LABOR & UNEMPLOYMENT LAW
Enforcement of Federal Unemployment Insurance Timeliness Regulations after Gonzaga University v. Doe

By Gregory Fortescue

The federal-state Unemployment Insurance System (UIS) was established with the passage of the Social Security Act (SSA). Under the UIS, if a state created and implemented its own unemployment insurance (UI) program in conformance with federal guidelines, including provisions to ensure that payments are made “when due” and to provide a fair hearing for denied claimants, the federal government would confer grant monies to cover all its administrative costs.

In 1976 the U.S. Department of Labor (USDOL) issued specific timeliness regulations intended to measure performance of state employment security agencies (SESAs). In practice, enforcement of these regulations has fallen to aggrieved UI claimants. Parties have most commonly sought injunctive remedies against the heads of SESAs pursuant to 42 U.S.C. section 1983. However, a Supreme Court decision in Gonzaga University v. Doe may have cast serious doubt on whether privately enforceable rights were in fact implicitly conferred in section 303 of the SSA. Gonzaga concerned the unauthorized release of student information by a teacher certification specialist to a state licensing commission. The plaintiff alleged that the specialist, acting as an agent of the university, violated his rights secured under the Family Educational Rights and Privacy Act (FERPA). He sought damages pursuant to section 1983. Chief Justice Rehnquist held that “unless Congress ‘speaks with a clear voice’ and manifests an ‘unambiguous’ intent to confer individual rights, federal funding provisions provide no basis for private enforcement by § 1983.”

The Court first distinguished “rights” from “benefits” or “interests.” The fact that a particular class benefits from the legislation or has a substantial interest in its proper administration does not necessarily mean that Congress intended to create a private right of action. Next, the Court inquired whether the statute speaks “in terms of institutional policy and practice” or “the needs of any particular person.” Like FERPA, section 301 et seq. of the SSA lacks the “rights-creating” language that the Court requires to establish statutory rights. Instead, the SSA focuses consistently on the performance of the SESA and not the rights of the individual beneficiary. Therefore, application of the first prong of the Gonzaga test seems to suggest that Congress did not intend to confer individual rights.

Analyzed under the second prong, section 303 of the SSA instructs the secretary of labor to review a state’s “methods of administration” to determine if there has been “a denial in a substantial number of cases” or “a failure to comply substantially with any provision.” Furthermore, section 304 provides judicial review only for states in the event that the secretary determines that an SESA has not substantially complied with the provisions. Taken together, this language seems to indicate an “aggregate” focus, with Congress most concerned with the organizational policies and practices of an SESA and not “the needs of a particular person.”

Plaintiffs may draw a court’s attention to the several places in the SSA and the Federal Unemployment Tax Act (FUTA) where provisions speak of an “individual,” “recipient,” or “claimant.” However, the Gonzaga Court made clear that where “the reference to individuals . . . is in the context of describing the type of ‘policy or practice’ that triggers a funding prohibition . . . such provisions cannot make out the requisite congressional intent to confer individual rights enforceable by § 1983.” The context in which the SSA and FUTA refer to individual claimants pertains to the state laws subject to review by the secretary. These provisions retain an unmistakable focus on the aggregate operation of the UIS and not on the conferral of individual federal rights.

In lieu of a section 1983 claim against state officials, some have suggested that private litigants might pursue judicial review of USDOL’s certification of failing state programs under the Administrative Procedure Act (APA). However, formidable obstacles stand at the threshold. First, potential plaintiffs must establish the jurisdiction of the court. Second, plaintiffs must satisfy the justiciability requirements of standing and mootness. Third, the USDOL’s conduct must be shown to have been an affirmative action as opposed to a failure to enforce. Finally, the characterization of action will dictate the standard of review and, therefore, the potential result.

Title 28, section 1331 of the U.S. Code provides a general grant of subject-matter jurisdiction to federal courts over federal questions. By contrast, section 703 of the APA makes clear that special statutory review provisions are the favored forms for obtaining subject-matter jurisdiction for judicial review of federal agency actions. Still, plaintiffs may obtain review under general jurisdictional statutes such as section 1331 when special statutory review provisions are either absent or inadequate. In this instance, Congress has included a special statutory provision only for an aggrieved state to obtain judicial review of a decertification determination in an appropriate court of appeals. No provision exists for judicial review of the decision to certify. “Where the challenged action would be ‘beyond the capabilities of the statutorily-prescribed methods of review to repair,’” most courts will allow plaintiffs to seek direct review under general jurisdictional statutes. Therefore, in this instance, section 703 of the APA would provide the plaintiff’s claim, and section 1331 would supply the basis for the court’s jurisdiction.

Standing and mootness may present the greatest jurisdictional hurdles for a UI claimant seeking judicial review of the secretary’s certification of an underperforming SESA. The question of constitutional standing will likely boil down to two key determinations by the court. First, can the plaintiffs illustrate a substantial causal connection between the systemic compliance by an SESA and the prompt processing of an individual UI claim or appeal? The applicable regulations imply that an SESA may be in substantial compliance without processing all claims and appeals within the time frames provided. Plaintiffs may also have some difficulty demonstrating that their injuries were fairly traceable to the secretary’s decision to certify the state program. Second, will a remedy calling on the USDOL to initiate interim enforcement procedures potentially leading to full decertification have a sufficiently restorative effect on the state’s UI program, which in turn would likely redress the procedural injury suffered by the plaintiff? However, the Court made clear in Village of Arlington Heights v. Metropolitan Housing Development Corp. that standing requirement demands a plaintiff only show a substantial likelihood that a favorable decision will redress the injury.

The mootness doctrine additionally requires that “[t]he requisite personal interest that must exist at the commencement of the litigation (standing) . . . continue throughout its existence (mootness).” However, aggrieved claimants may be able to keep their claims against the secretary of labor alive by relying upon one of two traditional exceptions to the mootness doctrine that could be appropriate in this context. First, the plaintiff could argue that the abuse of discretion claim against the secretary in certifying non-compliant state UI programs was “capable of repetition yet evading review.” Second, if the APA claim were brought against the secretary in the context of a properly certified class action lawsuit, the controversy may remain alive for the class even if subsequent circumstances change such that the representatives’ claim has resolved.

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This article is an abridged and edited version of one that originally appeared on page 306 of The Labor Lawyer, Winter/Spring 2006 (21:3).

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WEBSITE: www.abanet.org/labor

Periodicals: The Labor Lawyer, journal, published three times per year; Labor and Employment Law, newsletter, published quarterly; substantive committee newsletters, published biannually.

Books and Other Recent Publications: State-by-State Surveys: Covenants Not to Compete, 5th ed.; Employee Duty of Loyalty, 3d ed.; Tortious Interference in the Employment Context, with 2005 Supp.; Trade Secrets, 3d ed.; Wage and Hour Laws, with 2006 Cum. Supp.

Other Publications: The Developing Labor Law: The Board, the Courts, and the National Labor Relations Act, 5th ed.; Age Discrimination in Employment Law, 2006 Supp.; Equal Employment Law Update, Fall 2006 ed.a

Gregory Fortescue has a J.D. from the University of California, Hastings College of Law. He can be reached at .

Copyright 2007

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