ARB CASE NO. 05-127
ALJ CASE NO. 2005-SOX-017
DATE: October 31, 2007
In the Matter of:
DAVID WINDHAUSER,
COMPLAINANT,
v.
TRANE, AN OPERATING DIVISION
OF AMERICAN STANDARD, INC.,
RESPONDENT.
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
Appearance:
For the Respondent:
Frank C. Morris, Jr., Esq., Brian Steinbach, Esq., Epstein Becker & Green, P.C., Washington, D.C.
FINAL DECISION AND ORDER VACATING MONETARY SANCTIONS
The Respondent, Trane, terminated the Complainant, David Windhauser’s, employment
on November 12, 2003. Thereafter, on February 6, 2004, Windhauser filed a
complaint with the Department of Labor, Occupational Safety and Health
Administration (OSHA) alleging a violation of Section 806 of the Corporate and
Criminal Fraud Accountability Act of 2002 (SOX), 18 U.S.C.A. 1514A (West 2007).
On November 15, 2004, OSHA issued its findings and a preliminary order of
reinstatement. Trane, on December 14, 2004, filed a motion objecting to the
findings and requesting a stay of the Assistant Secretary’s preliminary order
of reinstatement. The Assistant Secretary and the Complainant filed motions
opposing Trane’s motion to stay the order of reinstatement.
[Page 2]
A Department of Labor Administrative Law Judge (ALJ) issued a Decision
and Order denying Trane’s motion to stay the order of reinstatement on February
11, 2005. On February 22, 2005, Trane filed a petition for review of the order
denying the motion to stay with the Administrative Review Board (ARB or Board).
Because the ALJ had not issued his final recommended decision and order on the
merits of the case, Trane’s request that the Board review the order denying its
motion for a stay was an interlocutory appeal. On April 29th, the ALJ approved
the parties’ settlement and requested briefs on the consequences of Trane’s refusal
to comply with the preliminary order of reinstatement. Trane, Windhauser, and
the Assistant Secretary for OSHA responded to the ALJ’s request for briefs on
sanctions.
The ALJ, on June 1, 2005, issued an order imposing monetary sanctions against Trane and dismissed
the case.[1]
On June 15, 2005, Trane petitioned the Board to review the ALJ’s
imposition of monetary sanctions against Trane for failing to reinstate
Windhauser pursuant to the preliminary order of reinstatement.
Discussion
The Secretary of Labor has delegated her authority to issue final
administrative decisions in cases arising under the SOX to the Board.[2]
The sole issue before the Board is whether the ALJ erred by imposing monetary
sanctions against Trane for failing to reinstate Windhauser.
The ALJ reasoned (without citation to any statute or case precedent) that
a reading of the SOX statute that allows only district court enforcement of the
reinstatement order, notwithstanding a denial of a request to stay the
preliminary order of reinstatement, “is absurd on its face.”[3]
The ALJ noted that the statute automatically stays all other remedies including
payment of back wages upon filing a request for hearing but requires immediate
reinstatement despite a request for a hearing (unless a stay of that
preliminary order of reinstatement is specifically granted). The ALJ reasoned
that a narrow reading allowing only district court enforcement effectively
gives a respondent a “passive stay” despite the preliminary order of
reinstatement and the denial of a stay of that preliminary order. Thus, the
ALJ concluded that “[u]pon stay denial, the unsuccessful movant is left, as
from the date of the order of reinstatement, with the same, ongoing obligation
to reinstate.”[4]
Furthermore, the ALJ stated:
To
not impose some administrative sanction to discourage this casual, astounding,
and very nearly arrogant defiance of the law,
[Page 3]
presumably on advice of counsel,
would mean to acquiesce in that absurdity, and ignore the clear Congressional
intent to seriously protect and enforce the public interest where an initial
investigation discloses a wrongful discharge of a would-be whistleblower, by
requiring immediate reinstatement to the job.[5]
The ALJ held
“[t]he statute’s grant of authority to an Administrative Law Judge to deny a
motion to stay reinstatement, perforce, inherently grants authority to preserve
the integrity of that denial through imposition of administrative sanctions.”[6]
The ALJ ruled “that a meaningful and forceful response to such intransigence is
necessary to preserve the integrity of and implement such Congressional
intent.”[7]
Thus, the ALJ awarded Windhauser a pro rata portion of his salary and expected
bonus for the months from the preliminary order of reinstatement to the
settlement of the case.[8]
Trane argued
before the ALJ that only the federal district court could provide a remedy for
Trane’s refusal to reinstate Windhauser.[9]
Trane argues before the Board that there is nothing in the SOX
statute, SOX regulations or DOL’s Rules of Practice granting power to impose
monetary sanctions.[10]
Thus, Trane argues that the ALJ had no authority to impose monetary sanctions
and that any enforcement remedies are reserved for the federal district court
to impose.[11]
We agree with Trane.
The Board has
held that the Secretary, absent statutory authority, has no power to impose monetary sanctions.[12]
The Administrative Procedure Act, § 558(b) provides
that “[a] sanction
[Page 4]
may not be imposed or a substantive rule or order issued
except within jurisdiction delegated to the agency and as authorized by law.”[13] The
Rules of Practice for ALJs provides for sanctions against parties failing to
comply with discovery or an order.[14] But
none of these administrative sanctions contemplate monetary sanctions. Furthermore,
in the case of failure to comply with an ALJ’s subpoena or order, the Rules of
Practice specifically indicate that enforcement should proceed in the federal district
court for the appropriate remedies.[15]
In Malpass
v. Gen. Electric Co.,[16] the
ALJ was asked to impose attorney fees and costs as sanctions against the
complainants for failing to comply with discovery. The ALJ refused, stating
such an action would have a chilling effect on whistleblowers. The respondent
appealed the ALJ’s denial of monetary sanctions. The Secretary
commented that had the case been in district court, the court would have
authority to impose sanctions on the complainant’s refusal to comply with
discovery under Federal Rules of Civil Procedure, but doubted the Secretary’s
ability to fashion monetary sanctions “beyond an order controlling the hearing
and proceedings before the Secretary (e.g., refusal to permit a party to
testify, taking certain facts to be established, barring an attorney from
participation, or dismissal of the matter.)”[17]
The Secretary discarded the ALJ’s argument that the authority to impose
sanctions derived from 28 U.S.C. § 1927 (1988) and from the Federal Rules,
incorporated by reference in the Rules of Practice at 29 C.F.R. § 18.29(a).
The Secretary observed that “the incorporation of the Federal Rules in 29
C.F.R. § 18.29 is for purposes of procedure and case management to fill in any
gaps where no specific provision in the Rules of Practice is applicable. [The
Federal Rules do] not give the Secretary the authority directly to impose
sanctions and penalties if not otherwise authorized by law.”[18]
In Malpass the Secretary rejected the argument that monetary sanctions
are within the discretion of the ALJ.
More recently, in Lebo v. Piedmont-Hawthorne, an AIR 21 case, the
complainant moved the Board to convert an order of reinstatement, with which
the respondent did not comply, into a
[Page 5]
sanction award of front pay. The Board
held that the remedy for failure to reinstate does not rest with the Board but
instead with the district court.[19]
Indeed, the implementing SOX regulation provides:
Whenever any person has failed to comply with a preliminary order of reinstatement or a final order or the terms of a settlement agreement, the Secretary or a person on whose behalf the order was issued may file a civil action seeking enforcement of the order in the United States district court for the district in which the violation was found to have occurred.[20]
Therefore, we conclude that the Secretary, and thus the ALJ, did not have the authority to impose monetary sanctions, and that any enforcement actions for failure to reinstate are, by statute, in the jurisdiction of the federal district courts. Thus, the ALJ erred in penalizing Trane with monetary sanctions for refusing to reinstate Windhauser.
Conclusion
We conclude that
the ALJ did not have jurisdiction or authority to impose monetary sanctions and
thus VACATE the ALJ’s recommended award of monetary
sanctions in the amount of $70,800.
SO ORDERED.
M. CYNTHIA DOUGLASS
Chief Administrative Appeals Judge
DAVID G. DYE
Administrative Appeals Judge
[1] Thereafter, the Board ruled the interlocutory appeal moot on August
31, 2005.
[2] Secretary’s Order 1-2002, 67 Fed. Reg. 64,272 (Oct. 17, 2002).
[3] R. D. & O. at 1.
[4] R. D. & O. at 1.
[5] R. D. & O. at 2.
[6] R. D. & O. at 2.
[7] R. D. & O. at 2 (footnote omitted).
[8] R. D. & O. at 2 n.5.
[9] The Assistant Secretary made similar arguments in its brief before
the Board in Trane’s interlocutory appeal, ARB No. 05-061.
[10] Brief at 17, 18.
[11] Brief at 14-15.
[12] See Watson v. Elec. Data Sys. Corp., ARB
Nos. 04-023, 029, 050, ALJ Nos. 2004-LCA-009, 2003-LCA-030, slip op. at 7
(ARB May 31, 2005) (Board does not have authority to impose monetary sanctions);
Malpass v. Gen. Elec. Co., 1885-ERA-038, -039, slip op. at 11 (Sec’y
Mar. 1, 1994) (federal rules of civil procedure do not give the Secretary the
authority to impose sanctions and penalties
if not otherwise authorized by law); cf. Puckett v. Tenn. Valley
Auth., ARB No. 03-024, ALJ No. 2002-ERA-015, slip op. at
5 (ARB June 25, 2004) (ARB affirms as in accordance with law the ALJ’s
dismissal of the case because the complainant’s attorney refused to comply with
a scheduling order); Somerson v. Mail Contractors of Am., ARB No.
02-057, ALJ Nos. 2002-STA-018,-019, slip op. at 10 (ARB Nov.
25, 2003) (complainant’s conduct was blatantly contumacious and warranted
dismissal of the case).
[13]
5 U.S.C.A. § 558(b) (West 2007); see Am. Bus. Ass'n v. Slater,
231 F.3d 1, 6-7 (D.C. Cir. 2000) (concluding that the Department.
of Transportation lacks the power to award monetary sanctions absent clear
congressional authority).
[14] Rules of Practice and Procedure for
Administrative Hearings Before the Office of Administrative Law Judges, 29 C.F.R. § 18.6(d)(2) (2006).
[15] Rules of Practice §§ 18.24(d); 18.29(b).
[16] 1985-ERA-038, -039, slip op. at 11 (Sec’y Mar. 1, 1994).
[17] Malpass, slip op. at 11.
[18] Malpass, slip op. at 11.
[19] Lebo v. Piedmont-Hawthorne, ARB No.
04-020, ALJ No. 2003-AIR 025, slip op. at 6-7 (ARB Aug. 30, 2005). The SOX
statute incorporates the AIR21 procedural rules. 18 U.S.C.A. § 1514A(b)(2)(A)
(Action under paragraph (1)(A) shall be governed under the rules and procedures
set forth in section 42121(b) of title 49, United States Code.).
[20] 29 C.F.R. § 1980.113 (2007).
