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NAACP v. U.S. SECY. OF LABOR

September 22, 1994

NAACP, Jefferson County Branch, et al., Plaintiffs,
v.
U.S. Secretary of Labor, et al., Defendants, and U.S. Sugar Corporation, et al., Defendant-Intervenors.



The opinion of the court was delivered by: CHARLES R. RICHEY

 INTRODUCTION

 Throughout the history of this litigation, the Plaintiffs in the above-captioned case have challenged the actions of the Department of Labor (the "Department" or "DOL") in interpreting and enforcing its regulations in various agricultural sectors of the country. Unfortunately, the Department's commitment to ensuring that the statutory rights of U.S. farm workers are fully and fairly protected has often been questionable at best. It is perhaps thus not surprising that the most recent phase of this litigation seems to present yet another instance in which the Department has failed to properly fulfil its statutory and regulatory obligations to protect domestic farm workers, thereby leaving them potentially vulnerable to exploitation by agricultural employers whom DOL has declined to properly regulate.

 Primarily at issue during this stage of the case are the particular payment practices utilized in the Florida sugar cane industry. In 1986, the Plaintiffs initiated this phase of the litigation by challenging the Department's failure to apply its "piece rate" regulations to the "task rate" payment system then used by the Florida Sugar Cane Growers, two of whom later moved to intervene in this case (the "Intervenor-Defendants" or the "Growers").

 At that time, the Court determined that factual disputes existed as to the method of payment in the sugar cane industry, as to whether DOL regulations were applicable to the task rate system, and as to whether any of the Department's regulations or this Court's Orders were violated. The Court therefore directed the Department to undertake an investigation of these matters. On November 12, 1993, the Department issued the "U.S. Department of Labor Final Report Regarding Methods of Payment in Sugar Cane" ("Final Report") -- which is now before the Court for judicial review and is the subject of the instant dispute.

 All three of the parties to this litigation have filed Motions for Summary Judgment in response to the issuance of DOL's Final Report. The Plaintiffs have challenged the conclusions reached by the Department as arbitrary, capricious, and contrary to law -- while DOL and the Growers have both urged the Court to recognize the limited scope of judicial review and uphold the Department's determinations as set forth in the Final Report.

 In connection with all three Motions, the Court has received voluminous papers from all parties to this case. Moreover, on March 23, 1994, the Court held an extensive Hearing to address the many arguments contained therein. Now, upon careful consideration of all of the relevant submissions, the oral arguments of counsel, the applicable law, the long history of this case, and the entire record herein, the Court has determined that, although the Plaintiffs' Motion for Summary Judgment may be granted in part, further proceedings will be necessary to resolve the remaining issues presented by this dispute.

 More specifically, the Court finds that the conclusions contained within the Department's Final Report cannot withstand judicial review. To that extent, the Plaintiffs' Motion for Summary Judgment shall be granted. However, in rejecting the Department's resolution of the many issues posed by this case, the Court is still left with a number of unanswered factual questions which will require further proceedings to resolve. Most importantly, there remain substantial disputes as to whether there were any regulatory violations which would entitle the Plaintiffs to further relief, thereby rendering summary judgment on the remaining issues in this case inappropriate at this time.

 It is, to say the least, unfortunate that the Court cannot accept the Department's conclusions as set forth in the Final Report. As noted at the outset, however, the Department's dedication to the protection of U.S. farm workers has been far from above reproach, and the Court will not merely "rubber stamp" the Final Report's determinations when they are not supportable as a matter of law. Accordingly, the Court finds that the Final Report cannot be upheld and that further proceedings will be required to resolve the remaining issues presented by this case.

 BACKGROUND

 The history of this case is by now undoubtedly quite well-known to all of those involved with the many phases of this litigation. For this reason, the Court shall only briefly review the sequence of events leading up to the Department's issuance of the Final Report, which is now the subject of the instant cross-Motions for Summary Judgment.

 This litigation originated in the summer of 1982. At issue was the Department of Labor's administration of the temporary foreign worker program, then known as the "H-2" program. *fn1" Under the program, farmers are permitted to employ foreign workers on a temporary basis upon certification by the Department of Labor that U.S. workers are unavailable and that the use of foreign workers will not adversely affect the wages and working conditions of similarly employed U.S. farm workers.

 In order to protect against such "adverse effect," the Department has issued a series of regulations designed to govern wages and working conditions. See 20 C.F.R. § 655. Prominent among these requirements is the existence of a special minimum hourly wage rate known as the "adverse effect wage rate" ("AEWR"). The operation of the AEWR is comparable to that of the more common "minimum wage" and needs no further explanation here.

 However, in many sectors of the economy, agricultural workers are not paid by the hour -- but rather are compensated under what is commonly known as a "piece rate" system. DOL thus promulgates additional "piece rate" regulations in order to protect against "adverse effect" in these industries. The relevant piece rate regulation under the H-2 program was 20 C.F.R. § 655.207(c) which provided that:

 
in any year in which the applicable adverse effect rate is increased, employers shall adjust their piece rates upward to avoid requiring a worker to increase his or her productivity over the previous year in order to earn an amount equal to what the worker would earn if the worker were paid at the adverse effect wage rate.

 20 C.F.R. § 655.207(c) (superseded).

 Later, when the Immigration and Nationality Act was amended by the Immigration Reform and Control Act of 1986, 8 U.S.C. §§ 101(a)(15)(H)(ii)(a) and 1188, the piece rate rule at 20 C.F.R. § 655.207(c) was superseded by new regulations. The relevant regulation under the new H-2A program is 20 C.F.R. § 655.102(b)(9)(ii)(B)(1) and (2) which provides that:

 
If the employer who pays by the piece rate requires one or more minimum productivity standards of workers as a condition of job retention, (1) such standards shall be specified in the job offer and be no more than those required by the employer in 1977, unless the RA approves a higher minimum; or (2) if the employer first applied for H-2 agricultural or H-2A temporary alien agricultural labor certification after 1977, such standards shall be no more than those normally required (at the time of the first application) by other employers for the activity in the area of intended employment, unless the RA approves a higher minimum.

 20 C.F.R. Section 655.102(b)(9)(ii)(B)(I) and (2).

 The Plaintiffs' original challenge arose in response to the Department's interpretation of its H-2 piece rate regulations as applied to the payment practices of a number of West Virginia apple growers. *fn2" In 1983, the case was converted into a nationwide class action and two more years of administrative and judicial proceedings ensued. A final decision was ultimately rendered in August of 1985 which required that piece rates be adjusted in proportion to any increases in the AEWR. In addition, the Court further required that minimum, job-retention productivity standards not be raised above 1977 levels so as to prevent employers from improperly increasing productivity requirements in order to offset increases in piece rates required by the AEWR.

 Thereafter, in 1986, the Plaintiffs filed a Motion for Further Relief, challenging the Department's failure to enforce its piece rate regulations in the sugar cane industry. In its defense, the Department contended that the "task rate" payment system utilized by sugar cane growers was not a "piece rate" and thus was not subject to the Department's piece rate regulations. More specifically, DOL argued that sugar cane workers were paid by the row (or number of feet cut in a given row) and that the price varied from row to row as a result of different factors affecting the degree of difficulty in cutting conditions.

 On the basis of the limited record presented at that time, the Court determined that a factual dispute existed as to the method of payment in the sugar cane industry and as to whether the Department's regulations should be applied to these payment practices. The Court therefore directed the Department to investigate this matter in order to determine whether the method of payment in the sugar cane industry was properly subject to the Department's piece rate regulations and whether there were any violations of the Department's regulations or the Court's Orders in this case.

 The Court thus ordered the Department to gather the data necessary to resolve this dispute, specifically directing DOL to:

 
gather from all sugar cane growers who have applied for or been awarded temporary labor certification for the 1986-1987 harvest season such information as is necessary to determine the growers' method of payment to their workers, how the growers calculate their productivity and piece or task rates, whether such rates are subject to 20 C.F.R. 655.207(c), and if so, whether the piece rates offered and/or paid by those growers comply with the Court's orders and judgment in this case.

 See Court's Order dated September 25, 1986. *fn3" In connection with the development of this factual record, the Court's September 25, 1986 Order also permitted the Plaintiffs to take appropriate discovery in accordance with the Federal Rules of Civil Procedure.

 In response to the Court's Order, the Department of Labor then commenced its investigation of the sugar cane task rate system, issuing a Draft Report on October 13, 1987. The Intervenor-Defendants commented on the Draft Report, as requested by the Department, within thirty days of its publication. *fn4" The Plaintiffs, however, requested a delay and sought discovery against the sugar cane Growers. Finally, on July 2, 1992, the Plaintiffs submitted their response to the Draft Report.

 Upon receipt of this information, the Department decided to retain an independent consultant. Dr. Robert Emerson was thus hired on September 29, 1992 to review the materials submitted. Throughout early 1993, further replies and rebuttals were submitted to the Department by both the Plaintiffs and the Growers. Dr. Emerson then submitted his Final Report to the Department in July of 1993, followed by submission of a Supplement in September of 1993. Finally, on November 12, 1993, the Department of Labor issued its Final Report Regarding Methods of Payment in Sugar Cane ("Final Report")

 In issuing the Final Report, the Department essentially concluded that the task rate system was not subject to the piece rate regulations and that no violations of DOL regulations had been documented:

 
DOL concludes that it acted reasonably in approving the pay systems used for sugar cane workers during the years relevant to this dispute, that there was no disguised piece rate paid to workers, and that the growers did not violate either 20 C.F.R. § 655.207(c) or 20 C.F.R. § 655.102(b)(9).

 See Final Report at 34.

 Upon receipt of the Final Report, the Plaintiffs moved to re-open this case on November 22, 1993, seeking judicial review of the Secretary's determinations as set forth therein. In response, the Federal Defendants and the Intervenor-Defendants filed objections to the Motion to Reopen. Both the Department and the Growers argued that the case should be dismissed as moot on jurisdictional grounds, albeit for different reasons. *fn5" The Court therefore permitted briefing on this issue and heard oral argument on February 3, 1994.

 Thereafter, on February 22, 1994 the Court issued a Memorandum Opinion and Order denying both Motions to Dismiss. The Court then confirmed the briefing schedule for the filing of Summary Judgment Motions and established a Hearing date of March 23, 1994.

 In connection with the parties' respective Motions for Summary Judgment, the Court has received voluminous papers from all concerned, including an Amici Curiae Memorandum filed by Representatives William D. Ford, George Miller, and Howard Berman, expressing concern over what they perceive to be "DOL's peculiar position effectively exempting the sugar cane task system from enforcement under the piece rate regulations." *fn6" In addition, as indicated above, the Court also entertained lengthy oral argument from counsel for all three parties at the March 23, 1994 Hearing. It is thus upon very careful consideration of all the relevant submissions, the oral arguments of counsel, the applicable law, and the entire record in this case, that the Court has reached the determinations set forth below.

 DISCUSSION

 In their Motion for Summary Judgment, the Plaintiffs have raised three primary challenges to the Department's conclusions as set forth in the Final Report:

 
(1) The Plaintiffs strongly contest the Department's determination that the task rate system is not subject to the piece rate regulations.
 
(2) The Plaintiffs further quarrel with the Department's rejection of the proposition that there was an 8 ton/day minimum productivity standard in the sugar cane industry.
 
(3) The Plaintiffs dispute the Department's determination that there were no regulatory violations during the relevant harvest seasons.

 Notwithstanding the deferential standard of review required of the Court in reviewing the Department's Final Report, the Court finds substantial merit to all three of the Plaintiffs' claims and must therefore conclude that DOL's determinations cannot be upheld. However, in rejecting the Department's conclusions as set forth in the Final Report, the Court has been careful not to improperly substitute its judgment for that of the agency in matters as to which significant factual discrepancies still exist. For this reason, the Court believes that further proceedings will be required to resolve the questions left unanswered as a result of the Court's rejection of the Final Report.

 STANDARD of REVIEW

 In reviewing the Final Report, the Court is mindful of the appropriate standard of review, which is limited to whether the agency action challenged was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 705(2)(A). As the Defendants point out:

 See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). As such, the Court has accorded substantial deference to the determinations of the Secretary as set forth in the Final Report. Nevertheless, the Court finds that there appear to be clear errors of judgment (and failure to consider all relevant factors) with respect to each of the three issues challenged by the Plaintiffs, thereby requiring invalidation of the Final Report.

 I. The Court finds that the Department's determination that the sugar cane task rate system is not subject to DOL's piece rate regulations constitutes an interpretation that must be rejected as arbitrary, capricious, and contrary to law.

 In issuing the Final Report, the Secretary has concluded that the sugar cane task rate system is not a piece rate, and is therefore not subject to the Department's piece rate regulations. Essentially, DOL has taken the position that the method of payment in the sugar cane industry is an incentive-based system pursuant to which workers are paid on the basis of how many feet are cut per row. However, since variability in cutting conditions affects the price per row, the Department concludes that there is no pre-determined piece rate (nor a standard unit of production) -- thereby rendering this payment system incapable of the sort of proportional adjustment mandated by DOL's regulations or this Court's Orders.

 The Plaintiffs, however, vigorously contest the Department's interpretation which seemingly exempts all but "simple" piece rates from the protections afforded by these regulations. In other words, when confronted with "complex" piece rates, such as the payment system utilized by the sugar cane industry, the Department seems content to rely on the alleged difficulty of applying the regulations as a reasoned basis for concluding that the payment system is not even subject to the piece rate regulations.

 The Court has carefully considered all of these arguments, and must conclude that the Department's determination that the task rate system is not a regulable piece rate is unlawful. As demonstrated below, the Department's conclusion is contrary to both the plain meaning and the purpose of the regulations, and is inconsistent with the agency's prior position on this issue. Most importantly, the Court finds that there is no reasoned basis for the Department's conclusion and it can thus not be upheld as a matter of law.

 A. The plain meaning of the term "piece rate" does not support the Department's Interpretation of its regulations.

 In urging the Court to reject the conclusions set forth in DOL's Final Report, the Plaintiffs first contend that the Department's interpretation of the term "piece rate" is contrary to the "plain language" of the regulations. Although the Department strenuously objects to this argument, the Court finds ample evidence for the Plaintiffs' contention that the plain meaning of the term "piece rate" is inconsistent with the Department's current interpretation.

 As the Plaintiffs correctly point out, both §§ 655.207(c) and 655.102(b)(9) refer to "piece rates" generally; neither indicates any intent to limit or qualify the term in any way. The Plaintiffs thus urge the Court to find that the plain language of the regulations "compels the conclusion" that the term "piece rate" was meant to encompass a vast array of production-based wage systems, including the task system at issue in this case. See Plaintiffs' Motion for Summary Judgment at 19.

 The broad definition of piecework set forth in the Dictionary of Economics indeed supports the Plaintiffs' argument. As defined therein, a "piece rate" is merely "a wage schedule which computes wages by assigning a certain sum for each article produced or each operation completed." As there is no requirement that the unit of production or pay be the same on a daily basis, the Court must agree with the Plaintiffs that the plain language of the regulations does not support the restrictive interpretation of the term adopted by the Department in compiling its Final Report.

 Even more significantly, all of the wage specialists who participated in this case -- including DOL's own consultant Dr. Robert Emerson -- agreed that the term "piece rate" as it is commonly used encompasses complex piece rates such as the task rate system utilized by the Florida sugar cane growers. Given this broad consensus, the Court has no doubt that the "plain language" of the regulations does not support the Department's conclusion that the task rate system is not properly subject to the Department's piece rate regulations. There is no evidence to indicate an intent to limit the definition of "piece rate" to a simple wage or payment schedule, and there is uncontradicted evidence that the term "piece rate," as it is generally used, encompasses both simple and highly complex payment systems.

 Moreover, the Defendants' efforts to convince the Court otherwise are hardly persuasive. In attempting to rebut the Plaintiffs' contention with respect to this issue, the Department misreads the Plaintiffs' argument, and overstates the Court's ruling in issuing its September 25, 1986 Order. More specifically, the Department's primary opposition to the Plaintiffs' claim seems to rest on the mistaken assumption that the Court's Order of September 25, 1986 "implicitly accepted" the Department's contention that variable changes in the task rate preclude the sort of mechanical adjustment mandated by the piece rate regulations. In reality, however, the Court merely confirmed that a factual dispute existed as to this issue.

 Thus, while it is true that the Court concluded that a factual dispute existed as to the method of payment in the sugar cane industry and as to whether the regulations in question were appropriately applied to the task rate system, the Court did not in any way "implicitly accept" the view that complex task rates were not properly subject to piece rate regulations, as the Department now seeks to contend. See Defendant's Opposition at 2. Nor did the Court "essentially reject" the Plaintiffs' plain meaning analysis in directing the Department to investigate this issue and compile the Final Report. Id.

 Rather, the Court found only that the development of a fuller factual record would be required in order to resolve these issues. That record is now before the Court, and nothing in the Court's decision to direct production of that Report should now be read as an implicit acceptance of the Department's instant conclusions. Nor, of course, should the Plaintiffs be precluded from basing their argument, at least in part, on a plain meaning analysis now that the record is complete. This is especially true in view of the fact that all of the specialists commenting in this case concurred in the belief that the term "piece rate" generally encompasses complex payment systems, thereby lending further factual support to the Plaintiffs' plain meaning analysis.

 B. The Department's conclusion that the task rate system is not subject to its piece rate regulations is also inconsistent with the purposes of the regulations.

 The Court further finds that the conclusions set forth in the Final Report are inconsistent with the purposes of the piece rate regulations. The Plaintiffs persuasively argue that the regulations in question must be construed broadly because they were designed to protect U.S. workers against the adverse effects of foreign competition. For this reason, the Department's decision to exempt complex piece rates from these regulatory protections is problematic -- as such a narrow definition of "piece rate" would fail to encompass the wide variety of agricultural pay practices utilized throughout the country. The Court must thus ...


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