OFCCP Dealt a Blow in ABM Case

Regular readers are aware that ABM Industries Groups, LLC has sued the OFCCP challenging the constitutionality of the agency’s adjudication process. ABM stands accused of hiring discrimination against White and Black applicants for janitorial positions, denies the accusations, and is currently in the middle of the first step arguing their case in front of an Administrative Law Judge (ALJ).

ABM is arguing that the ALJ adjudication process is unconstitutional on two fronts: 1) ALJ’s are improperly insulated from removal by the President (making their decisions unenforceable); and 2) OFCCP’s enforcement scheme deprives contractors of their constitutional right to an “Article III” jury trial.

If you’re just catching up, or need a refresher, you can read all about it here.

As part of the initial complaint, ABM asked the District Court for the Southern District of Texas to issue an injunction, halting the current ALJ proceedings against them, and the court has granted that request, likely throwing a significant wrench into the OFCCP’s enforcement machine.

The bar for such an injunction is relatively high. The requesting party has to convince the court that there is a substantial likelihood that they will prevail on the merits, there is a substantial threat of not just harm, but “irreparable injury” if the injunction is not granted, that such injury outweighs any harm the injunction might do to the other party, and that the injunction is in the public interest.

On the eve of Halloween, Judge Sim Lake issued a Memorandum Opinion and Order granting ABM’s request for a preliminary injunction.

What Does This Mean?

For ABM, the order halts the ALJ case the OFCCP is currently pursuing against them. This is only a partial victory for the contractor, though, as they had asked the court to enjoin the OFCCP from “subjecting ABM to unconstitutionally structured administrative proceedings” more broadly. The judge declined by only granting the injunction as to the case that is currently pending. In theory, the OFCCP could still bring proceedings against the contractor based on the findings of a different audit, but that is highly unlikely.

The judge did not halt all OFCCP ALJ proceedings, though the judge’s order could end up having significant impact on OFCCP enforcement proceedings for the foreseeable future. Exactly what that impact will be is hard to say.

The judge’s order only addresses the “removal” issue, and if that issue stands as decided by the District Court, the OFCCP will have to restructure how ALJs can be removed, and likely how they are appointed. And if the current ALJ structure is deemed unconstitutional, a whole slew of ALJ decisions become vulnerable to challenge.

The OFCCP needs to perform its own sober analysis of the likelihood of ABM’s success on the merits of this argument and start planning for potential outcomes. That is likely to have an impact on agency decisions regarding how to proceed with pending cases, and whether and when to bring any new cases.

And the OFCCP also has to consider what is likely to be a relatively long timeframe. There will likely be appeals, though few expect the 5^th Circuit Court of Appeals to be overly helpful to the agency, and the case could eventually land at the Supreme Court. This process could take several years.

What About the Rest of the Case?

The judge issued a preliminary injunction, signaling pretty strongly where the court expects to come down on the removal issue, but not actually deciding the issue yet. The parties will still need to argue that issue in court.

But the judge explicitly did not address the merits of the argument that the OFCCP impermissibly deprives contractors of their constitutional right to a trial by jury. If ABM wins on the removal issue, the nature of ALJs will have to be restructured, but the OFCCP’s overall enforcement scheme would not necessarily have to change. If ABM wins on the jury trial issue, the OFCCP’s enforcement scheme would have to change dramatically.

The OFCCP’s response to the initial complaint addressed the elephant in the room that the complaint did not. Specifically, that certain constitutional rights—including the right to a jury trial—are “waivable.” In other words, an informed party can consent to that right being unavailable.

Think of the myriad arbitration clauses you agree to every time you check the box that you “read” the terms and conditions for a service. Those are so ubiquitous because the issue is well-settled, so those arbitration clauses are generally enforceable.

Arguably, contractors do the same thing when they sign a qualifying federal contract or subcontract. If you’ve ever wondered why the OFCCP is so concerned about the “EO Clause flowdown” requirement, wonder no more. That’s their fine-print arbitration clause.

So while the removal issue appears to be on the road to requiring the OFCCP to redefine the ALJ role, the jury trial issue is very much still up for debate, and the agency’s position is relatively strong. The cases cited to in the complaint did not involve any similar “knowing” (or should have known) relinquishing of rights, and the complaint ignored the issue entirely. But whether or not it will win the day remains to be seen.

Looking Ahead

The case has the potential to change the way the OFCCP does business going forward, and the injunction is likely to disrupt OFCCP enforcement more immediately, so there is a lot to follow. We will continue to follow it, of course, and bring you the significant developments.

In the meantime, if you have any questions about this or any other OFCCP-related matter, feel free to reach out to us at BAI@berkshireassociates.com