . were eventually terminated because BP continued to require cost sa vings as a result of incr eased imports of oil and natural gas that competed with BP’s U.S. produc tion (and ultimately led to shifts in production)”); see generallysection IV.D.2.C, supra . The Government’s analysis here fails to do so. See Def.’s Brief at 61-63. Further, the evidence cited by the Government as support for a negative determination on causation is largely conclusory, and thus does not merit great weight. See generally Def.’s Brief at 61-63. Mere denials have little probative valu e. And corporate double-speak is also virtually worthless. See , e.g. , CSAR 723-24, 761-62 ( cited in Def.’s Brief at 61-62). In BMC , for example, when asked to “[b]riefly explain the circumstances related to separations at [BMC], the company responded simply that the company had taken “si gnificant restructuring actions, including reductions in force, to reduce its ongoing operational expenses to be in line with the revenue that [was then] currently being generated.” See generally BMC , 30 CIT at ____, 454 F. Supp. 2d at 1326-27 (citation omitted). The Labor Department was castigated for making “no effort whatsoever to plumb the meaning of [the company’s] wholly uninf ormative response” to the agency’s question. Id . As BMC observed: BMC’s response to the Labor Department’s question . . . was little more than a tautology, not illuminating in the least. . . . In essence, BMC responded that the company laid off workers to reduce expenses, so that expenses would not exceed revenues. But it is a virtual truism that companies strive to ensure that expenses do attempts at “backfill” must therefore be rejected as flagrant post hoc rationale. See , e.g. , Burlington Truck Lines, Inc. v. United States , 371 U.S. 156, 168-69 (1962) (agenc y action must “be upheld, if at all, on the same basis articulated by the agency itself”). 72Court No. 04-00079 Page 88

not exceed revenues, and that laying off wo rkers reduces expenses. For purposes of a TAA analysis, the salient question is “why?”: Why were [BMC’s] revenues down? For example, were lower revenues attributable in part to increased imports?
BMC , 30 CIT at ____ n.32, 454 F. Supp. 2d at 1326-27 n.32. So, too, the Labor Department cannot content its elf here with bland assertions by corporate officials that lay-offs were simply the result of “rebalanced” staffing, or “restructuring” designed to “improve . . . services . . . at a better cost.” And it is mere tautology to say that “changes in staffing levels were due to a reduction in the finance and accounting staff” or that “workers lost employment due to a reduction in the number of finance and accounting personnel.” See Third Negative Redetermination on Remand, 71 Fed. Reg. at 10,711 n.3; CSAR 723-24, 761-62 ( cited in Def.’s Brief at 61-62). Finally, there is a distinctly hollow ring to the Government’s criticisms of the Former Employees’ evidence tying their termination either to increased imports or to a shift in production. See Def.’s Brief at 62. It is true that petitioning workers bear the burden of proof on their claim. But it is equally true that the TAA statute implicitly recognizes that the Labor Department has expertise and resources (not to mention subpoena power) that petitioning workers do not. The agency is thus “charged with an affirmative obligation to proactively and thoroughly investigate all TAA claims filed with the agency – and, in the word s of its own regulations, to ‘marshal all relevant facts’ to make its determinations.” BMC , 30 CIT at ____, 454 F. Supp. 2d at 1357 ( citing 29 C.F.R. § 90.12); see generally id ., 30 CIT at ____, 454 F. Supp. 2d at 1355-57. The Labor Department’s obligation to act with the “utmost regard” for the interests of the Former Employees is in no way diminished by the fact that they are now represented by counsel. To date, the Labor Department has largely failed to look behind the broad, generalized assertions of BP and IBM. Similarly, the agency has apparently failed to consider the possible motives and incentives that might bear on the comp anies’ credibility (especially on this issue). See section IV.D.2.a(2), supra . Nor has the agency posed the obvious threshold questions point-blank, or confronted the companies with hard data concerning matters such as increased import levels and shifts in production. See , e.g. , CSAR 951 (summarizing certain data concerning increased imports of oil and natural gas, as well as data on shifts in production). As things stand now, the Labor Department is derelict in its duty to investigate whether international trade was a factor in the Former Employees’ termination; and the existing evidentiary record is simply insufficient to support a negative determination on that issue. The Labor Department is once again instruct ed, on remand, to make determinations on all applicable criteria for certification of Former Employees. Judgement is reserved as to theCourt No. 04-00079 Page 89

consequences of the agency’s failure to comply with this and other instructions set forth in IBM I

. See Anderson v. U.S. Sec’y of Agriculture , 30 CIT ____, ____, 469 F. Supp. 2d 1300, 1301 (2006) (ordering agency to show cause under Rule 11 for fa ilure to comply with remand instructions in AgTAA case).
F. The Remedy of Last Resort Particularly in light of the Labor Departme nt’s failure to make findings on certification criteria other than control, the Former Employees make out a compelling case for court-ordered certification. See generally Pls.’ Brief at 32-35; Pls.’ Reply Brief at 9-10. The Former Employees argue that there is ample evidence in the administrative record demonstrating that they satisfy all applicable crite ria, and that the record thus supports certification.
See , e.g. , Pls.’ Brief at 31-32, 34. They reiterate that the Labor Department’s criteria for certification have been “a constantly moving target,” and posit that there is no reason to believe that – in a fourth remand proceeding – the Labor Department will not simply changethe rules once again, “continuing to make it impossible for the Former Employees to demonstrat e their eligibility for certification.” Pls.’ Brief at 17-18. They contend that another remand will befutile, because the Labor Department “poisoned the well” in the most recent remand investigation by failing to take necessary measures to ensure the reliability of evidence collected on remand ( see section IV.D.2.a(1), supra ), and by failing to put its questions into proper context by defining “control” for BP and IBM ( see section IV.D.2.b, supra ).Court No. 04-00079 Page 90

73 The Former Employees fear that, as a result of the agency’s actions, it will now “be impossible for Labor to obtain information from the parties involved in this case that [does] not reflect the parties’ previous, tainted positions.” Pls.’ Reply Brief at 10; see also Pls.’ Brief at 33. See Pls.’ Reply Brief at 10; Pls.’ Brief at 33. 73 They emphasize that continued delay in thei r receipt of TAA benefits diminishes the usefulness of those benefits. Pls.’ Reply Brief at 10. They point out that the Labor Department “has now had four opportunities to develop and revi ew the record” in this matter, and therefore “does not deserve another, fifth bite at the apple. ” Pls.’ Brief at 33; Pls.’ Reply Brief at 10. And they note that IBM Iaffirmatively put the Labor Department on notice that it was being allowed only “one last, very brief, remand.” Pls.’ Brief at 32-33; Pls.’ Reply Brief at 9 ( quoting IBM I , 29 CIT at ____, 403 F. Supp. 2d at 1347). In short, according to the Former Employees, “[t]he time has come for the Court to order that Labor certify the Former Employees as eligible to receive TAA.” Pls.’ Brief at 1. But, pointing to the language of the statute, the Government continues to insist that the Court lacks the power to order the Labor Department to certify workers in TAA cases. See Def.’s Brief at 14, 63-65. And there is at least some authority for that proposition. See Merrill Corp. , 31 CIT at ____, Slip Op. 07-46 at 29 (Mar. 28, 2007) (“Even if Plaintiffs have satisfied all of the eligibility requirements for TAA certification under the Trade Ac t, this Court is powerless to direct Labor to certify Plaintiffs as eligible for TAA. The Tr ade Act is clear. This Court may affirm Labor’s determination or it may set aside Labor’s determin ation in whole or in part, 19 U.S.C. § 2395(c), but this Court is not authorized to direct Labor to certify Plaintiffs as eligible for TAA . . .”). As explained above ( see note 32), the Court of Appeals thus far has side-stepped this issue.Court No. 04-00079 Page 91

See Marathon Ashland , 370 F.3d at 1386 (finding, under the circ umstances, “no occasion to address the government’s argument that the remedy ordered by the [Court of International Trade] was outside [its] authority”); Barry Callebaut , 357 F.3d at 1383 (deeming moot “the question of the Court of International Trade’s authority to order Labor to certify [workers]” for TAA benefits). But a careful reading of the relevant precedent suggest s that, if a case of court-ordered certification is to have any shot at surviving on appeal, it must be a clear-cut case where another remand would be plainly futile. Cf . Nippon Steel Corp. , 458 F.3d at 1359. Though it may be close, this is not (yet) that case.

V. Conclusion For all the reasons set forth above, the Labor Department’s Third Negative Redetermination on Remand cannot be sustained. A ccordingly, out of an abundance of caution and in an exercise of restraint, this action is remanded to Defendant once again, for further proceedings not inconsistent with this opinion. A separate order will enter accordingly.

Delissa A. Ridgway Judge Dated: March 30, 2007 New York, New YorkUNITED STATES COURT OF INTERNATIONAL TRADE 

### F ORMER 

### E MPLOYEES OF 

### I NTERNATIONAL : 

### B USINESS 

### M ACHINES 

### C ORPORATION 

### , : Plaintiffs , : Court No. 04-00079 v. : 

### U.S. S ECRETARY OF 

### L ABOR , : Defendant.



### ORDER Upon consideration of the U.S. Department of Labor’s Third Negative Redetermination on Remand, 71 Fed. Reg. 10,709 (March 2, 2006), Plainti ffs’ Comments thereon, Defendant’s response, and Plaintiffs’ reply, and in accordance with the Court’s opinion issued this day in this matter, it is hereby ORDERED that this action is remanded to Defe ndant for further proceedings not inconsistent with the opinion of the Court; and it is further ORDERED that judgement is reserved as to the consequences of Defendant’s failure to comply with the instructions of the Court in Former Employees of Int’l Business Mach. Corp. , 29 CIT ____, 403 F. Supp. 2d 1311 (2005); and it is further ORDERED that the parties shall confer with one another, and – no later than April 9, 2007 – Defendant shall notify the Court of several alternative, mutually-convenient dates and times in the week of April 23, 2007 when all counsel (includi ng counsel at the Department of Labor) are available to appear before the Court at a hearing to be convened to discuss the schedule and structure of the remand proceeding in this matter.

Delissa A. Ridgway, Judge Dated: March 30, 2007 New York, New York