D. and
O. at 8. The ALJ concluded from the evidence before him at the hearing, including Dennis'
testimony, that Dennis considered only one of the regulatory factors. Id. and n.6.
Dennis testified that she assessed the CMP by each minor rather than by each violation
because the Respondent had not been previously investigated. T. at 32-33.
The ALJ found that the use of Form WH-266, which prescribes the
assessment process through the use of predetermined dollar values associated with various
categories of violations as they pertain to each of the minors involved, denied individual
employers the due process guaranteed by the applicable regulations. D. and O. at 15.
Although the ALJ recognized the need for administrative efficiency through the use of
standardized penalties and procedures, he found that the use of what he characterized as a
"boilerplate form" and a "numbers game" procedure violated the
pertinent regulations, Id. at 8, and effectively eliminated the discretion he found
inherent in the Secretary's promulgation of the regulations pertaining to the assessment of
penalties under the child labor laws. Id. at 15. The ALJ determined that the
penalty should have been assessed only after all the evidence pertaining to the violations was
considered in light of the factors delineated in the regulations. Id. The ALJ
identified and reviewed each regulatory factor and, finding favorably on behalf of Respondent
in each factor, reduced the assessed penalty by 75%. Id . at 10-12, 15.
The Administrator objects to the ALJ's dismissal of the penalty
schedule as "boilerplate" or a "numbers game." Administrator's
Petition for Review (Petition) at 21. The Administrator argues that the establishment of a
standardized penalty schedule permits the enforcement of the child labor laws in a consistent
and uniform manner, free from subjective appraisals and is allowable within statutory and
regulatory criteria. Petition at 14. The Administrator recognizes that while a standardized
penalty schedule may result in certain imprecision in determining a penalty in a specific case,
this imprecision is preferable to the subjective appraisals of the employer's culpability by a
Compliance Officer. Id.
Given the breadth of the interpretive possibilities set forth in the
regulations to determine the appropriateness of CMPs, we look to the clear intention of the
[Page 4]
language of the Act, and the intent of the regulations to gauge the gravity of the violations of
the child labor laws. We find that the Administrator's operational interpretation is reasonable
and consistent with Congressional purpose and regulatory guidelines. Since that interpretation
does not conflict with the Act's plain meaning, it should be granted due deference. See
U.S. v. Larionoff, 431 US 864, 872 (1977) (where an agency's regulatory interpretation
is not plainly inconsistent with the wording of the regulations and the regulations are consistent
with the statute, the agency's interpretation will be accepted); Udall v. Tallman,
380 US 1,16 (1965)(the Court will clearly give deference to an agency's interpretation
of its own regulations); Bowles v. Seminole Rock and Sand Co. , 325 US 410, 414
(1965)(the ultimate criterion for judicial construction of an ambiguous regulation "is the
administrative interpretation, which becomes of controlling weight unless it is plainly
erroneous or inconsistent with the regulation."). Consequently, we find that although
the penalty schedule did not reference each criterion of the regulatory guidelines, nevertheless
it is a reasonable interpretation of those guidelines and within the broad authority granted an
agency charged with implementing those regulations. See Coal Employment Project v.
Dole, 889 F.2d 1127, 1131 (D. C. Cir. 1989).
The regulations list the various factors to be taken into consideration
in determining the appropriateness of CMPs, but they are ambiguous with regard to the
utilization of these factors to determine the appropriateness of a CMP. There is no guidance
as to the weight or import of any particular factor, nor do the regulations prescribe any
numerical or percentage factor to guide an increase in the assessment for an aggravated
violation or a mitigation of the assessment where appropriate. The factors listed at §
579.5(c) concern aggravating factors and the those listed at § 579.5(d)(2) pertain to
mitigating factors.
Section 579.5(a) provides for a maximum civil penalty of $10,000 for
each employee who was subject to a violation of the Act, taking into account the size of the
business of the person charged with the violations and the gravity of those violations.
Subsection (b) provides certain factors to consider in determining the size of the business.
Subsection (c) provides factors to consider in determining the gravity of the violations. The
Administrator used one of the factors listed in subsection(b), the number of employees, to
make an initial determination of Thirsty's eligibility for a reduction of the penalty. We agree
that the number of employees is generally a good indicator of the size of a business. Any
error committed by not evaluating the other factors set out in subsection (b) was harmless
because the Administrator found Thirsty eligible for the appropriate reduction. It is important
to note that the initial determination of the investigator on Form WH-266 is subject to review
and may be modified by the District Director.
The factors listed in subsection (c) are treated in the same manner.
[Page 5]
Factors are identified, but there is no regulatory guidance concerning how each factor might
be used in determining the gravity of an employer's child labor law violations or the
appropriateness of any consequent penalty.
Section 579(d) deals with mitigating factors of a violation and the
determination of whether a civil penalty would be necessary to achieve the purposes of the
Act. Subsection (d)(1) allows for a determination that the violations were de minimis,
and subsection (d)(2) lists some of the factors set forth in subsection (c),
which if not present, might allow for no penalty assessment.
The Secretary has affirmed reductions of an assessed CMP by a
presiding ALJ where an employer was found to have comported with the mitigating factors
of subsection (d)(2). Administrator, Wage and Hour Division v. Navaho
Manufacturing, 92-CLA-13, Sec. Final Dec. and Order, issued Feb. 21, 1996, slip op.
at 5-7; Administrator, Wage and Hour Division v. City of Wheat Ridge, Colorado,
91-CLA-22, Sec. Final Dec. and Order, issued Apr. 18, 1995, slip op. at 11;
Administrator, Wage and Hour Division v. D. D. & D., Inc. dba Sizzler Family
Steakhouse, 90-CLA-35, Sec. Final Dec. and Order, issued Apr. 3, 1995, slip op. at
7-9. It should be noted, however, that although the ALJs' reductions of the CMPs were
affirmed in these cases, the Secretary did not question the appropriateness of the
Administrator's use of a schedule of penalties as a method of assessing the CMPs.
The grid and matrix schedule incorporated in form WH-266 is an
appropriate tool to be used by a field Compliance Officer to recommend penalties through the
enumeration and determination of the gravity of factual violations. We note that Part A
includes an analysis reflecting the mitigating factors set out in 29 C.F.R. § 579.5(d)(2).
As noted above, the recommended determination is subject to approval by a reviewing official.
We further note that the agency's use of the schedule of penalties was
well established at the time that Congress increased the maximum penalty for employers
violating the child labor laws, and no issue was raised with regard to the manner of assessment
or enforcement. We therefore reverse the ALJ's blanket dismissal of the schedule of
standardized penalties and find the Administrator's establishment of a standardized penalty
schedule for the initial recommended determination is not violative of the pertinent regulations.
Additionally, the regulations provide for a review of assessed CMPs
by an ALJ, whose regulatory authority is broadly drawn consistent with the factors to be
considered, thereby providing adequate due process.5 We find that a presiding ALJ
has the authority to review the case and to duly consider all of the factors delineated by the
[Page 6]
pertinent regulations. An ALJ's scope of authority to change the Administrator's assessments
is untrammeled, 29 C.F.R. § 580.12(c), and specifically includes a determination of the
appropriateness of the assessed penalty. 29 C.F.R. § 580.12(b). We find that the
review and modification of an assessed CMP is not an arrogation of the Administrator's
authority, but a proper adjudicatory process. While we reverse the ALJ's determination that
the schedule of penalties is violative of the regulations or of an employer's right to due
process, we affirm an ALJ's authority to review and modify the Administrator's CMP
assessment.
However, we disagree with the ALJ's contention that it would be
inappropriate to increase the penalty if it were warranted in the case before him and after all
of the factors were considered. See D. and O. at 8, n.7. An increased penalty is
not a punishment levied on an employer for seeking a hearing and review, but rather a possible
outcome of an adjudicator looking anew at a situation where violations of child labor laws
occurred and determining that the violations were of greater gravity than the Compliance
Officer and Administrator determined.
We disagree with and modify the ALJ's 75% reduction of the assessed
CMP. We note that the proposed reduction results in an approximate $80 penalty per child,
regardless of the number of violations attributed to the child's employment. This penalty is
not appropriate for an egregious work situation where some children were subjected to
multiple violations over a period of months.
We are not convinced that Thirsty's management made adherence to
the restrictions in the child labor laws a priority. The violations occurred in at least eleven
locations, A. X. 2, out of the twelve or thirteen locations that Thirsty's operated during the
period in question. Testimony of James Read Boles, President of Thirsty's, T. at 38. Boles'
testimony indicates that the managerial staff, who controlled the local hiring, was relatively
stable even at the start-up, in contrast to the high turnover rates of the clerks. Id.
at 41. We are of the opinion that Respondent was obliged to emphatically advise its
local managers with regard to the legal restrictions of hiring children younger than sixteen,
since the employment of such youth was apparently a common practice, in a manner beyond
the "bi-weekly little update" or a memorandum. Id . at 44. We are of
the opinion that the distribution and gravity of the violations in light of Congressional concern
regarding the abuses of child labor militates in favor of a greater level of assessment of
penalties.
Accordingly, IT IS ORDERED that the civil money
penalty assessed by the Administrator against the Respondent, Thirsty's, Inc., is modified for
the reasons set out above, with a twenty-five (25%) percent reduction of that penalty, in due
[Page 7]
deference to regulations at 29 C.F.R. § 580.12(c), which pertain to the ALJ's review
authority. The Respondent is ordered to pay a penalty of $7,873.12 to the United States
Department of Labor for violations of the child labor provisions of the Fair Labor Standards
Act as amended, 29 U.S.C. §§ 212, 216(e) (1988 and Supp. III 1991).
SO ORDERED.
DAVID A. O'BRIEN
Chair
KARL J. SANDSTROM
Member
JOYCE D. MILLER
Alternate Member
[ENDNOTES]
1 Allowable maximum civil
money penalties that may be assessed for violations of the child labor standards occurring subsequent
to November 5, 1990, were increased from ,000 to $10,000. 29 U.S.C. § 216(e). Omnibus
Budget Reconciliation Act of 1990, Pub. L. No. 101-598, § 3103, 104 Stat. 1388-29.
2 The regulations
pertaining to agricultural jobs are not relevant in this case.
3 The Act at 29
U.S.C. § 212(c) entitled Oppressive child labor provides: "No employer
shall employ any child labor in commerce or in the production of goods for commerce or in any
enterprise engaged in commerce or in the production of goods for commerce."
The Act at 29 U.S.C. § 203(l) defines Oppressive child labor
and provides, in part:
The Secretary of Labor shall provide by regulation or order that the employment of employees
between the ages of fourteen and sixteen years . . . shall not be deemed to constitute oppressive
child labor if and to the extent that the Secretary of Labor determines that such labor is confined
to periods which will not interfere with their schooling and to conditions which will not interfere
with their health and well-being.
4 The regulations
at 29 C.F.R. § 579.5 titled Assessing the penalty provide in part:
(b) In determining the amount of such penalty there shall be
considered the appropriateness of such penalty to the size of the business of the
person charged with the violation or violations, taking into account the number of employees
employed by that person[,] . . . dollar volume of sales or business done, amount of capital
investment and financial resources, and such other information as may be available relative to
the size of the business of such person.
(c) In determining the amount of such penalty there shall be considered
the appropriateness of such penalty to the gravity of the violation or violations ,
taking into account, among other things, any history of prior violations; any evidence of
willfulness or failure to take reasonable precautions to avoid violations; the number of minors
illegally employed; the age of the minors so illegally employed and records of the required proof
of age; the occupations in which the minors were so employed; exposure of such minors to
hazards and any resultant injury to such minors; the duration of such illegal employment; and,
as appropriate, the hours of the day in which it occurred and whether such employment was
during or outside of school hours. (Emphasis supplied)
5 The regulations
at § 580.12 entitled "Decision and Order of Administrative Law
Judge" provide in part:
(b) The decision of the (ALJ) shall be limited to a determination of . . . the
appropriateness of the penalty assessed by the Administrator.
(c) The decision . . . may affirm, deny, reverse, or modify, in whole or in part, the determination of
the Administrator.