Labor & Employment Law Daily Wrap Up, PROCEDURE—3d Cir.: DOL’s use of ALJs to impose penalties for H-2A program violations deemed unconstitutional, (Jul 30, 2025)

By Marjorie Johnson, J.D.

“In short, because the H-2A labor certification regulations mainly concern the federal government’s local interest in domestic wages, DOL’s action does not fit within the public rights exception to Article III adjudication.”

In light of the Supreme Court’s recent decision in SEC v. Jarkesy, the Third Circuit held that the U.S. Department of Labor violated Article III by bringing, before an agency tribunal, an enforcement action against an employer for alleged breach of its contractual obligations to workers under the H-2A nonimmigrant visa program. Because the government’s action concerned private rights and did not fall within the public rights exception for certain immigration matters, Article III required the DOL to instead proceed before a federal district court. Therefore, the Third Circuit reversed and remanded with instruction to enter judgment in favor of the employer (Sun Valley Orchards, LLC v. U.S. Department of Labor, No. 23-2608 (3d Cir. July 29, 2025)).

H-2A certification. In 2015, the Sun Valley Orchards participated in the H-2A nonimmigrant visa program, hiring 96 foreign workers and 51 corresponding domestic workers. Under the H-2A program, domestic employers may temporarily hire foreign laborers to perform seasonal agricultural work. The program is administered jointly by DOL and the Department of Homeland Security, and prospective H-2A employers must obtain a labor certification from DOL and a visa petition approval from DHS.

DOL regulations. DOL regulations dictate what benefits H-2A workers—and therefore, corresponding U.S. workers—must receive. Relevant here, these include no-cost housing, access to a kitchen or meal plan, and transportation to the work site. These conditions are incorporated into a “job order,” which functions as a work contract absent a written agreement, and DOL may enforce its terms.

Violations. After spending time at the farm in 2015, DOL investigators identified several alleged job order violations. These included the employer’s alleged failure to provide sanitary housing and transporting workers to the fields using unlicensed drivers and unsafe vehicles. The employer also allegedly terminated more than 20 workers without cause in the middle of the growing season and then attempted to coerce them to waive their right to employment for the time commitment required by the H-2A regulations by directing them to sign false statements. Finally, the investigation found that the company denied workers access to the company’s kitchen to cook their own food, and instead charged workers for meals and drinks at a profit, resulting in illegal deductions from workers’ wages.

Penalties and backpay. Based on the investigation’s findings, the DOL assessed the employer over $212,000 in civil penalties and $369,000 in back wages. The employer timely requested a hearing before an administrative law judge (ALJ) who agreed with DOL that the employer violated the job order provisions but modified the civil penalties and back wages to $211,800 and $344,945.80, respectively. The employer petitioned the Administrative Review Board for review, which affirmed the ALJ’s decision in its entirety.

Federal lawsuit. The employer challenged the decision in the district court, seeking declaratory and injunctive relief under the Administrative Procedure Act. It alleged several statutory and constitutional defects in DOL’s order, including that the DOL adjudicated private rights in violation of Article III of the Constitution. The court granted DOL’s motion to dismiss all claims. In particular, it rejected its Article III claim, holding that agency adjudication was appropriate because DOL’s action fit within the public-rights doctrine.

Article III. The Third Circuit reversed, concluding that DOL violated Article III by adjudicating the employer’s private rights through in-house proceedings. In so ruling, the court held that DOL’s action concerned private rights did not fall within the public rights exception.

Private rights. The Third Circuit took guidance from the Supreme Court’s 2024 decision in SEC v. Jarkesy, which held that the SEC could not, consistent with Article III and the Seventh Amendment, enforce federal antifraud statutes through in-house civil penalty proceedings. Because both the remedies (civil penalties) and the nature of the action (targeting fraud) could be traced to English common law, the case presumptively involved “a matter of private rather than public right,” the Court held. The Third Circuit reasoned that the same considerations required Article III adjudication here.

First, the nature of the government’s H-2A enforcement actions was contractual. While regulations require H-2A employers to provide housing, meals, transportation, and guaranteed work, employee benefits are formalized in an employer’s “job order,” which in turn functions as a “work contract.” It is the violation of the terms of that work contract, rather than the regulations that shape it, that supports H-2A enforcement actions. And consistent with that scheme, DOL framed its enforcement action against the employer in contractual terms. In addition, the agency sought common law remedies: civil penalties and back wages.

Immigration exception inapplicable. The Third Circuit rejected DOL’s argument that the employer was not entitled to adjudication by an Article III court because the case concerned immigration, which is traditionally a matter of public rights. While H-2A labor certification regulations may ultimately serve immigration-related goals, this case fell outside the immigration exception since the regulations did not directly address the admission and exclusion of aliens. “Instead, the labor certification process is designed to vindicate the domestic national policy goal of preserving ‘the wages and working conditions of workers in the United States.”

Addressing DOL’s argument that portions of the sprawling H-2A program implicate the President’s unique power over foreign affairs, the Third Circuit further found that, at most, this showed that some H-2A-related actions may proceed before an agency tribunal. For example, DOL could use agency proceedings to bar the employer from the program or to remove ineligible foreign workers from its employ. “Those actions, to the extent they vindicate the federal government’s critical interest in border control, likely fall within the immigration exception,” stated the court. “But the fact that DOL has some authority to proceed in a non-Article III tribunal does not give it carte blanche to do so for all violations.”

The case is No. 23-2608.

Judge: Hardiman, T.

Attorneys: Robert M. Belden (Institute for Justice) for Sun Valley Orchards LLC. Daniel J. Aguilar, U.S. Department of Justice, for U.S. Department of Labor and U.S. Secretary of Labor.

Companies: Sun Valley Orchards LLC; U.S. Department of Labor

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