The opinion of the court was delivered by: Royce C. Lamberth Chief Judge United States District Court for the District of Columbia
This case involves a dispute between the Office of Federal Contract Compliance Programs and United Space Alliance, LLC. OFCCP, an agency within the Department of Labor, is responsible for ensuring that federal contractors comply with their nondiscrimination obligations. United Space, a federal contractor that works in human space operations, refuses to provide OFCCP with information that the agency has requested and that the Department of Labor has now ordered United Space to produce. United Space challenges the lawfulness of that order on the basis of its Fourth Amendment right to be free from unreasonable searches and seizures, the government's obligations under the Administrative Procedure Act, and several other grounds. Before the Court are the government's motion to dismiss the complaint or, in the alternative, for summary judgment [Dkt. # 18], and United Space's cross-motion for summary judgment [Dkt. # 21]. Upon consideration of the motions, the oppositions thereto, and the record of this case, the Court concludes that the government's motion should be granted and United Space's motion denied.
Under Executive Order 11246, federal contractors whose contracts
exceed a certain value must agree that they "will not discriminate
against any employee or applicant for employment because of race,
color, religion, sex, or national origin," and "will furnish all
information and reports required by [the executive order] and by the
rules, regulations, and orders of the Secretary of Labor, or pursuant
thereto, and will permit access to [the contractor's] books, records,
and accounts by the contracting agency and the Secretary of Labor for
purposes of investigation to ascertain compliance with such rules,
regulations, and orders." Exec. Order No. 11246, § 202.*fn1
These terms must be included in every government contract
that is not expressly exempted from the requirement. Id. § 204. As
authorized by the executive order, id. § 401, the Secretary of Labor
has delegated her authority and responsibility for enforcing these
agreements to the Deputy Assistant Secretary for Federal Contract
Compliance, who directs the Office of Federal Contract Compliance
Programs. 41 C.F.R. § 60-1.2; see also 74 Fed. Reg. 58,834 (Nov. 13,
The regulations implementing Executive Order 11246 authorize OFCCP to conduct compliance evaluations of a covered contractor "to determine if the contractor maintains nondiscriminatory hiring and employment practices." 41 C.F.R. § 60-1.20(a). These evaluations may take the form of a "compliance review," which can itself involve a "desk audit" in which OFCCP analyzes contractor-provided data at its own office, an on-site review conducted at the contractor's establishment, id. § 60-1.20(a)(1)(i)-(ii), "an off-site analysis of information supplied by the contractor or otherwise gathered during or pursuant to the on-site review," id. § 60-1.20(a)(1)(iii), or all three. Id. § 60-1.20(a)(1). When OFCCP has reasonable cause to believe that a contractor has violated the executive order or its implementing regulations, the agency may issue a notice to show cause why enforcement proceedings should not be initiated, id. § 60-1.28, and, after reasonable attempts at conciliation, may refer the matter to the Solicitor of Labor to initiate such proceedings. Id. § 60-1.26(b). Enforcement proceedings are held before an administrative law judge. Id. § 60-1.26(b)(2). Although these proceedings usually allow for normal civil discovery, including interrogatories, depositions, document requests, and requests for admission, id. § 60-30.9--30.11, when a contractor "has refused to give access to or to supply records or other information as required by the equal opportunity clause[,] or has refused to allow an on-site compliance review to be conducted," id. § 60-30.31, the proceeding may be expedited. In expedited enforcement proceedings, discovery is limited to requests for admissions, an exchange of witness lists, and depositions, if good cause is shown by the party seeking the deposition. Id. § 60-30.33. After discovery is completed, an administrative law judge holds a hearing on the record and recommends findings, conclusions, and a decision to the Administrative Review Boardof the Department of Labor. Id. § 60-30.35. The parties may submit exceptions to those recommendations. Id. § 60-30.36. After considering the recommendations and any exceptions to them, the Administrative Review Board issues a final administrative order. Id. § 60-30.37. If the Board does not issue a final administrative order within thirty days of the administrative law judge's recommended decision, that recommendation becomes the final administrative order. Id. Failure to comply with a final order exposes the contractor to the cancellation of its current government contracts and debarment from future contracts. Id. § 60-30.30.
On August 7, 2009, OFCCP initiated a compliance evaluation of the United Space facility in Cape Canaveral, Florida. AR 1071--75.*fn2 The evaluation began with a desk audit. As relevant to this case, OFCCP requested that United Space submit for its review annualized compensation data broken up by race, gender, and the employees' "salary range, rate, grade, or level." AR 1075. Because these data were the eleventh and final item in a list of OFCCP requests, the parties refer to them as "Item 11 data." United Space submitted the compensation data, AR 1077--94, and OFCCP analyzed them. AR 800--10. This dispute arises from the way in which OFCCP performed that analysis.
First, an OFCCP compliance officer entered the United Space compensation data into a spreadsheet provided by the national office. That spreadsheet contained an algorithm that the national office had developed to compare the earnings of certain groups-here, men and women. As described on the OFCCP website, the algorithm determined whether a certain percentage of the men or women in the United Space workforce worked in job groups in which their gender earned on average a certain percentage less than the other gender. If the pay gaps within job groups negatively affected enough members of either gender by a large enough amount, then the algorithm compared the percentage of women working in a job group in which a pay disparity above the threshold level disfavored women to the percentage of similarly situated men. If that ratio exceeded a certain threshold, the algorithm indicated potential compensation discrimination. AR 1165. The parties refer to this algorithm as the "threshold test."
Applied to the data submitted by United Space, the threshold test did not indicate potential compensation discrimination. AR 805. However, the OFFCP compliance officer found patterns in the data that he believed to be indications of troubling disparities between the pay of men and women. His supervisor, Miguel Rivera, agreed that "it appeared that women were earning less more frequently than men," AR 758--59, and performed a series of additional calculations. The supervisor's calculations revealed that 75.7% of the women in the United Space workforce worked in job groups in which women earned, on average, less than men, while only 17.7% of men worked in job groups in women earned, on average, more. AR 770--71, 777, 1090. The parties often refer to this calculation as the "pattern analysis." Mr. Rivera then eliminated from that calculation any job group with fewer than thirty workers, or fewer than five members of either gender, and found that 76.3% of the remaining women worked in job groups in which women earned, on average, less than men, while only 13.5% of the remaining men worked in job groups in which women earned, on average, more. AR 772--78, 1090. The parties refer to this calculation as the "30-5 test."
Based on these analyses, OFCCP decided to request additional data from United Space. The agency sent a letter to United Space stating that it had found "unexplained differences in average compensation that require further investigation of your company's compensation practices." AR 1095. OFCCP requested that United Space provide more detailed data on its employee compensation. AR 1095--96. United Space responded that, based on its own analysis of the data that it had submitted, it believed that the OFCCP request was unjustified. United Space indicated that it had performed its analysis by referring to the publicly-available description of the threshold test and the "actual audit experiences of many contractors," based on which "it has been widely reported that the specified percentage thresholds" for the threshold test "is [sic] 5% average differences, affecting at least 10% of the protected class population, and that the percent protected class affected is three times the percent non-affected class." AR 1097. OFCCP responded by reiterating and slightly altering its data request. AR 1099--1100. The agency also noted that the publicly-available description of the threshold test stated that the thresholds were "not static, but rather . . . subject to change as OFCCP continues to evaluate its targeting methodology." AR 1099 (quoting AR 1165) (internal quotation mark omitted). OFCCP also made clear that it could not endorse any third-party analysis that claimed to replicate an agency analysis. Id. After United Space continued to challenge the basis for OFCCP's second data request, AR 1496--1501, the agency sent a letter noting that it had not received the requested information and scheduling an on-site review of United Space records. AR 1503--06. United Space responded that it would agree to provide additional data in a format different than that requested by OFCCP, would only provide it under certain conditions, and would not permit an on-site inspection unless the same conditions were satisfied. AR 1510, 1514. OFCCP issued a notice to show cause why enforcement proceedings should not be initiated. AR 1512--15. United Space repeated that it would be willing to provide the data requested under certain conditions. AR 1517--20.
OFCCP filed an administrative complaint against United Space, AR 4--7, and sought an expedited hearing pursuant to 41 C.F.R. § 60-30.31, on the grounds that United Space had "refused to give access to or supply records and information" and had "refused to allow an onsite compliance review to be conducted." AR 5. United Space objected to the expedited proceedings on the grounds that they would not allow for proper consideration of whether the United Space data request was "appropriate under the published OFCCP standards" and "justified under pertinent legal standards," AR 24, but its motion to remove the administrative complaint from expedited hearing procedures was denied, AR 208--09, as was its motion for reconsideration of that denial. 476--77.
At the administrative hearing, Miguel Rivera testified about his analysis of the United Space data. United Space presented the testimony of a labor economist, who criticized that analysis. AR 955. At the close of the hearings, United Space argued that under Marshall v. Barlow's, 436 U.S. 307 (1978), the OFCCP request for additional data violated the Fourth Amendment. AR 1052. United Space further argued that the Administrative Procedure Act required the agency to base any request for additional information on the results of the standard threshold test endorsed by the national office, AR 1058--62, and that the agency had violated the Fifth Amendment and the Paperwork Reduction Act. AR 1062--65. OFCCP, in turn, argued that the data request had a "reasonable basis" and so satisfied the Fourth Amendment, AR 1047--50, that the threshold analysis was not binding on the agency under the Administrative Procedure Act, AR 1042--46, that there was no evidence of a violation of the Equal Protection component of the Fifth Amendment, AR 1046--47, and that the data request was an "investigation involving an agency against specific individuals or entities," 44 U.S.C. § 3518(c)(1)(B)(ii), and therefore exempt from the requirements of the Paperwork Reduction Act. AR 1040--41.
In his recommended decision and order, the administrative law judge determined that OFCCP was required to have "a reasonable suspicion of [a] violation of the Executive Order," to issue its data request, that the actions of its officials had been "prudent and quite reasonable," and that the additional data request was "quite limited in scope." AR 1757. He decided that the public description of the threshold test was "a mere policy statement" and not binding on the agency, AR 1762, that the agency's information request was an individualized audit to which the Paperwork Reduction Act did not apply, AR 1758, and that United Space had offered no facts sufficient to demonstrate either vindictive prosecution, AR 1759--60, or an equal protection violation. AR 1758--59. The administrative law judge recommended that United Space be required "to comply with the desk audit" and that, if the Administrative Review Board required United Space to comply with an on-site review as well, that review be limited to gathering data and/or documents related to OFCCP's most recent request for information. AR 1763.
United Space filed exceptions to the recommendation, in which it expanded upon the arguments that it had made before the administrative law judge. AR 1809--40. In response to those exceptions, OFCCP defended the recommendation that United Space be ordered to comply with the agency's request for information, and argued that the company should also be ordered to submit to an on-site review of documents. AR 1841--97. The Administrative Review Board did not issue a final administrative order within thirty days after the time for filing exceptions expired, and so the recommended decision and order of the administrative law judge became the final administrative order. AR 1938--39. United Space petitioned this Court for relief from that order.
III. JURISDICTION AND STANDARD OF REVIEW
United Space brings its claims under the Administrative Procedure Act and the U.S. Constitution. Although "the APA neither confers nor restricts jurisdiction," Trudeau v. FTC, 456 F.3d 178, 185 (D.C. Cir. 2006), this Court has jurisdiction over those claims under 28 U.S.C. § 1331. See id. The APA gives United Space the right to challenge a final administrative order that has been issued against it. See 5 U.S.C. § 702. Under the familiar standards set out by the statute, "[t]o the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." 5 U.S.C. § 706. A reviewing court must, as relevant here, "hold unlawful and set aside agency action . . . found to be-(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right . . . ; [or] (C) in excess of statutory . . . authority . . . ." 5 U.S.C. § 706(2); see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 413--14 (1971) ("In all cases agency action must be set aside if the action was 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law' or if the action failed to meet statutory, procedural, or constitutional requirements.") (quoting 5 U.S.C. § 706(2)).
"[W]hen a party seeks review of agency action under the APA, the district judge sits as an appellate tribunal." Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001). "The entire case on review is a question of law, and only a question of law." Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993). When an agency's findings are at issue, the question of law is "whether [the agency] acted in an arbitrary and capricious manner." Univ. Med. Ctr. v. Shalala, 173 F.3d 438, 440 n.3 (D.C. Cir. 1999). This analysis is conducted under the substantial evidence standard, which requires that a court "determine only whether the agency could fairly and reasonably find the facts as it did." Robinson v. Nat'l Transp. Safety Bd., 28 F.3d 210, 215 (D.C. Cir. 1994) (internal quotation marks and ellipses omitted). "[I]n the context of the APA, arbitrary and capricious review and the substantial evidence test '"are one and the same" insofar as the requisite degree of evidentiary support is concerned.'" Am. Radio Relay League, Inc. v. FCC, 524 F.3d 227, 243 (D.C. Cir. 2008) (quoting Consumers Union of U.S., Inc. v. FTC, 801 F.2d 417, 422 (D.C. Cir. 1986) (quoting Ass'n of Data Processing Serv. Orgs. v. Bd. of Governors of Fed. Reserve Sys., 745 F.2d 677, 683 (D.C. Cir. 1984))); see also Mem'l Hosp./Adair Health Ctr., Inc. v. Bowen, 829 F.2d 111, 117 (D.C. Cir. 1987) (noting that the "substantial evidence" standard is "that aspect of the arbitrary and capricious test usually applied to review of agency adjudications," and emphasizing that "its use does not connote stricter scrutiny of agency action"). When the constitutionality of an agency's action and not the rationality of its findings is challenged, however, a district court must (like any appellate tribunal) determine for itself whether the agency based its decision on the appropriate constitutional standard. 5 U.S.C. § 706; Crowell v. Benson, 285 U.S. 22, 60 (1932) ("In cases brought to enforce constitutional rights, the judicial power of the United States necessarily extends to the independent determination of all questions . . . of . . . law, necessary to the performance of that supreme function.").
The government has moved to dismiss or, in the alternative, for summary judgment. Although, in the context of challenges to agency actions, "there is no real distinction . . . between the question presented on a 12(b)(6) motion and a motion for summary judgment," Marshall Cnty. Health Care Auth., 988 F.2d at 1226, the Court of Appeals has suggested that "[i]t is probably the better practice for a district court always to convert to summary judgment" in such cases. Id. at 1226 n.5. This Court therefore treats the government's motion as one brought for summary judgment, and evaluates both it and United Space's cross-motion for summary judgment under the standards discussed above.
This case concerns the validity of a final order issued by the Administrative Review Board of the Department of Labor. Before evaluating the parties' arguments, the Court must be clear about precisely what was ordered. At the conclusion of the administrative hearing, the administrative law judge recommended that:
1. The Administrative Review Board (ARB) order Defendant to comply with the desk audit within thirty days of the ARB's Final Decision;
2. Should the ARB order defendant to comply with the on-site compliance review, it is recommended that the compliance review should be limited to gathering the data and/or documents related to the 18 questions concerning possible violations of the Executive Order; and
3. Should Defendant fail to comply with the desk audit and/or on-site compliance review, it is recommended that the ARB cancel all Defendant's present federal contracts and debar all future federal contracts until such time as Defendant is in compliance with the ARB's order.
AR 1763 (footnote omitted).
Although the first recommendation's reference to "the desk audit" is not entirely transparent, in the context of the recommended decision this phrase evidently refers to the amended information request that OFCCP issued on December 10, 2009. AR 1099--1100. As to the second item, the government concedes that it does not constitute a recommendation that the Administrative Review Board order compliance with an on-site review. Gov't Reply Br. at 6 n.2. Rather, it recommends only that, if an on-site review were to be ordered, it should be limited in certain ways. Because the second recommendation was conditioned on an action that the Board did not take-that is, ordering United Space to comply with an on-site review-it is now a nullity.*fn3 In sum, the final agency action that this Court reviews is an order that United Space produce the information requested by OFCCP in its letter of December 10, 2009. With this initial matter clarified, the Court goes on to consider the parties' arguments as to the legality of that order.
A. Administrative Procedure Act
United Space brings two significant challenges under the Administrative Procedure Act. The company argues first that the final administrative order is "not in accordance with law," 5 U.S.C. § 706(2), because the regulations governing OFCCP investigations only permit the agency to require the production of additional documents for off-site review in conjunction with an on-site inspection.*fn4 The company then argues that, even if such an order is permitted by the published regulations, an internal agency policy barred OFCCP from requesting additional compensation data under the circumstances that it did. The Court addresses each argument in turn.*fn5
i. OFCCP Authority to Order Document Production
Executive Order 11246 requires that covered contractors "furnish all information and reports required by [the executive order] and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto." Executive Order 11246, § 202. The regulations implementing the executive order provide that "OFCCP may conduct compliance evaluations to determine if the contractor maintains nondiscriminatory hiring and employment practices." 41 C.F.R. § 60-1.20(a). "A compliance evaluation may consist of any one or any combination of . . . investigative procedures" including a compliance review, 41 C.F.R. § 60-1.20(a)(1), and an off-site review of records. 41 C.F.R. § 60-1.20(a)(2).
In its initial letter to United Space, OFCCP stated that it had selected the company "for a compliance review under Executive Order 11246, as amended," and that the agency would "conduct the compliance review as described in the regulations at 41 CFR 60-1.20(a)(1)." AR 1071. Those regulations state that a compliance review is a "comprehensive analysis of the hiring and employment practices of the contractor," which "may proceed in three stages." 41 C.F.R. § 60-1.20(a)(1). The first stage is "a desk audit of the written [affirmative action plan] and supporting documentation." 41 C.F.R. § 60-1.20(a)(1)(i). As relevant here, "[t]he desk audit is conducted at OFCCP offices." Id. The second stage is an "on-site review, conducted at the contractor's establishment to investigate unresolved problem areas identified in the [affirmative action plan] and supporting documentation during the desk audit," 41 C.F.R. § 60-1.20(a)(1)(ii), and the third is "an off-site analysis of information supplied by the contractor or otherwise gathered during or pursuant to the on-site review." 41 C.F.R. § 60-1.20(a)(1)(iii). As part of its desk audit (and as discussed above) OFCCP typically requests that a contractor submit annualized compensation data broken up by race, gender, and "salary range, rate, grade, or level," see AR 1075, which are commonly referred to as "Item 11 data." When analyzing these data, OFCCP has historically used a tiered-review approach . . . . Under the tiered-review approach . . . . [o]nce it receives the Item 11 data, OFCCP conducts a simple comparison of group average compensation by pay grade or other aggregation unit by which the employer has provided the data. If this comparison indicates a significant disparity, OFCCP will ask the contractor for employee-specific compensation and personnel information.
71 Fed. Reg. 35,124, 35,125 (June 6, 2006).
The agency has announced that it "intends to continue this tiered-review approach." Id.
United Space argues that the agency's long-standing approach is unauthorized by the underlying regulations. In its briefing and at oral argument, the company asserted that to the extent that the government wants to conduct an "off-site analysis of information," 41 C.F.R. § 60-1.20(a)(1)(iii), not included in the "supporting documentation," 41 C.F.R. § 60-1.20(a)(1)(i), requested by OFCCP in its initial scheduling letter, that additional information must be "supplied by the contractor or otherwise gathered during or pursuant to [an] on-site review." 41 C.F.R. § 60-1.20(a)(1)(iii) (emphasis added). Under United Space's interpretation of the regulatory scheme, the "desk audit of . . . supporting documentation" that is described in 41 C.F.R. § 60-1.20(a)(1)(i) comes to an end when OFCCP completes its analysis of the information that it initially requested. The company argues that any additional information that the agency might wish to review must be collected pursuant to 41 C.F.R. § 60-1.20(a)(1)(ii)--(iii), both of which, per United Space, describe procedures associated with an on-site agency visit.*fn6
The agency, by contrast, argues that the regulations at issue here give it broad authority to request "supporting documentation," 41 C.F.R. § 60-1.20(a)(1)(i), during the desk audit and also to request "[w]here necessary, an off-site analysis of information supplied by the contractor or otherwise gathered during or pursuant to [an] on-site review." 41 C.F.R. § 60-1.20(a)(1)(iii) (emphasis added). OFCCP points out that the terms "desk audit" and "supporting documentation" are nowhere defined to limit the agency to a single request for particular information. Indeed, the agency notes that it has consistently maintained a contrary interpretation. See, e.g.,71 Fed. Reg. 35, 124, 35, 125 (June 6, 2006).
In resolving these conflicting interpretations, this Court emphasizes that considerable deference must be given to agency interpretations of their own regulations. As the Supreme Court has described it:
We must give substantial deference to an agency's interpretation of its own regulations. Martin v. Occupational Safety and Health Review Comm'n, 499 U.S. 144, 150--51 (1991); Lyng v. Payne, 476 U.S. 926, 939 (1986); Udall v. Tallman, 380 U.S. 1, 16 (1965). Our task is not to decide which among several competing interpretations best serves the regulatory purpose. Rather, the agency's interpretation must be given "'controlling weight unless it is plainly erroneous or inconsistent with the regulation.'" Ibid. (quoting Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945)). In other words, we must defer to the Secretary's interpretation unless an "alternative reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation." Gardebring v. Jenkins, 485 U.S. 415, 430 (1988).
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994). United Space has articulated a plausible reading of the regulatory scheme-indeed, one which the Court might prefer if it were to interpret the regulatory text on a clean slate. But that is not the task at hand. The government has pointed to particular regulatory language that it plausibly interprets to confer the authority that it claims. Because this Court cannot say that the government's interpretation is plainly erroneous, it therefore finds that OFCCP had the authority under 41 C.F.R. § 60-1.20(a)(1) to make the data request that ...