Supreme Court Disapproves ALJ Appointments

In a surprising decision, Lucia v. SEC, the Supreme Court held that the system used to appoint administrative law judges (ALJs) throughout the federal government violates the U.S. Constitution.

Many federal agencies, including the National Labor Relations Board and the Department of Labor, use ALJs to decide contested cases. The civil service system used to appoint them was designed to maintain their neutrality. However, in a case involving the Securities and Exchange Commission, the Supreme Court held that ALJs must be appointed by the President, a court of law, or the head of a government department. As the remedy, the Supreme Court ordered that the case be retried, before a different and properly appointed ALJ.

Going forward, agencies can cure this problem by developing a new appointment system. It appears, however, that pending cases heard by ALJs who were not validly appointed may have to start over, before a different ALJ.  Whether having cases decided by ALJs who are beholden to agency heads for their appointments is ultimately good for employers remains to be seen.