• The Supreme Court's recent decision in SEC v. Jarkesy held that certain Securities and Exchange Commission adjudications must take place in court because defendants are entitled to a jury trial.
• It will be interesting to see whether the principles of Jarkesy will apply such that complaints initiated by other federal agencies, including those handling immigration compliance, will entitle employers to a trial in federal district court.

In Securities and Exchange Commission v. Jarkesy, 603 U.S. ___ (June 27, 2024), the U.S. Supreme Court held that the SEC's administrative law judges (ALJs) lack jurisdiction to impose civil penalties for alleged securities fraud. The Court found the SEC's litigation was to "punish and deter, not to compensate," which is a type of remedy at common law that could only be enforced in courts of law because defendants are entitled to a jury trial under the Seventh Amendment to the U.S. Constitution. Thus, the SEC, in cases where parties are alleged to have committed fraud, must take them to federal court.

In the aftermath of Jarkesy, certain questions remain. How does this decision impact litigation concerning I-9 penalties or immigration status discriminatory practices before another government agency, the Office of Chief Administrative Hearing Officer (OCAHO)? Additionally, how might this decision impact the adjudication of immigration benefits and programs, whether through immigration court and the Executive Office of Immigration Review (EOIR) or the U.S. Department of Labor (DOL) and its administration of H-1B and related immigration programs?

Many agencies, including OCAHO, EOIR, and DOL, enforce statutes through ALJs. ALJs are not judges nominated by the president and confirmed by the U.S. Senate under Article III of the Constitution. Instead, they are agency employees, appointed by their agency with some statutory removal protection, who decide cases using administrative procedures and without a jury.

In Jarkesy, the Supreme Court stated that SEC ALJs use purely administrative processes to impose civil penalties. After determining the Seventh Amendment applies, the Supreme Court considered whether the "public rights" exception to Article III jurisdiction applies. The Supreme Court held:

This exception has been held to permit Congress to assign certain matters to agencies for adjudication even though such proceedings would not afford the right to a jury trial. The exception does not apply here because the present action does not fall within any of the distinctive areas involving governmental prerogatives where the Court has concluded that a matter may be resolved outside of an Article III court, without a jury. The Seventh Amendment therefore applies and a jury is required.

The "public rights" exception involves cases where there are conflicts between a "private actor," such as an employer, and a government agency. These cases involve civil law, not common law. The Court found the SEC's antifraud provisions "replicate common law fraud."

Thus, we return to our initial question, whether under Jarkesy, the "public rights" exception applies to OCAHO and similar federal agency (in the immigration context) ALJs. If so, the ALJs would have the authority to continue to hear cases. The Supreme Court opined on this and stated, "Congress could also prohibit immigration by certain classes of persons and enforce those prohibitions with administrative penalties assessed without a jury."¹

Yet, in the context of immigration judges charged with adjudicating removal/deportation proceedings, these individuals are, in fact, "non-ALJ adjudicators." To give further context, ALJs, which preside over federal administrative adjudication, share a statutory framework under the Administrative Procedure Act (APA). The APA provides uniform provisions for ALJs that seek to protect ALJs from undue agency interference with their decision-making. For instance, ALJs are not evaluated by the agency in which they conduct hearings and may only be fired for good cause after an independent hearing process.

Yet, APA hearings are only a fraction of an agencies' adjudicatory hearings. Instead, a large majority of hearings are overseen by adjudicators, often referred to as non-ALJs, who do not share a statutory framework under the APA or any congressional statute. And, as such, they do not have the same statutory protections to promote their independence as ALJs.

Within the area of immigration, court judges are not considered judicial officers, but attorney-employees of the Department of Justice, appointed by the Attorney General, charged with adjudicating cases in accordance with the policies and priorities of the governing administration. While DOJ rules state that, "immigration judges shall exercise their independent judgment and discretion," in practice, the Attorney General possess substantial influence on these non-ALJs and can override any decision reached in these hearings.

Returning to Jarkesy, support for the argument that these non-ALJ adjudicators might not possess the power to adjudicate the cases assigned to them becomes far stronger with this knowledge. These non-ALJs are not only not nominated by the president and confirmed by the U.S. Senate under Article III, they are also not protected under any statutory provisions, possessing minimal removal protection subject to individual agency rules and appointed by these agencies to serve as employees.

Despite the Supreme Court's above statement, it is unclear if the "public rights" exception principle would apply in non-removal/deportation proceedings, such as U.S. Immigration and Customs Enforcement (ICE) and Office of Immigrant and Employee Rights (IER) actions before OCAHO. Clearly, ICE's complaints are meant to remedy substantive I-9 errors and "punish and deter" employers from committing such violations. This appears to be a type of remedy at common law, document fraud, that could only be enforced in courts of law because defendants are entitled to a jury trial.

Complaints filed by the IER before OCAHO are a little more complicated. In immigration status discrimination cases, the IER is seeking to compensate victims of discrimination as well as punish and deter employers from committing discrimination.

Similarly, the DOL appoints ALJs with authority to adjudicate cases involving non-immigrant worker programs, such as H-1B, H-2A and H-2B cases brought by the DOL's Wage and Hour Division. This includes holding hearings related to an employer's failure to comply with a Labor Condition Application (LCA), which often involves claims of "wage theft." Unpaid wage claims are understood to trace back to the common law tort of "conversion," thus calling into question whether such a review by an ALJ, without a jury, can survive post-Jarkesy under the "public rights" exception.

It will be interesting to see whether the principles of Jarkesy will apply such that DOL, ICE, and IER complaints will entitle employers to a trial in federal district court. Even if Jarkesy doesn't apply, there is a separate pending issue of whether the OCAHO (as well as other federal agency) ALJs are constitutionally appointed. In the language of the Supreme Court, the primary concern is that Congress should not be permitted "to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch."

Posted: August 13, 2024

¹ See Oceanic Steam Navigation Co. v. Stranahan, 214 U.S. 320, 339-40 (1909).