USDOL/OALJ Reporter: ARB Decision Caselist - March 2018

TIMELINESS OF COMPLAINT; STATUTE OF LIMITATIONS IS AN AFFIRMATIVE DEFENSE THAT IS WAIVED IF NOT RAISED IN THE PLEADINGS; RESPONDENT FOUND TO HAVE WAIVED DEFENSE WHEN IT DID NOT RAISE IT BEFORE THE ALJ UNTIL A POST-HEARING CLOSING BRIEF

In DeDios v. Medical Dynamic Systems, Inc. , ARB No. 16-072, ALJ No. 2013-LCA-9 (ARB Mar. 30, 2018), the Respondent argued for the first time in its closing brief, filed after the evidentiary hearing  before the ALJ, that the Prosecuting Party/Complainant had not timely filed his LCA complaint.  On appeal, the ARB affirmed the ALJ’s holding that the Respondent had waived this argument by raising it too late in the hearing process.  The ARB wrote:

     The ALJ found that MDSI waived any objection to timeliness by not raising it until after the hearing when the record had closed and consequently, the complainant did not have an opportunity to address it or submit evidence to support his timely complaint. As noted above in the Legal Background [to the ARB’s decision], the limitations period for the INA is not jurisdictional. Thus, an objection to timeliness may be waived if not raised. The defense that a complaint is untimely falls into the category of defenses that must be raised in a motion to dismiss for failure to state a claim.  According to the ALJ rules [at 29 C.F.R. Part 18.70 (c) (2017)], such a motion should be filed before a hearing has occurred.  The Federal Rules of Civil Procedure, which apply in situations not provided for or controlled by the ALJ rules, require that a party file a motion asserting this defense no later than the conclusion of the trial on the merits. Under either of these rules, MDSI failed to file a motion to dismiss for untimeliness (or object in any way) at or before the hearing, and the argument is waived.

USDOL/OALJ Reporter at 7-8 (footnotes omitted). Although the Respondent argued before the ARB that it had not deliberately relinquished the timeliness issue, the ARB noted that the Respondent knew about an apparently undated complaint for more than a year prior to raising the question in the post-hearing closing brief, and that it was clear that it had the opportunity to raise the issue earlier.

TIMELINESS OF COMPLAINT; ARB FINDS THAT 20 C.F.R. § 655.806(a)(5) ALLOWS AN LCA COMPLAINT TO BE FILED WITHIN 12 MONTHS AFTER THE LATEST DATE ON WHICH ALLEGED VIOLATIONS WERE COMMITTED, EVEN IF ALJ LATER FOUND AFTER HEARING THAT CERTAIN OF THE ALLEGATIONS WERE NOT SUBSTANTIATED OR ONLY PARTIALLY SUBSTANTIATED

In DeDios v. Medical Dynamic Systems, Inc. , ARB No. 16-072, ALJ No. 2013-LCA-9 (ARB Mar. 30, 2018), the Respondent argued for the first time in its closing brief that the Prosecuting Party/Complainant had not timely filed his LCA complaint.  On appeal, the ARB affirmed the ALJ’s holding that the Respondent had waived this argument by raising it too late in the hearing process. The ARB, however, went on to also address how to interpret the limitations period for an LCA complaint. 

The ARB noted that “[t]he language of the INA makes clear that a complaint must be filed ‘not later than 12 months after the date of the failure’ in an LCA and the regulations clarify that this means ‘not later than 12 months after the latest date on which the alleged violations were committed.’”  USDOL/OALJ Reporter at 8 (quoting 20 C.F.R. § 655.806(a)(5); emphasis as added by the ARB).  In the instant case, the Complainant’s complaint alleged that the Respondent benched him, failed to pay him for the entire LCA period, and never effected a bona fide termination.  The ARB thus found that the “the 12-month limitations period did not begin to run until the end of [the] LCA period.” Id . at 8-9 (footnote omitted).  The ARB acknowledged that the ALJ had found that a bona fide termination had occurred prior to the end of the LCA, but the ARB noted that the regulations speak to the 12 months “after the latest date on which the alleged violations were committed.” Id . at 9.  The ARB continued:  “Thus a complaint’s timeliness is based in part on the content and allegations contained in the complaint. In this case, the limitation period did not begin running until the last day of the LCA period since DeDios alleged benching violations (that are considered continuing violations) and that MDSI never effected a no [sic] bona fide termination.” Id . (footnote omitted).

BONA FIDE TERMINATION; ARB STATES IN APPARENT DICTA THAT—TO BE EFFECTIVE – ANY OFFER OF TRANSPORTATION HOME, AND THE NOTICE OF TERMINATION TO USCIS, MUST OCCUR AFTER NOTICE OF TERMINATION TO THE H-1B WORKER

In DeDios v. Medical Dynamic Systems, Inc. , ARB No. 16-072, ALJ No. 2013-LCA-9 (ARB Mar. 30, 2018), the Respondent argued for the first time in its closing brief that the Prosecuting Party/Complainant had not timely filed his LCA complaint.  On appeal, the ARB affirmed the ALJ’s holding that the Respondent had waived this argument by raising it too late in the hearing process. The ARB went on to also address how to interpret the limitations period for an LCA complaint, finding that the regulation at 20 C.F.R. § 655.806(a)(5) allows an LCA complaint to be filed within 12 months after the latest date  on which alleged violations were committed.  The ARB also stated, in apparent dicta that “although we have never had the occasion to so hold, it would be reasonable to assume that any offer of transportation home (and again, notice to USCIS of termination) would necessarily have to occur after notice of termination to the employee to be effective.”   The ARB explained:

First, notice to USCIS is notice “that the employment relationship has been terminated . . .”. MDSI did not notify USCIS that the employment relationship had been terminated but instead simply moved that the petition be withdrawn or revoked. Arguably, without properly informing a nonimmigrant of his termination, the requirement of notice to USCIS would not be effective. But not only did MDSI fail to notify USCIS that it had terminated DeDios’ employment, it apparently failed even to notify DeDios that he was fired, before moving to revoke his H-1B status. Second, although we have never had the occasion to so hold, it would be reasonable to assume that any offer of transportation home (and again, notice to USCIS of termination) would necessarily have to occur after notice of termination to the employee to be effective. Here, neither occurred after termination. Had it been argued and/or appealed, it may have been found that there was no bona fide termination for the reason that notice to the employee of termination must necessarily come before a notice to USCIS of termination or an offer of return fare home. One final argument calls into question the legitimacy of the termination in this case. MDSI continued to offer DeDios interviews for jobs after it offered him a return trip home and after it moved for USCIS to revoke the H-1B petition—evidence of an ongoing employment relationship after the satisfaction of the three requirements (notice to employee, notice to USCIS, and payment home) could “belie a bona fide termination” and negate their effectivity. To continue to offer an H-1B nonimmigrant worker interviews for work would at least confuse the question of whether he was still employed if not convince him that he was, regardless of any past offers of airfare home.

USDOL/OALJ Reporter at 9 (footnotes omitted).

TIMELINESS OF COMPLAINT; IGNORANCE OF THE LAW, DILIGENCE IN PURSUIT OF CLAIMS AND LACK OF PREJUDICE ARE NOT NORMALLY GROUNDS FOR EQUITABLE MODIFICATION OF FILING DEADLINE

TIMELINESS OF COMPLAINT; GROUND FOR EQUITABLE MODIFICATION OF FILING DEADLINE BASED ON BEING MISLED BY RESPONDENT REQUIRES “ACTIVE” AND NOT MERELY “NEGLIGENT MISLEADING; RESPONDENT IS UNDER NO OBLIGATION TO INFORM A COMPLAINANT ABOUT SOX FILING REQUIREMENTS

In Komatsu v. NTT Data, Inc. , ARB No. 16-069, ALJ No. 2016-SOX-24 (ARB Mar. 13, 2018), the ARB affirmed the ALJ’s findings that the Complainant’s SOX complaint was untimely and that equitable modification of the filing deadline was not warranted. 

The ARB stated that the Complainant’s ignorance of the law was not generally a factor justifying equitable modification. Similarly, the ARB stated that the Complainant’s alleged diligence in pursing his claims, and alleged lack of prejudice to the Respondent, were not grounds for equitable modification, which is granted for unusual or exceptional reasons.

In regard to the Complainant’s argument that the Respondent “negligently” misled him as to his SOX claim, the ARB noted that the standard is -- “actively” -- not “negligently” – misleading of the complainant. See School Dist. of Allentown v. Marshall , 657 F.2d 16, 19-21 (3d Cir. 1981).  The ARB observed that the Respondent had apparently required the Complainant to take SOX training at some point before he was fired.  The ARB stated, however, that “a pre-adverse action and pre-complaint training cannot mislead a complainant about a claim that had not yet arisen to justify equitable modification. …  Further, a respondent has no obligation to inform a complainant about SOX filing requirements.”

SUMMARY DECISION; WHERE RESPONDENT CAME FORWARD WITH CLEAR AND CONVINCING EVIDENCE THAT IT WOULD HAVE FIRED COMPLAINANT EVEN ABSENT PROTECTED ACTIVITY (IN THIS CASE THE REPORT AND RECOMMENDATION OF OUTSIDE COUNSEL), ALJ’S GRANT OF SUMMARY DECISION WAS SUMMARILY AFFIRMED WHERE COMPLAINANT’S ONLY RESPONSE WAS A CONSPIRACY THEORY AND ALLEGATIONS OF COLLUSION

In Latigo v. ENI Trading & Shipping , ARB No. 16-076, ALJ No. 2015-SOX-31 (ARB Mar. 8, 2018), the ARB affirmed the ALJ’s grant of summary decision dismissing the Complainant’s SOX case.  The ALJ found that there was no genuine issue of material fact to warrant a hearing where the Respondent produced evidence that the Complainant had been fired after outside counsel recommended termination of Complainant’s employment because he had harassed a female coworker.  The Complainant’s behavior was corroborated by witness statements and documents.  The Complainant’s only response to the Respondent’s motion for summary decision was to allege that the female coworker and the Respondent were colluding and had hacked his computer to prevent him from reporting the Respondent to OSHA and federal securities officials.  In granting summary decision, the ALJ noted that nonmoving parties cannot rely on conclusory allegations to create a genuine issue of material fact. Nonmoving parties must do more than recite mere allegations to avoid summary decision.  On appeal, the ARB summarily affirmed the ALJ’s dismissal, stating that it “agree[s] with the ALJ’s finding that ‘Complainant did not provide any affidavits, sworn statements, or other admissible evidence’ to rebut the clear and convincing evidence ETS adduced in support of its affirmative defense.”  USDOL/OALJ Reporter at 3, quoting ALJ’s Order Granting Motion for Summary Decision at 12.

FAILURE TO PAY ADVERSE EFFECT WAGE RATE (AEWR) TO U.S. DOMESTIC WORKERS PERFORMING “CORRESPONDING EMPLOYMENT”; QUALIFICATIONS OF WORKERS IS NOT A RELEVANT FACTOR IN DETERMINING CORRESPONDING EMPLOYMENT; 2010 REGULATORY AMENDMENT COVERS ANY U.S. WORKERS, AND NOT JUST THOSE “NEWLY HIRED,” AND PROVIDES THAT H-2A WORKERS CANNOT PERFORM JOB DUTIES OTHER THAN THOSE LISTED ON THE JOB ORDER WITHOUT TRIGGERING THE AEWR REQUIREMENT FOR U.S. WORKERS PERFORMING THOSE OTHER JOB DUTIES

In Overdevest Nurseries, L.P. , ARB No. 16-027, ALJ No. 2015-TAE-8 (ARB Mar. 15, 2018), the ARB affirmed the ALJ’s Decision and Order granting summary decision in favor of the Wage and Hour Division (WHD) Administrator on the ground that the Respondent, a wholesale nursery, failed to meet its wage obligations under the H-2A program to pay the Adverse Effect Wage Rate (AEWR) to both its H-2A workers and its U.S. employees doing the same work in “corresponding employment.” The ALJ found that the Respondent  employed its U.S. domestic workers as “production workers” in “corresponding employment,” as defined under 29 C.F.R. § 501.3(a) and 20 C.F.R. § 655.103(b), with its H-2A workers, employed as “order pullers,” but did not pay the domestic workers the same requisite AEWR, in violation of 20 C.F.R. § 655.122(l).

Background and regulatory changes

 The order puller position required three months of experience, familiarity with plant names to be able to accurately and timely complete orders, and the ability to complete written reports. In addition, the job specification provided that order pullers would perform other general nursery tasks as necessary.  The domestic U.S. workers who did not have the requisite skills for the order puller position only performed general nursery tasks or production activities, and were known as “production workers.”

The Respondent had used the H-2A program since 1999, but had never been charged with a “corresponding employment” violation in the past, including during a 2007 investigation. In 2008, the Wage and Hour Division amended the definition of “corresponding employment.” This amendment only applied to “newly hired” U.S. workers, and permitted H-2A workers to perform other “minor” or “incidental” job duties not listed on the H-2A job order without violation of the regulations.  In 2010, the regulation was again amended.  The ARB quoted the regulatory history for the reason for the amendment:

               The Administrator explained in the comments to the latest amended regulation that it was changed “to address the adverse impact on U.S. workers when . . . H-2A workers [engage] in agricultural work outside the scope of work found in the approved job order, including work impermissibly performed outside the area of intended employment,”35 and removed having “H2A protections [apply] only to newly-hired [U.S.] workers” and applied “wage depression” protections to “longtime” U.S. employees as well.

Slip op. at 7, quoting 75 Fed. Reg. 6884, 6886 (Feb. 12, 2010). Thus, under the 2010 regulation “1) any U.S. workers, not just ‘newly hired’ U.S. workers, could engage in ‘corresponding employment’ with H-2A workers, and 2) H-2A workers could not perform any other job duties than those specifically listed on the H-2A job order without violating the regulations….” Id .  The ARB observed that it appeared the Respondent drafted its subsequent H-2A job orders broadly to permit its order pullers to perform potential minor and incidental job duties.  The ALJ, however, held that the U.S. domestic workers met the definition of working in “corresponding employment” with the H-2A workers and, therefore, the Respondent should have paid the U.S. domestic workers AEWR rates.

Qualifications of workers not relevant to question of “corresponding employment” determination; 2010 regulations require employer to either restrict H-2A workers only to duties requiring greater qualifications, or to pay same wage to U.S. workers for work duties they both perform

On appeal the Respondent argued that its U.S. production workers were not as “qualified” as its H-2A order puller workers, which the statute at 8 U.S.C. § 1188(a)(1) requires for approval of H-2A applications, and, therefore, they were not “similarly employed” under § 1188(a)(1). The Respondent argued that the WHD determination required it to pay its less qualified U.S. workers the same wage as its H-2A workers during the period of H-2A employment. The ALJ, however, had held that the “qualifications” of the U.S. workers were not relevant in determining whether they were engaged in “corresponding employment,” as referred to in the regulation at § 655.103(b).  The ARB expounded on that holding to note that “[t]he H-2A workers are not any more qualified than the U.S. workers to perform those ‘general nursery tasks’ and, therefore, the U.S. workers should be paid the same wage to perform those duties as the H-2A workers are paid to perform those duties during the period of H-2A employment.” Id . at 9.  The ARB stated that “[u]nder the amended 2010 regulation, H-2A employers are … required to either restrict its H-2A workers to perform only the work duties that the H-2A workers are determined to have more qualifications to perform or pay its U.S. workers the same wage as its H2A workers for the same work duties that they both perform.” Id. at 10.  The ARB addressed the Respondent’s redrafting of the job order to include “general nursery tasks as necessary,” and found that “in doing so, [the Respondent] was required to pay its U.S. workers the same wage as its H-2A workers for those same work duties that they both performed to protect against ‘the adverse impact on U.S. workers’ when H-2A workers did so, consistent with the purpose of the Act to prevent the hiring of H-2A workers having an adverse effect on the wages or working conditions of U.S. workers.” Id .  The ARB noted that the Respondent could have drafted a narrow job order restricting its H-2a workers to duties requiring the greater qualifications, and to hire additional U.S. workers to perform the “general nursery tasks,” which would have been consistent with the purpose of the Act.

2010 rule was not a “complete return” to the 1987 rule

The Respondent noted that the rulemaking for the 2010 amendment stated that the amended definition was a return to the 1987 rule definition for “corresponding employment.” The Respondent thus argued that the Administrator’s current interpretation was inconsistent with the 1987 definition, as evidenced by the Respondent having not been found to violate the 1987 rule during the 2007 investigation.

The ARB, however, agreed with the ALJ that the Administrator’s 2007 investigation only resulted in a “no determination” due to a lack of guidance at the time; it was not an endorsement of the Respondent’s practices. The ARB also agreed with the ALJ that the 2010 definition was not a “complete return’ to the 1987 definition “as it holds that U.S. domestic workers that perform ‘any work included in the job order, or in any agricultural work performed by the H-2A workers’ are in ‘corresponding employment’ with the H-2A workers.” Id . at 11 (citation omitted).

ARB rejects argument of “Catch-22” for H-2A employers; third-quarter workday regulation merely requires artful drafting of job order

The Respondent argued that the Administrator’s interpretation of “corresponding employment” puts employers in a “Catch-22” situation by requiring an employer to either draft a broad job order and thereby risk having U.S. domestic workers being determined to be in “corresponding employment,” or draft a narrow job order risking that its H-2A workers will be unable to perform other duties in emergency or unforeseen circumstances.

The Respondent asserted before that it drafted its job orders broadly “to avoid having its H-2A workers perform only ‘order puller’ duties if it drafted its job orders narrowly but yet still have to pay them in accordance with the ‘Three-Fourths Guarantee’ requirement [ of 20 C.F.R. § 655.122(i)(1)] even when there were no ‘order puller’ duties to perform.” Section 655.122(i)(1) provides that an employer must guarantee the H-2A worker employment for at least three-fourths of the workdays during the contract period.  The ARB found that the ALJ properly rejected this assertion, finding that the regulations “allow an employer to provide an ‘artfully drafted job order’ ‘to include enough activities that H-2A workers do not perform activities outside the job order or sit idly, while not crafting the job order too broadly so that almost all of its agricultural workers are in corresponding employment (e.g., including a catch-all job duties provision).’” Id . at 13, quoting ALJ’s decision.  The ARB reiterated that if an emergency or other contingency requiring additional general nursery tasks arises, the Respondent could hire additional less qualified U.S. workers.  The ARB agreed with the ALJ’s assessment:

The ALJ held that Overdevest’s:

broadly written job order reflected its desire to employ its H-2A workers . . . in tasks performed by its domestic production workers, while simultaneously wishing to avoid paying those workers in corresponding employment the AEWR. The regulations do not permit Employer to do so, and the domestic workers here should have been paid the AEWR rates for all hours worked. See 20 C.F.R. § 655.103(b).

Id. , quoting ALJ’s decision.

Validity of regulation

The Respondent, recognizing that the ARB lacks the authority to rule on the validity of the regulation, contended, for purposes of preserving the argument for appeal, that “the regulation defining ‘corresponding employment’ at 20 C.F.R. § 655.103(b) is invalid, as its issuance was arbitrary and capricious in light of the statute, regulatory history, other regulations and the DOL’s prior interpretations.” The ARB noted that it had previously held that it is not permitted to rule on the validity of the DOL’s H-2A regulations, and found that this contention was not properly  before the Board.

BACK WAGES FOR FAILURE TO PAY AEWR TO U.S. DOMESTIC WORKERS PERFORMING “CORRESPONDING EMPLOYMENT”; BACK WAGES ARE SET BASED ON THE VALIDITY PERIOD OF THE JOB ORDER AND DO NOT EXCLUDE THE PERIOD PRIOR TO THE ARRIVAL OF THE H-2A WORKERS

In Overdevest Nurseries, L.P. , ARB No. 16-027, ALJ No. 2015-TAE-8 (ARB Mar. 15, 2018), the ARB affirmed the ALJ’s Decision and Order granting summary decision in favor of the WHD Administrator on the ground that the Respondent, a wholesale nursery, failed to meet its wage obligations under the H-2A program to pay the Adverse Effect Wage Rate (AEWR) to both its H-2A workers and its U.S. employees doing the same work in “corresponding employment.”  The ALJ also affirmed the WHD Administrator’s back wage calculations, awarding $92,984.22 in back wages to the Respondent’s domestic workers. The Respondent argued that the back wages improperly included periods in which H-2A workers were not yet on the job.  The ARB, however, agreed with the ALJ that, “because the temporary domestic production workers were employed in work included in the job order during the validity period of the job order, they were engaged in ‘corresponding employment’ with the H-2A workers and ‘nothing in the Act or regulations’ waives [the Respondent’s] ‘obligations during that time’ to pay them the same wage as the H-2A workers ‘simply because the H-2A workers had not yet began working.’”  Slip op. at 15, quoting ALJ’s decision.

[Nuclear & Environmental Whistleblower Digest VIII A 4]
[Nuclear & Environmental Whistleblower Digest IX D 3]
INDICATIVE RULING; WHERE A MOTION FOR RECONSIDERATION OF A FEES AND COSTS SUPPLEMENTAL DECISION WAS PENDING BEFORE THE ALJ AT THE TIME THAT THE ARB ACCEPTED A PETITION FOR REVIEW OF THE SUPPLEMENTAL DECISION, THE ALJ ERRED BY RULING ON THE MOTION FOR RECONSIDERATION BECAUSE JURISDICTION HAD PASSED TO THE ARB ONCE IT ACCEPTED THE PETITION; RATHER, THE ALJ’S OPTIONS ARE SPECIFIED IN THE INDICATIVE RULING REGULATION AT 29 C.F.R. § 18.94

In Jenkins v. United States Environmental Protection Agency , ARB No. 16-027, -046, ALJ No. 2011-CAA-3 (ARB Mar. 6, 2018), the ALJ issued a decision in favor of the Complainant. The Complainant then filed a petition for an award of attorney’s fees, costs, and for compensatory damages. The ALJ ordered supplemental briefing.  Thereafter the ALJ retired, and a substitute ALJ issued a Supplemental Decision and Order on the petition.  The Complainant filed a motion for reconsideration of the Supplemental Decision and Order with the substitute ALJ.  Shortly thereafter, the Complainant filed a petition for ARB review of the Supplemental Decision and Order, and the ARB accepted the petition for review.  Several months later, the substitute ALJ issued an order granting partial reconsideration of the Supplemental Decision and Order.  The Complainant filed a petition for ARB review of decision on partial reconsideration.  The ARB issued an order to show cause why it should not refuse to accept the petition.  The Complainant responded but the Respondent did not.

The ARB held that when the ALJ issued the partial decision on reconsideration, OALJ not have jurisdiction over the case. The Complainant had appealed the remedies decision to the ARB and the ARB had accepted the petition.  The ARB noted that an ALJ’s options upon receiving a motion for relief following an order that has been accepted for review by the ARB are stated in the indicative ruling rule of procedure at 29 C.F.R. § 18.94.  The ALJ’s granting of reconsideration is not one of the options.  The ARB thus treated the ALJ’s order on partial reconsideration as a “prospective order” under § 18.94(a)(3).  That subsection permits an ALJ to state to the movant that “either that the judge would grant the motion if the reviewing body remands for that purpose or that the motion raises a substantial issue.”    The ARB treated the Complainant’s petition for review as notice under § 18.94(b), which directs the movant to notify the reviewing body of the ALJ’s prospective order.  The ARB thus remanded the matter to the ALJ “properly consider” the motion for reconsideration.

[Nuclear & Environmental Whistleblower Digest VII A 3]
[Nuclear & Environmental Whistleblower Digest VIII C 6]
[Nuclear & Environmental Whistleblower Digest VIII C 10]
DISCRETION OF ALJ TO IMPOSE DISMISSAL OR DEFAULT JUDGMENT AS A DISCOVERY SANCTIONS; FACTORS THAT MUST BE CONSIDERED; SPOLIATION OF EVIDENCE

In Jenkins v. United States Environmental Protection Agency , ARB No. 15-046, ALJ No. 2011-CAA-3 (ARB Mar. 1, 2018), the ARB affirmed the ALJ’s entry of a default judgment against EPA for discovery violations.  The ARB recited the history of the discovery dispute that had resulted in multiple ALJ orders compelling EPA’s compliance with discovery requests.  At the evidentiary hearing, it was determined that EPA had not fully complied with the ALJ’s orders to compel, resulting in additional post-hearing discovery and additional orders to compel. The Complainant filed a motion for discovery sanctions.  After considering the parties’ arguments on the motion, the ALJ issued her Decision and Order, in which she drew adverse evidentiary inferences of causation and as to the EPA's lack of a legitimate, non-pretextual reason for dismissing the Complainant.  These inferences effectively resulted in a default judgment against the EPA.

Limits on ALJ discretion to impose dismissal or default judgment as a discovery sanction; factors to consider

The ARB began by noting that ARB precedent “affords a reasonable degree of latitude and discretion to ALJs in the imposition of discovery sanctions under 29 C.F.R. §18.6(d)(2), as well as in imposition of sanctions pursuant to the inherent authority of ALJs to manage the orderly and expeditious disposition of cases.” Slip op. at 7-8 (citations omitted).  The OALJ rule of practice and procedure at §18.6(d)(2) was the authority in effect at the time of the ALJ’s decision.  (The ARB observed that §18.6(d)(2) has since been replaced by 29 C.F.R. § 18.57, effective June 18, 2015.)  The ARB noted that it had occasionally affirmed, under an abuse of discretion standard, an ALJ’s dismissal or entry of judgment as a discovery sanction, but that the ARB had not articulated the basis or factors for applying the abuse of discretion standard.  The ARB turned to federal case authority interpreting FRCP 37(b)(2) for guidance.  The ARB began by reciting the Supreme Court’s decisions on the subject. The ARB wrote, in part:

To justify dismissal or entry of default as a discovery sanction, the misconduct must be due to "willfulness, bad faith, or ... fault" on the part of the non-complying party. "Rule 37(b)(2) contains two standards-one general and one specific-that limit a district court's discretion. First, any sanction must be 'just'; second, the sanction must be specifically related to the particular 'claim' that was at issue in the order to provide discovery." Finally, in determining whether to dismiss for failure to comply with discovery orders, the trial court is obligated to consider the full record.

Slip op. at 9 quoting Societe Internationale v. Rogers , 357 U.S. 197, 207 (1958); Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 707 (1982); and National Hockey League v. Metropolitan Hockey Club , 427 U.S. 639, 642 (1976).  The ARB also turned to the caselaw of the courts of appeal, and primarily to that of the Circuit Court of Appeals for the District of Columbia, which the ARB found provides a relatively comprehensive explication of the principles.  Essentially, that precedent recognizes great deference to the trial court for its “feel” for the litigation and the appropriate remedial actions under the circumstances – but also the need for a thorough review because dismissal or default as a discovery sanction is a drastic sanction that completely deprives a party of its day in court.  The ARB noted the following limits on a trial court’s discretion:

(1) the court must consider the appropriateness of lesser sanctions;

(2) the choice of sanction must be proportional between the offense and sanction;

(3) dismissal as a sanction is a last resort imposed only when less dire alternatives have been explored without success or would obviously prove futile;

(4) a trial court is not required to exhaust lesser sanctions prior to dismissal or default; but it must explain its reasoning for doing so.

“Fault” within the meaning of the Societe Internationale criteria has been found by appellate courts to include gross negligence  amounting to a "total dereliction of professional responsibility" even though not a conscious disregard of a court's orders. Id . at 11, quoting Cine Forty-Second St. Theatre v. Allied Artists Pictures , 602 F.2d 1062, 1067 (2d Cir. 1979).

Additional considerations are “any resulting prejudice to the other party, prejudice to the judicial system requiring the trial court ‘to modify its own docket and operations to accommodate the delay,’ and the need ‘to sanction conduct that is disrespectful to the court and to deter similar conduct in the future.’ At least one of these factors concerning the relationship between the discovery misconduct at issue and the matters in controversy in the case must exist.” Id . at 11-12 (citations omitted).  A final consideration is a general deterrent effect both on the case at hand and on other litigation.  The ARB noted that eventual compliance with discovery orders can still warrant sanctions, including dismissal.

Application of factors to case at hand

The ARB reviewed the ALJ’s consideration of lesser sanctions in the case sub judice. The ALJ had first considered limiting sanctions to the EPA’s lead attorney, who the ALJ found to be largely responsible for the Respondent’s discovery failures.  The ALJ, however, found that the lead attorney did not act alone, and that as an employee of EPA, the EPA was implicated in the attorney’s conduct, and could not absolve itself of responsibility by throwing that attorney “under the bus.”

The ALJ considered, but rejected, reopening the record and continuing the hearing after completion of post-hearing discovery with an award of costs to the Complainant. The ARB found that the ALJ had well explained her reasoning and that the record clearly supported that reasoning.  The ARB also noted that the ALJ’s imposition of adverse evidentiary inferences was a lesser sanction.  The ARB rejected the Respondent’s argument that the ALJ had misapplied the inferences.

-- Spoliation of evidence

A significant factor in the ALJ’s sanctioning of the Respondent was her finding of spoliation of evidence by the Respondent – specifically destruction of certain emails. The Respondent argued before the ARB that “the ALJ committed reversible error as a matter of law because entry of default judgment for spoliation of evidence requires proof by clear and convincing evidence that the destruction was undertaken in bad faith, a burden of proof that in this case was not met.” Id . at 16, quoting Respondent's Brief.  The ARB conducted an extensive review of the law governing spoliation—that is, “the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation” Id . quoting West v. Goodyear Tire & Rubber Co. , 167 F.3d 776, 779 (2d Cir. 1999).  The ARB noted that the trial court’s authority for sanctioning for spoliation derives both from the court’s inherent powers and the FRCP.  The ARB noted that “the D. C. Circuit Court of Appeals has subdivided spoliation sanctions into two categories: (1) issue-related sanctions, such as adverse evidentiary determinations and preclusion of the admission of evidence, and (2) punitive or penal sanctions, such as dismissal or default Judgments (as well as contempt orders, awards of attorney's fees, and the imposition of fines).” Id . a 17 (citation omitted).  The former may be imposed when a preponderance of the evidence establishes misconduct tainting the evidentiary resolution of an issue; the latter requires clear and convincing evidence of the predicate misconduct.

The ARB found that because in the instant case the ALJ imposed issue-related sanctions, the preponderance of evidence standard applied. The ARB described the standard for imposing an adverse inference based on spoliation:

               To support an adverse inference ruling based on the spoliation of evidence it must be established before the trial court that: (1) the party having control over the evidence had an obligation to preserve it when it was destroyed; (2) the records were destroyed with a "culpable state of mind;" and (3) the destroyed evidence was relevant to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reasonable fact finder could conclude that the lost evidence would have supported the claims or defense of the party that sought it.

Id. (citations omitted).  In the instant case, the ARB found that there had been no question of the Respondent’s duty to preserve the emails at issue as the litigation was reasonably foreseeable.  The emails were those of an official who had played an important role in disciplining the Complainant.  The Respondent had been specifically notified by the Complainant that she intended to dispute her dismissal, and that notice put a litigation hold duty on the Respondent.

The Respondent presented an affidavit from an official purporting to establish that the destruction of the emails was in the normal course of business, as it was routine agency procedure to delete a departing employee’s emails if not subject to an outstanding litigation hold.   The Respondent noted that FRCP 37(e) as in effect at the time prohibited sanctions for routine, good-faith operation of an electronic information system.  The ARB was not persuaded, finding that the record did not support the argument that the emails were destroyed through a routine, good faith operation of an electronic-information system.  The ARB cited the ALJ’s finding that at the relevant time, “standard agency procedure was to determine if there was an outstanding litigation hold on the departing employee's email inventory, and if not, to initiate deletion of the emails.” Id . at 20.  The ARB also noted that the affidavit did not address why there was no litigation hold in place or the question of whether a departing official’s records should have been preserved pursuant to the Federal Records Act.  The ARB noted that the obligation to preserve evidence extends both to legal counsel and to managers of governmental or corporate parties.

The ARB found that the next question was whether the emails were destroyed with a culpable state of mind. The ARB reiterated that since the ALJ implied issue-related sanctions rather than punitive sanctions, the applicable standard was preponderance of the evidence and not clear-and-convincing evidence.  The ARB noted that a culpable state of mind for purposes of a spoliation inference includes ordinary negligence.  The ARB wrote "[A] court may employ an adverse inference due to a party's 'failure to preserve evidence,' even if deliberate or reckless conduct is not present." Id . at 21, quoting More v. Snow , 480 F. Supp. 2d 257, 274-75 (D.D.C. 2007) (in turn quoting Rice v. United States , 917 F. Supp. 17, 19-20 (D.D.C. 1996)).  The ARB found that here, the EPA’s failure to preserve the emails was neither negligent nor reckless.  Nor was it inadvertent.  Rather, the record supported the ALJ’s finding that it was a willful failure to preserve the emails despite pending litigation in which the retiring official’s testimony could play a key role.

The next question was it likely that the emails were relevant to the foreseeable litigation.   Here, the emails were intentionally destroyed, which supports an inference that they were relevant to the Complainant’s claim.  The ARB noted that, in contrast, when the destruction is negligent, the relevancy must be proven by the party seeking sanctions.

Willful and deliberate nature of non-compliance

The ARB next turned to the nature of the Respondent’s discovery non-compliance. The ARB noted that the ALJ had not based default judgment merely on the spoliation, but on the entire history of the Respondent’s efforts to thwart discovery, and its disregard of the ALJ’s repeated orders to compel.    The ALJ had found the Respondent’s conduct, particularly that of its lead counsel, to be deliberate and willful.  On appeal, the Respondent conceded that its initial discovery effort was insufficient and that the conduct of its attorney, while deserving of some sanction, had been timely and based on objections pursued on good faith based on the relationship to discovery before a parallel MSPB proceeding, or based on the attorney’s reasonable belief that the documents at issue were privileged attorney-client communications.  The Respondent cited cases in which sanctions had been based on more egregious conduct.  The ARB was not persuaded.  It found that the claim the discovery responses were “timely” was debatable, given the need for multiple orders to compel—including two such orders issued post-hearing—and the ALJ’s repeated need to address the failure to properly prepare or use privilege logs.  The ARB found that the Respondent’s conduct was just as egregious as numerous cases in which default judgment for discovery misconduct had been ordered.  The ARB found that substantial evidence supported the ALJ’s finding that the Respondent willfully and deliberately engaged in discovery misconduct.

Prejudice to opposing party; deterrence

The ARB noted that it must also consider whether the discovery misconduct resulted in prejudice to the Complainant or to the judicial system. The ARB found that the ALJ rightfully considered the destruction of the emails as severely hampering the Complainant’s ability to present her case, and that the ALJ had not based her finding of prejudice solely on spoliation, but also on other factors such as the large volume of untimely, post-hearing document production.  The ALJ had also taken into consideration that most of the major witnesses were no longer employed by the Respondent, and could not be compelled to participate in discovery or testify at a hearing.

The ALJ had not based a prejudice finding on the burden on the court to oversee the discovery, finding that although it had been a diversion of resources, it could not be fairly characterized as an intolerable burden on the court. The ARB disagreed, noting that the ALJ had to devote significant resources to overseeing discovery, that the case should have been resolved much sooner without the discovery misconduct, and that the hearing had been conducted prematurely because the ALJ had not been aware of the extent and breath of the discovery failures.  The ARB wrote:

               It bears repeating: "The judicial system cannot tolerate litigants who flagrantly refuse to comply with the orders of the court and who refuse to make discovery, for '(d)elay and evasion are added burdens on litigation, causing waste of Judicial and legal time, are unfair to the litigants and offend the administration of justice' ." "Litigants who are willful in halting the discovery process act in opposition to the authority of the court and cause impermissible prejudice to their opponents. It is even more important to note, in this era of crowded dockets, that they also deprive other litigants of an opportunity to use the courts as a serious dispute settlement mechanism. "  To allow parties to flout their discovery obligations and choose, instead, to wait "until a trial court has lost patience with them" thereby forcing the trial judge to become embroiled in virtual day-to-day supervision of discovery is a result "directly contrary to the overall scheme of the federal discovery rules."

Id . at 31-32 (citations omitted).  In regard to the deterrence factor, the ARB summed up:

               The Board affirms the ALJ's invocation of deterrence as an additional basis for the entry of a default judgment against the EPA. The EPA' s continued non-compliance with discovery requests and at least five court orders directing it to search emails of specific individuals and justify withholding of documents in privilege logs, non-compliance that forced the ALJ to suspend hearing in this case pending even further discovery, covered an expanse of more than two and one-half years. Moreover, the EPA's misconduct did not just begin the moment discovery commenced in this case, it began even earlier with its failure to place a litigation hold preserving Vickers's email records. Again, EPA's attempt to place all blame on its attorney, Winick, is to no avail. As the record in this case demonstrates, Winick was not a rogue actor but a senior EPA attorney who, together with colleagues, litigated this case under the supervision of superiors.

Slip op. at 33 (footnote omitted).

The Respondent argued that “an ‘unpublished administrative ALJ decision’ would serve little if any deterrence for other litigants who might consider flouting discovery rules. The ARB found no merit to this argument because ALJ decisions are published, and because the ARB’s decision affirming the ALJ’s decision “will surely send a signal to government and private-sector parties alike who appear before Department of Labor administrative law judges that the level of discovery misconduct engaged in by the EPA and its legal counsel in this case will simply not be tolerated.”  Slip op. at 35.

Alternative ruling of ALJ

The Jenkins decision was rendered by a two-member panel of the ARB.  Both members agreed that the ALJ’s Order of Default Judgment against the EPA would be affirmed.  One member of the Board affirmed the ALJ’s alternative ruling that, based on the evidence of record considered independently of the adverse inference sanction, the EPA did not have a legitimate, non-pretextual reason for dismissing the Complainant.  The other member, however, found that this alternative ruling was not supported by substantial evidence and that the ALJ’s legal analysis contained reversible error.