SpaceX, Walmart Court Wins Imperil US Immigration Bias Cases (1)

Justice Department efforts to prevent businesses from discriminating against work-authorized immigrants are in jeopardy after two courts sided with Walmart Inc. and SpaceX in declaring a little-known adjudication process unconstitutional.

By halting DOJ’s internal judicial panel from considering the government’s immigration cases against the retail giant and Elon Musk’s spacecraft manufacturer, federal judges in Georgia and Texas have handed other employers new leverage to push back on investigations from a civil rights unit that’s been on an enforcement streak. That includes penalizing Apple Inc. a record-high $25 million in November.

“We’re in a brave new world when it comes to anti-discrimination cases because of the Walmart and SpaceX decisions, and it’s going to take a while for this issue to get sorted out,” said Stephen Yale-Loehr, an immigration law professor at Cornell Law School.

The court decisions are likely to serve as blueprints for additional companies to litigate rather than feel pressured to pay settlements when civil rights enforcers accuse them of denying jobs to refugees or Homeland Security agents allege they’ve committed employment verification errors, multiple immigration attorneys said.

They build on a wave of challenges companies are filing to counter executive branch enforcement by contending in-house judges, such as at the Drug Enforcement Administration and Labor Department, lack accountability as unconstitutional appointees.

“Absolutely, I would advise my employer clients who would be facing scrutiny to definitely file a lawsuit on these lines, if they were so inclined,” said Cyrus Mehta, managing partner at Cyrus D. Mehta & Partners, PLLC. “I think it does embolden employers.”

‘Extremely Damaging’

Neither court decision, one of which was preliminary, is binding nationwide. In the interim, federal enforcement continues as usual, as are the small share of those cases pending before DOJ’s four-member administrative judicial panel.

Yet defense lawyers are speaking with clients about new opportunities to turn the tables on the government. It’s unclear how many businesses are ready to finance what would be drawn-out litigation expenses from not only appealing a matter to the administrative law judge, but then filing a separate complaint asking a federal court to invalidate the ALJ’s authority.

A neutered enforcement regime worries people like Leon Fresco, who was head of DOJ’s Office of Immigration Litigation during the Obama administration.

“There are huge institutional interests at stake here because Congress delegated this specific authority to enforce the worksite enforcement both from a matter of civil rights and from a matter of not hiring undocumented workers, to the Department of Justice,” said Fresco, now a partner with Holland & Knight. “To the extent the Department of Justice is unable to carry out that function, this will be extremely damaging.”

Both court rulings found merit in company arguments that DOJ administrative law judges operate in violation of the Constitution. In granting summary judgment for Walmart in March, Chief District Judge J. Randal Hall of the Southern District of Georgia held that ALJs are shielded from presidential supervision—violating Article II. Judge Rolando Olvera of the Southern District of Texas in November froze ALJ proceedings with SpaceX over a related theory that the panel contravenes the Constitution’s appointments clause by issuing decisions without attorney general oversight.

The administrative judges reside within the department’s Executive Office for Immigration Review, but are distinct from the far better known and much larger bureaucracy of immigration court judges. Instead, the ALJs collectively are part of the arcane Office of the Chief Administrative Hearing Officer, or OCAHO.

The district courts curbed DOJ judges as part of expanding legal attacks on the so-called administrative state across government. The US Supreme Court is weighing a challenge to the legality of the Securities and Exchange Commission’s administrative law judge system in a case that could have implications for other federal agencies.

Lost Leverage

It’s another DOJ agency that relies on OCAHO, but rarely appears before it, whose power is also at risk.

The Civil Rights Division’s immigrant and employee rights section protects employment rights of refugees, those granted asylum, green card holders, and other foreign-born US residents. The office has little experience litigating before OCAHO because companies usually make the business decision to settle before cases reach the panel.

The civil rights office still routinely counts on the threat of litigating at OCAHO as a means of persuading businesses to settle or to produce additional documents, say attorneys experienced on both sides of investigations.

A typical IER case may involve scrutinizing a company’s hiring processes to see if they’re steering jobs to US citizens only or hiring with bias against applicants with foreign accents. Or the office reviews if employers are illegally requiring more paperwork to prove work authorization than is necessary.

The office began more aggressive enforcement under President Donald Trump, a trend that’s continued under Joe Biden, management lawyers say. That includes allegations of recruiting failures at Apple and Meta Platforms Inc. for bias against US workers when sponsoring foreign employees for lawful permanent residency. Meta, then called Facebook, resolved its case for $15 million in 2021.

Dozens of other settlements in recent years, many for much lower dollar figures, are posted on the agency’s website.

“In my view,” the office’s “end goal is to just keep asking questions until they think they find something, and then offer to settle with the employer—rather than ever getting to OCAHO,” said Stephen Smalley, a shareholder with Ogletree Deakins.

While the Walmart and SpaceX decisions are hardly a nationwide trend, “employers are seeing a crack in the foundation of the IER’s ability to behave as aggressively as they have,” Smalley added.

“As IER’s recent settlements demonstrate, the Civil Rights Division will continue to investigate and, where appropriate, take enforcement actions against employers for violating the anti-discrimination provision of the Immigration and Nationality Act,” a division spokesman said in a statement.

When it comes to DHS enforcers, who also bring complaints to Justice Department ALJs, it’s a similar calculus, said Diane Butler, a partner and chair of the immigration group at Davis Wright Tremaine.

“It’s really a gotcha situation in the way that the I-9 audits and enforcement are occurring” at DHS, Butler said. “The strategy that I and other colleagues of mine certainly are going to be employing now is to make sure we have the defense based on the Walmart case in our answer to the complaint, and then move for a dismissal.”

The department has filed a brief asking the Texas court to lift its temporary stay in the SpaceX matter, and DOJ is widely expected to appeal last week’s Georgia decision for Walmart.

Even though the chief of the Civil Rights Division’s immigration bias unit said last month at a conference that his office is proceeding as usual after the SpaceX ruling, two attendees said, the landscape that led to his string of enforcement successes has decidedly shifted.

“Right now, we’re in a situation where the employer probably has more leverage in terms of settling a case,” said Laura Reiff, co-chair of the immigration and compliance group at Greenberg Traurig. “It’s an awkward position for the government to be put in, but it’s factual—if an employer decides to take it up, then it could be nullified completely.”