The legal status of U.S. Administrative Law Judges (ALJs) has been in a state of flux. From a Supreme Court decision finding the appointment of a Securities and Exchange Commission (SEC) ALJ unconstitutional, to an Executive Order (EO) issued by the President, to proposed legislation to restrict the EO, to an announcement by the Social Security Administration (SSA) that its ALJs would be reappointed, things in the past month have been a bit topsy-turvy, to say the least.
Supreme Court Lucia Decision
By way of background, in June, the Supreme Court decided Lucia v. SEC, 585 U.S.__(2018), which held that the SEC ALJ who ruled against Mr. Lucia had not been constitutionally appointed. The case turned on the Appointments Clause of the U.S. Constitution. The Court found that the SEC ALJs are “Officers of the United States,” and thus subject to the Appointments Clause, rather than federal employees who could be hired by the SEC.
Does Lucia have any bearing on the authority on Social Security Administration ALJs? Not necessarily. Although SSA ALJs have been hired in the same manner as SEC judges, there appear to be significant differences between the roles of the SEC judges and SSA ALJs. SSA ALJs arguably have far less than the significant authority given to SEC ALJs. At best, a Social Security ALJ has power over taking testimony and maybe ruling on admissibility of evidence. The most significant element lacking with Social Security ALJs is the lack of an adversarial hearing. The Lucia majority opinion mentioned “adversarial” repeatedly as a basis for its finding that SEC judges are officers rather than employees. But, as discussed below, the Solicitor General has weighed in on this issue, and has decreed that all ALJs should be considered “inferior officers.”
Presidential Executive Order
Subsequently, on July 10th, the President issued an Executive Order (EO), ostensibly based on Lucia. But rather than addressing the Appointments Clause issue in raised in Lucia, the EO instead upends the long standing practice for hiring ALJs through the Office of Personnel Management (OPM). It creates a new excepted service “schedule E.”
Under the EO, all agencies, including SSA, will be able to hire ALJs directly by selecting “from the best candidates who embody the appropriate temperament, legal acumen, impartiality, and judgment required of an ALJ, and who meet the other needs of the agencies.” This means there will no longer be ALJ examinations or an OPM registry from which federal agencies, including SSA, must select its judges. The jobs will not necessarily be posted on USA Jobs. The only requirement the EO includes for ALJs is that the ALJ “must possess a professional license to practice law and be authorized to practice law…” The order also gives agencies the ability and discretion to add any other qualifications the agency thinks necessary and appropriate. The EO directs OPM to issue new regulations and amend or rescind existing regulations as necessary to carry out the EO. Because the EO affects the hiring of ALJs, it excludes current ALJs (serving as of July 10) from the requirements in the order. This EO applies to ALJs in all governmental agencies. OPM has already issued guidance to agencies on implementing the EO.
Reaction to the EO, or Schedule E, has been swift and largely negative. NOSSCR expressed its concern about the impact this EO might have on the qualifications and qualified judicial independence of newly hired ALJs, as has Justice in Aging. According to ALJ Marilyn Zahm, President of the Association of Administrative Law Judges, “This change will politicize our courts, lead to cronyism and replace independent and impartial adjudicators with those who do the bidding of political appointees…If allowed to go forward, it would be equivalent of placing a thumb on the scale of justice.” Social Security Works President Nancy Altman, who also serves on the federal Social Security Advisory Board, said “ALJs already feel political pressure to deny Social Security disability claims. This will only ratchet up that pressure.” Both the Washington Post and Los Angeles Times have published editorials criticizing the EO.
Congress has also jumped into the fray. Rep. Bobby Scott (D-Va.) has offered an amendment to an appropriations bill to prohibit the use of OPM funds in implementing the order. Hilarie Bass, president of the American Bar Association, urged the adoption of Scott’s amendment in a July 16 letter to the leaders of the House Rules Committee: “By giving agency heads sole discretion to hire ALJs who will be making determinations affirming or overturning decisions rendered by that agency, the EO has the potential to politicize the appointment process and interfere with the decisional independence of ALJs.” And Rep. Elijah Cummings (D-Md.) and Rep. Gerry Connolly (D-Va.) have asked the House Oversight Committee to hold hearings on any changes made to ALJ selection in the wake of the Lucia ruling: “We believe the executive order would give politically-appointed agency heads nearly unlimited discretion to stack the ALJ corps with partisan individuals, whose only qualification is they are licensed attorneys.”
In addition to the above criticisms of the EO, its legality may be under dispute. Valerie C. Bannon, Legislative Attorney with the Congressional Research Service, has summarized current law regarding the President’s authority to amend federal rules without going through the notice-and-comment rulemaking procedures required by the Administrative Procedure Act (APA). Even if the President’s actions are not subject to the APA requirements, other laws may govern the President’s rulemaking authority. Further complicating the issue, the APA will likely govern the actions of executive branch agencies implementing the presidential directive. See https://fas.org/sgp/crs/misc/LSB10172.pdf. Bottom-line? Implementation of this EO could be slowed down by litigation.
DOJ and SSA Responses
In the meantime, SSA, which accounts for 85% of federal ALJs, reissued Emergency (EM)-18003, reminding ALJs and Appeals Council judges that they are not authorized to determine constitutional issues. It directed ALJs and the Appeals Council to acknowledge any challenge that a party to a hearing raises as to whether the ALJ has been validly appointed. The ALJ or the Appeals Council is to take no action on the issue, note in the decision that it was raised, and flag the case record for future reference. SSA’s retention date for this Emergency Message, originally July 29, 2018, has been extended in the revised message to December 26, 2018.
Apparently the Solicitor General has now issued guidance to all Agency General Counsels designed to reduce litigation risk post Lucia. The Department of Justice (DOJ) acknowledges the Supreme Court did not squarely resolve the status of SSA ALJs who preside over non-adversarial hearings. It nonetheless concludes that all ALJs should be considered “inferior officers.” This gist of the advice is for each agency to ratify and approve existing ALJs. It also advises agencies to follow the EO for the appointment of new ALJs.
In anticipation of court challenges to ratifications, the memo advises agencies the DOJ will no longer argue that ALJs are regular employees rather than inferior officers. In other words, it will not try to defend the constitutionality of ALJ decisions made prior to their new appointments. Agencies are advised to request voluntary remands in pending court cases in which an Appointments Clause challenge was properly made and preserved. The remands should provide for new hearings before different ALJs. It further advises agencies to consider arguing challenges have been forfeited if not properly raised and preserved. The memo acknowledges that different agencies may have different practices regarding when and how a party must raise a challenge for it to be preserved for judicial review, but encourages agencies to construe or clarify their rules to require presentation of Appointments Clause claims in administrative proceedings. [Note: issue preclusion is not mandatory in SSA cases, per Sims v. Apfel, 530 U.S. 103 (2000).]
The memo also advises agencies as to the government’s position on defending ALJ removal. DOJ is prepared to defend the “good cause” standard for removal but reads 5 U.S.C. § 7521(a) to allow for removal of an ALJ who fails to perform adequately or fails to follow agency policies, procedures, or instructions.
On July 17th, SSA Chief ALJ Patrick Nagle apparently notified SSA ALJs that after analyzing Lucia and consulting with Department of Justice, the Acting Commissioner ratified the original selection of incumbent SSA ALJs and approved their current appointments in the competitive service. Rumor has that as of July 27th, the oath of office has now been administered to all ALJs. Whether these re-appointments by an Acting Commissioner will be sufficient to cure the Appointments Clause problem may be one of many open questions.
What happens next is anyone’s guess. Lucia, and now the SG’s memo, raise more questions than they answer. Now that SSA ALJs have arguably been “properly” appointed, advocates who were contemplating challenges to the constitutionality of SSA ALJs at the hearing level might want to reconsider. But should advocates argue the ALJ was not constitutionally appointed in every case now at the Appeals Council, or about to be appealed? The SG has basically conceded this point in the DOJ memo. And per the Memo, any case timely appealed should be remanded for an additional hearing before a properly appointed ALJ. Every case is of course unique, and a particular strategy should considered in each case in consultation with the client. But given how infrequently the Appeals Council remands or reversed claims on the merits, it may be hard to pass up the opportunity for an “easy” remand to a different ALJ, even if there is no guarantee the new ALJ would decide the disability claim any differently than the prior one did. Remember that the Lucia court did not address the merits of the underlying decision, just the way the ALJ was appointed. And bear in mind several other caveats. The DOJ Memo is adamant that any challenge must have been made and preserved. How will SSA interpret that requirement at the Appeals Council level? Will an objection made now be deemed sufficient? And how quickly will SSA and the Appeals Council figure out how to handle these claims? These issue could add more delay to an already slow process. On the other hand, if SSA ultimately decides to follow the DOJ memo and offer remands, if we have not raised the issue, we may have cost the claimant that opportunity. At this point, it is unclear if and how SSA will apply Lucia to all pending claims, or to reopening considerations.
What about appeals pending in U.S. District Court? Some of the same considerations outlined above apply. But there may be additional ones. DOJ will likely argue that any challenge to the appointment of the ALJ had to be raised at the administrative level. As noted above, issue preclusion is not necessarily applicable in Social Security cases. But would fighting that point delay the claim more? And might you be at a disadvantage with a Lucia remand rather than a merits-based remand that provides guidance to the ALJ as to the errors committed? Again, it will be crucial to consider the option of raising Lucia claims in pending and new court appeals, but each case and each claimant may be unique.
In the meantime, developments in this ALJ drama have been occurring at a whirlwind pace. We will try to keep you posted as we learn more – and please keep us posted as to how you decide to proceed in your individual cases post Lucia.