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ILGWU v. DOLE

December 7, 1989

INTERNATIONAL LADIES' GARMENT WORKERS' UNION, AFL-CIO, et al., Plaintiffs,
v.
ELIZABETH DOLE, SECRETARY OF LABOR, et al., Defendants; CAROL QUINT, et al., Defendant-Intervenors


Gerhard A. Gesell, United States District Judge.


The opinion of the court was delivered by: GESELL

GERHARD A. GESELL, UNITED STATES DISTRICT JUDGE

 Section 11(d) of the Fair Labor Standards Act ("FLSA") authorizes the Secretary of Labor to "make such regulations and orders regulating, restricting, or prohibiting industrial homework as are necessary or appropriate to prevent the circumvention or evasion of and to safeguard the minimum wage rate . . . ." 29 U.S.C. § 211(d). Plaintiffs, claiming arbitrary and capricious action, sue the Secretary of Labor to obtain review of a Department of Labor (the "Department") Final Rule rescinding a previous total ban on homework in five industries -- gloves and mittens, handkerchiefs, buttons and buckles, "nonhazardous" jewelry, and embroideries (the "five industries") -- in favor of implementing a certification system for persons working at home in those industries. The Final Rule, published at 53 Fed.Reg. 45706, is now before the Court for review on cross-motions for summary judgment which have been fully briefed and argued. A group of New England homeworkers has intervened as defendants and has also briefed and argued the issue.

 A ban on homework in the five industries, as well as in the knitted outerwear and women's apparel industries, was adopted by Department regulations in the early 1940's. In 1981, the Department by regulation rescinded the homework ban in the knitted outerwear industry, but the Court of Appeals vacated that rule as arbitrary and capricious in ILGWU v. Donovan, 722 F.2d 795 (D.C.Cir. 1983), cert. denied, 469 U.S. 820, 105 S. Ct. 93, 83 L. Ed. 2d 39 (1984) (" ILGWU "). In 1984, the Department issued a new regulation, which again rescinded the homework ban in knitted outerwear but this time replaced it with a system for certification of employers in the industry. This rule was not challenged in court. Now the Department, by the Final Rule at issue here, seeks to extend the certification system, with certain alleged improvements, to the five industries. *fn1"

 For the reasons discussed below, the Court grants the defendants' motions for summary judgment.

 I. Background

 The FLSA, enacted in 1938, established minimum wage, overtime pay and child labor standards aimed at achieving "in those industries within its scope, certain minimum labor standards." ILGWU, 722 F.2d at 801.

 Department investigations in the early 1940's found high rates of violation of minimum wage, maximum hour, and child labor provisions among homeworkers in the seven industries mentioned above. Homeworkers in those industries are normally paid by piece rate rather than hourly wages. The Department found four primary impediments to enforcing the FLSA among homeworkers in the seven industries: first, the difficulty in identifying homeworkers; second, the difficulty in securing accurate records of hours worked at home; third, the difficulty in detecting and remedying FLSA violations with respect to homeworkers; and fourth, the lack of sufficient resources to enforce the FLSA with respect to homeworkers. The Department concluded that even extremely diligent enforcement efforts could not prevent FLSA violations among homeworkers, and, accordingly, it adopted rules banning homework, subject to a few exceptions, in the seven industries. ILGWU, 722 F.2d at 801-04. Persons who were elderly, disabled or responsible for the care of an invalid could apply for an exemption certificate to work at home. Additional homework bans or limitations in these industries are imposed by the laws of some 20 states. *fn2" Federal law permits homework in all other industries.

 In 1981, the Department proposed rescission of the homework ban in all seven restricted industries. 46 Fed.Reg. 25108 (1981). However, the final rule adopted lifted the ban in the knitted outerwear industry only. 46 Fed.Reg. 50348 (1981). The rule was challenged in court, and the Court of Appeals concluded that the rescission of the homework ban was arbitrary and capricious, because the Department had failed to consider alternatives to the complete elimination of restrictions and because the record did not support the conclusion that FLSA compliance could be maintained without the homework ban:

 
The Secretary argues that because of increased acceptance of the minimum wage, and the developing expertise of his enforcement officials, a "concerted compliance program" by the Department will insure effective enforcement of the Act. The Secretary's statements are unsupported by the record and, in effect, ask us to accept the Secretary's conclusory assurances and to assume that the impediments to enforcement of the Act which were considered 'inherent in the home work practice' in 1942, have disappeared with the passage of time.
 
We do not believe that the Secretary was free to ignore the specific impediments identified in the 1942 findings, and we also may not ignore them. . . . Because of the Secretary's failure to consider adequately factors identified in this subsection, his judgment that removing restrictions would not prevent effective enforcement of the Act was arbitrary and capricious and cannot be upheld.

 722 F.2d at 825-26 (citation omitted). The Court ordered that the restriction against homework in knitted outerwear "be reinstated and remain in effect unless properly modified pursuant to 'reasoned decisionmaking' consistent with the opinion of this court." Id. at 828.

 In 1984, the Department initiated another rulemaking, which resulted in a new rule rescinding the homework ban in knitted outerwear but this time replacing the ban with a certification system. Under this system, an employer who wishes to hire homeworkers lawfully must obtain a certificate from the Department. The rule was not challenged in court; the International Ladies' Garment Workers' Union (ILGWU) told the Department that it viewed the certification system as an experiment, and the union closely monitored the program by requesting and obtaining Department documents.

 On August 21, 1986, the Department proposed to extend the certification system to the other six restricted industries. 51 Fed.Reg. 30036. At that time, the Department stated that its "enforcement experience in knitted outerwear has demonstrated the effectiveness of the certification program in improving the Department's ability to enforce the FLSA and in fostering FLSA compliance." 51 Fed.Reg. 30038.

 The Department received thousands of comments on its proposal. The ILGWU comments asserted that the certification system did not overcome the impediments to FLSA enforcement identified by the Department in the 1940's and that the Department's own records contradicted the claim that the certification system had been effective.

 The Department reacted to the ILGWU's comments by assigning Alfred Perry, a Department official, to review the comments. Perry produced an internal memorandum that acknowledged major weaknesses in enforcement of the certification system. Subsequently, the Department held regional training conferences on homeworker investigations and developed a training packet to guide Department compliance officers in enforcing the FLSA among certified employers and their employees.

 In March 1988, the Department published a revised homework proposal and reopened the record for comments. 53 Fed.Reg. 10342. The Department acknowledged the validity of some of the prior comments as to the ineffectiveness of enforcement of the knitted outerwear certification system and announced that it would incorporate a number of new enforcement provisions. The Department also dropped its proposal to ban homework in the women's apparel industry and with respect to certain "hazardous" jobs in the jewelry industry.

 The ILGWU was once again one of many commentators urging retention of the total ban. This time, it argued that despite the 1987 training conferences, there was still significant evidence that the certification program was not achieving adequate FLSA compliance in the knitted outerwear industry.

 On November 10, 1988, the Department published the Final Rule, 53 Fed. Reg. 45706, largely adopting the March 1988 proposal. On January 5, 1989, plaintiffs filed this action.

 II. Standard of Review

 The Court has jurisdiction pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 553, 701 et seq. The issue of whether there is a cause of action and standing for all plaintiffs -- labor organizations, manufacturers associations, and state officials -- was clearly settled in favor of plaintiffs in the prior litigation, see ILGWU, 722 F.2d at 805-812, and although this litigation deals with the rule as applied to five industries instead of one, standing is not contested here.

 The Department does assert that the issue of whether protection of the minimum wage in an industry requires the banning of homework "is a policy making function entrusted by statute to the Secretary of Labor" and therefore "the final rule revising and expanding the certification system is entitled to legislative effect and must be upheld" (emphasis added). That contention was clearly rejected by the Court of Appeals in ILGWU. Although the Department's policy judgment is entitled to substantial deference, the Court has a responsibility to determine whether the Department's decision is sufficiently supported by the rulemaking record.

 This standard of review, codified at 5 U.S.C. § 706(2)(A), is well understood; an agency action is unlawful if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." In Motor Vehicle Manufacturers Association v. State Farm, 463 U.S. 29, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983), the Supreme Court outlined the parameters of APA review:

 
The scope of review under the "arbitrary and capricious standard" is narrow and a court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a "rational connection between the facts found and the choice made." In reviewing that explanation, we must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. The reviewing court should not attempt itself to make up for such deficiencies; we may not supply a reasoned basis for the agency's action that the agency itself has not given. We will, however, "uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned" (citations omitted).

 Accordingly, under this standard, the sole issue before the Court is whether the Department provided a reasoned basis, grounded in the record, for its finding that implementation of the certification system is, on balance, a better means of enforcing the FLSA than was the total homework ban. *fn3"

 Plaintiffs assert that the Department has flunked the tests of Motor Vehicle Manufacturers Assn. and ILGWU because the evidence in the rulemaking record does not permit the Department to reasonably conclude that the lifting of the total homework ban in ...


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