Source: https://www.law.cornell.edu/supremecourt/text/446/238
Timestamp: 2019-09-16 06:45:43
Document Index: 136806845

Matched Legal Cases: ['§ 16', '§ 12', '§ 570', '§ 212', '§ 580', '§ 16', '§ 580', '§ 580', '§ 16', '§ 16', '§ 16']

Ray MARSHALL, Secretary of Labor, et al., Appellants, v. JERRICO, INC. | US Law | LII / Legal Information Institute
Ray MARSHALL, Secretary of Labor, et al., Appellants, v. JERRICO, INC.
446 U.S. 238 (100 S.Ct. 1610, 64 L.Ed.2d 182)
Argued: March 19, 1980.
Under § 16(e) of the Fair Labor Standards Act, 29 U.S.C. 216(e), sums collected as civil penalties for the unlawful employment of child labor are returned to the Employment Standards Administration (ESA) of the Department of Labor in reimbursement for the costs of determining violations and assessing penalties. The question for decision is whether this provision violates the Due Process Clause of the Fifth Amendment by creating an impermissible risk of bias in the Act's enforcement and administration.
* The child labor provisions of federal law are primarily contained in § 12 of the Fair Labor Standards Act, 52 Stat. 1067, as amended, 29 U.S.C. 212. The Secretary of Labor has designated the ESA as the agency responsible for enforcing these provisions, 36 Fed.Reg. 8755 (1971). The ESA in turn carries out its responsibilities through regional offices, and the assistant regional administrator of each office has been charged with the duty of determining violations and assessing penalties.
Appellee Jerrico, Inc., is a Delaware corporation that manages approximately 40 restaurants in Kentucky, Indiana, Tennessee, Georgia, and Florida. In a series of investigations from 1969 to 1975, the ESA uncovered over 150 violations of the child labor provisions at appellee's various establishments. After considering the factors designated by statute and regulations, 1 the ESA Assistant Regional Administrator in the Atlanta office assessed a total fine of $103,000 in civil penalties for the various violations. That figure included a supplemental assessment of $84,500 because of his conclusion that the violations were willful.
Appellee filed exceptions to the determination and assessment of the Assistant Regional Administrator, and pursuant to 29 U.S.C. 216(e), a hearing was held before an Administrative Law Judge. Witnesses included employees of appellee and representatives of the Department of Labor. The Administrative Law Judge accepted the Assistant Regional Administrator's contention that violations had occurred, concluding that the record showed "a course of violations" for which "respondent's responsibility cannot be disputed." At the same time, he was persuaded by appellee's witnesses and by a review of the evidence that the violations were not willful. Accordingly, he reduced the total assessment to $18,500.
The requirement of neutrality has been jealously guarded by this Court. In Tumey v. Ohio, supra, the Court reversed convictions rendered by the mayor of a town when the mayor's salary was paid in part by fees and costs levied by him acting in a judicial capacity. The Court stated that the Due Process Clause would not permit any "procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear and true between the state and the accused." 273 U.S., at 532, 47 S.Ct., at 444. Tumey was applied in Ward v. Village of Monroeville, supra, to invalidate a procedure by which sums produced from a mayor's court accounted for a substantial portion of municipal revenues, even though the mayor's salary was not augmented by those sums. The forbidden "possible temptation," we concluded, is also present "when the mayor's executive responsibilities for village finances may make him partisan to maintain the high level of contribution from the mayor's court." 409 U.S., at 60, 93 S.Ct., at 83. We have employed the same principle in a variety of settings, demonstrating the powerful and independent constitutional interest in fair adjudicative procedure. 2 Indeed, "justice must satisfy the appearance of justice," Offutt v. United States, 348 U.S. 11, 14, 75 S.Ct. 11, 13, 99 L.Ed. 11 (1954), and this "stringent rule may sometimes bar trial by judges who have no actual bias and who would do their very best to weigh the scales of justice equally between contending parties," In re Murchison, 349 U.S. 133, 136, 75 S.Ct. 623, 625, 99 L.Ed. 942 (1955). See also Taylor v. Hayes, 418 U.S. 488, 94 S.Ct. 2697, 41 L.Ed.2d 897 (1974).
As noted above, the major portions of the federal child labor provisions appear in 29 U.S.C. 212, which outlaws the employment in interstate commerce of "oppressive child labor," as that term is defined in 29 U.S.C. 203(l ) and implementing regulations. These provisions demonstrate a firm federal policy of "protecting the safety, health, well-being, and opportunities for schooling of youthful workers." 29 CFR § 570.101 (1979). See also H.R.Rep. No. 1452, 75th Cong., 1st Sess., 6 (1937); S.Rep. No. 884, 75th Cong., 1st Sess., 2, 6 (1937).
Before 1974, the Secretary of Labor enforced the child labor provisions primarily through actions for injunctive relief, see 29 U.S.C. 212(b), 217, and for criminal sanctions, see 29 U.S.C. 216(a), 215(a)(4). Having found such relief to be an inadequate or insufficiently flexible remedy for violations of the law, cf. H.R.Rep. No. 93-913, p. 15 (1974), U.S.Code Cong. & Admin.News, 1974, p. 2811, Congress in 1974 authorized the Secretary to assess a civil penalty not to exceed $1,000 for each violation of § 212. 29 U.S.C. 216(e). Under this provision for the assessment of civil penalties, the Secretary's determination of the existence of a violation and of the amount of the penalty is not final if the person charged with a violation enters an exception within 15 days of receiving notice. In the event that such an exception is entered, the final determination is made in an administrative hearing conducted in accordance with the Administrative Procedure Act, 5 U.S.C. 554. The administrative law judge "may affirm, in whole or in part, the determination by the Administrator of the occurrence of violations or . . . may find that no violations occurred, and shall order payment of a penalty in the amount originally assessed or in a lesser amount . . . or order that respondent pay no penalty, as appropriate." 29 C.F.R. § 580.32(a) (1979). He is directed to consider the same factors considered by the assistant regional administrator 3 in making his original assessment. Ibid. Under the natural construction of this regulation, the administrative law judge is required to conduct a de novo review of all factual and legal issues. 4
The provision whose constitutionality is at issue in this case is a part of 29 U.S.C. 216(e), the civil penalty section of the Act. That provision states that civil penalties collected for violations of the child labor law "shall be applied toward reimbursement of the costs of determining the violations and assessing and collecting such penalties, in accordance with the provisions of section 9a of this title." Section 9a, 29 U.S.C. 9a, added in 1934, provides in turn that all sums
"received by the Department of Labor in payment of the cost of such work shall be deposited to the credit of the appropriation of that bureau, service, office, division, or other agency of the Department of Labor which supervised such work, and may be used, in the discretion of the Secretary of Labor, and notwithstanding any other provision of law, for the ordinary expenses of such agency and/or to secure the special services of persons who are neither officers nor employees of the United States." 5
The record developed in the District Court permits a detailed description of the administration of the reimbursement provision in the years 1976, 1977, and 1978. It is plain that no official's salary is affected by the levels of the penalties. In all three years the sums collected as child labor penalties amounted to substantially less than 1% of the ESA's budget. 6 And in each of those years, the ESA did not spend the full amount appropriated to it, and the sums that were not spent were returned to the Treasury. The amounts returned to the Treasury in that fashion substantially exceeded the sums collected under § 16(e) in all three years. 7 The challenged provisions have not, therefore, resulted in any increase in the funds available to the ESA over the amount appropriated by Congress.
Civil penalties for child labor violations are allocated by the national office of the ESA, subject to the approval of the Secretary of Labor. In 1976, the sums collected were allocated to and retained by the ESA national office; in 1977, they were allocated to the national office, to the Office of the Solicitor of Labor, and to the various regional offices in proportion to the amounts expended on enforcement of the child labor provisions; 8 and in 1978, the penalties were held in the Treasury. Civil penalties have never been allotted to the regional offices on the basis of the total amount of penalties collected by particular offices.
The assistant regional administrator simply cannot be equated with the kind of decisionmakers to which the principles of Tumey and Ward have been held applicable. He is not a judge. He performs no judicial or quasi-judicial functions. He hears no witnesses and rules on no disputed factual or legal questions. The function of assessing a violation is akin to that of a prosecutor or civil plaintiff. If the employer excepts to a penalty—as he has a statutory right to do—he is entitled to a de novo hearing before an administrative law judge. 9 In that hearing the assistant regional administrator acts as the complaining party and bears the burden of proof on contested issues. 29 CFR § 580.21(a) (1979). Indeed, the Secretary's regulations state that the notice of penalty assessment and the employer's exception "shall, respectively be given the effect of a complaint and answer thereto for purposes of the administrative proceeding." 29 CFR § 580.3(b) (1979). It is the administrative law judge, not the assistant regional administrator, who performs the function of adjudicating child labor violations. As the District Court found, the reimbursement provision of § 16(e) is inapplicable to the Office of Administrative Law Judges. 10
We do not suggest, and appellants do not contend, that the Due Process Clause imposes no limits on the partisanship of administrative prosecutors. Prosecutors are also public officials; they too must serve the public interest. Berger v. United States, 295 U.S. 78, 88, 55 S.Ct. 629, 633, 79 L.Ed. 1314 (1935). In appropriate circumstances the Court has made clear that traditions of prosecutorial discretion do not immunize from judicial scrutiny cases in which the enforcement decisions of an administrator were motivated by improper factors or were otherwise contrary to law. See Dunlop v. Bachowski, 421 U.S. 560, 567, n. 7, 568-574, 95 S.Ct. 1851, 1858, n. 7, 1858-1861, 44 L.Ed.2d 377 (1975); Rochester Telephone Corp. v. United States, 307 U.S. 125, 59 S.Ct. 754, 83 L.Ed. 1147 (1939). 11 Moreover, the decision to enforce—or not to enforce—may itself result in significant burdens on a defendant or a statutory beneficiary, even if he is ultimately vindicated in an adjudication. Cf. 2 K. Davis Administrative Law Treatise 215-256 (2d ed. 1979). A scheme injecting a personal interest, financial or otherwise, into the enforcement process may bring irrelevant or impermissible factors into the prosecutorial decision and in some contexts raise serious constitutional questions. See Bordenkircher v. Hayes, 434 U.S. 357, 365, 98 S.Ct. 663, 669, 54 L.Ed.2d 604 (1978); cf. 28 U.S.C. 528 (1976 ed., Supp. III) (disqualifying federal prosecutor from participating in litigation in which he has a personal interest). But the strict requirements of neutrality cannot be the same for administrative prosecutors as for judges, whose duty it is to make the final decision and whose impartiality serves as the ultimate guarantee of a fair and meaningful proceeding in our constitutional regime.
In this case, we need not say with precision what limits there may be on a financial or personal interest of one who performs a prosecutorial function, 12 for here the influence alleged to impose bias is exceptionally remote. No governmental official stands to profit economically from vigorous enforcement of the child labor provisions of the Act. The salary of the assistant regional administrator is fixed by law. 5 U.S.C. 5332 (1976 ed. and Supp. III). The pressures relied on in such cases as Tumey v. Ohio, supra; Gibson v. Berryhill, 411 U.S. 564, 579, 93 S.Ct. 1689, 1698, 36 L.Ed.2d 488 (1973); and Connally v. Georgia, 429 U.S. 245, 250, 97 S.Ct. 546, 548, 50 L.Ed.2d 444 (1977) (per curiam ), are entirely absent here.
Nor is there a realistic possibility that the assistant regional administrator's judgment will be distorted by the prospect of institutional gain as a result of zealous enforcement efforts. As we have noted, the civil penalties collected under § 16(e) represent substantially less that 1% of the budget of the ESA. 13 In each of the relevant years, the amount of the ESA's budget that was returned to the Treasury was substantially greater than the amount collected as civil penalties. Unlike in Ward and Tumey, it is plain that the enforcing agent is in no sense financially dependent on the maintenance of a high level of penalties. Furthermore, since it is the national office of the ESA, and not any assistant regional administrator, that decides how to allocate civil penalties, such administrators have no assurance that the penalties they assess will be returned to their offices at all. See Dugan v. Ohio, 277 U.S. 61, 48 S.Ct. 439, 72 L.Ed. 784 (1928).
The District Court's conclusion that the reimbursement provision violated the Due Process Clause was evidently premised on its perception that an assistant regional administrator might be tempted to devote an unusually large quantity of resources to enforcement efforts in the hope that he would ultimately obtain a higher total allocation of federal funds to his office. This increase in enforcement effort, the court suggested, might incline the assistant regional administrator to assess an unjustified number of penalties, and to make those penalties unduly high. But in light of the factors discussed above, it is clear that this possibility is too remote to violate the constraints applicable to the financial or personal interest of officials charged with prosecutorial or plaintiff-like functions. 14 In order to produce the predicted result, the ESA would be required to decide to allocate civil penalties to regional offices; the sums allocated to the particular regional office would have to exceed any amount of that office's budget returned to the Treasury at the end of the fiscal year; the assistant regional administrator would have to receive authorization from his superiors to expend additional funds to increase his enforcement expenditures to the desired level; the increased expenditures would have to result in an increase in penalties; and the administrative law judge and reviewing courts would have to accept or ratify the assistant regional administrator's assessments. "Under a realistic appraisal of psychological tendencies and human weakness," Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 1464, 43 L.Ed.2d 712 (1975), it is exceedingly improbable that the assistant regional administrator's enforcement decisions would be distorted by some expectation that all of these contingencies would simultaneously come to fruition. We are thus unable to accept appellee's contention that, on this record and as presently administered, the reimbursement provision violates standards of procedural fairness embodied in the Due Process Clause.
Appellee errs in suggesting that the Office of Administrative Law Judges is also entitled to reimbursement under § 16(e). When read in conjunction with 29 U.S.C. 9(a), that section allows reimbursement to offices that "supervised [the] work" of "determining the violations and assessing and collecting [the] penalties." The Office of Administrative Law Judges does not "supervise" that work. Indeed, the Administrative Procedure Act expressly forbids such supervision. 5 U.S.C. 554(d). The Office of Administrative Law Judges maintains an administrative section within the Department of Labor entirely separate from that of the supervising body, the ESA, and the Office has a separate budget.
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