Removal Protections for Administrative Adjudicators: Constitutional Scrutiny and Considerations for Congress

Removal Protections for Administrative Adjudicators: Constitutional Scrutiny and Considerations for Congress

Legal Sidebari

Removal Protections for Administrative
Adjudicators: Constitutional Scrutiny and
Considerations for Congress
September 21, 2022
Since the passage of the Administrative Procedure Act (APA) in 1946, administrative law judges (ALJs)
across all federal agencies have enjoyed statutory removal protection. The Constitution, however, places
some limits on the appointment and removal of executive branch officers, which can include ALJs. The
Supreme Court’s 2018 decision Lucia v. Securities and Exchange Commission resolved constitutional
concerns about the appointment of Securities and Exchange Commission (SEC) ALJs but left open
constitutional questions about restrictions on the President’s authority to remove them. That question,
which could have sweeping implications, is now making its way through the federal courts.
In Jarkesy v. SEC, issued in May 2022, a divided three-judge panel of the Fifth Circuit held that removal
protections for SEC ALJs violated the President’s constitutional power to take care that the laws be
faithfully executed. The Jarkesy decision calls ALJs’ statutory removal protection into question across the
federal bureaucracy. Doing away with removal protections for ALJs would appear to mark a major shift in
administrative law.
The practical effects of Jarkesy, however, may be more limited. The shift that the decision portends has
been underway for decades within the federal bureaucracy. Although many federal agencies employ ALJ-
like adjudicators (the names vary from administrative judge to patent examiner to investigator), most are
not formally ALJs and thus are not protected by the APA’s removal restrictions. Only some agencies (like
the SEC) still rely on ALJs as their primary adjudicators. This Legal Sidebar provides an overview of the
history of the APA’s removal protections, recent case law evaluating its constitutionality, and an analysis
of the uneven effects that jettisoning removal protections would have on the federal bureaucracy. The
Sidebar concludes with considerations for Congress.
The APA and Administrative Adjudications
Federal agencies frequently engage in adjudication—both formal and informal—to resolve the application
of a statute or regulation to a particular case. Some of these agency adjudications are governed by the
APA, a law that sets out agency procedures in the absence of more specific statutes. Section 3105 of the
Congressional Research Service
https://crsreports.congress.gov
LSB10823
CRS Legal Sidebar
Prepared for Members and
Committees of Congress

Congressional Research Service
2
APA permits federal agencies to appoint ALJs to conduct formal adjudications. The APA also provides a
common set of procedures for adjudications normally presided over by ALJs.
For those adjudications presided over by an ALJ, the APA ensures ALJs some independence from their
employing agency. The APA contains a number of procedures designed to reduce interference in the
decisions of ALJs, including—most importantly for this Sidebar—for-cause removal protections and
restrictions on performing duties inconsistent with adjudicating, such as acting as an investigator or
prosecutor. Once appointed, the APA provides that ALJs are removable only for good cause “established
and determined by the Merit Systems Protection Board” (MSPB). The MSPB is an independent agency
that is responsible for, among other things, evaluating whether good cause exists to fire federal employees
protected by for-cause removal protections. The MSPB’s members, like ALJs, are removable only for
cause.
The APA’s formal adjudication requirements and limitations on removal of ALJs grew out of the political
debate surrounding the creation of New Deal agencies during the Great Depression. At that time, there
were no general background procedures regulating how agencies conducted adjudications. Formulation of
adjudication procedures was left to individual agencies. This lack of direction led, in some instances, to
concerns that agency adjudications were unfair, biased in favor of the agency, and violated due process. A
series of Supreme Court cases in the 1930s revealed that agencies permitted investigators to act as judges,
failed to provide notice of the claims of the agency, and failed to restrict ex parte communications with
adjudicators. Moreover, agency adjudicators’ continued employment, classification, compensation, and
promotion were all dependent on how their employing agency rated them. As the Supreme Court later
explained, “[m]any complaints were voiced against the actions of [ALJs], it being charged that they were
mere tools of the agency concerned and subservient to the agency heads in making their proposed
findings of fact and recommendations.”
In 1946, Congress passed the APA in part to address the shortcomings of agency adjudications. The
APA’s formal adjudication procedures were aimed at addressing lingering due process concerns and
bolstering faith in administrative adjudications by limiting bias (both actual and the appearance of it).
Creating an independent class of ALJs through removal protections served both of these purposes.
The APA, however, was only a partial solution. ALJs and the APA-governed hearings over which they
preside account for a fraction of agency adjudications. A 2018 survey by the Administrative Conference
of the United States (ACUS) found that there are approximately 2,000 ALJs across all federal agencies.
By contrast, there are approximately 10,000 non-ALJ adjudicators. Except for some minimal procedural
requirements included in the APA, non-ALJs and the hearings over which they preside do not share a
common statutory framework, and almost no non-ALJ adjudicators enjoy APA-like removal protection or
restrictions on performing other duties within their agencies. (Non-ALJs may be subject to civil service
removal protections depending on how they are classified by their parent agency. Civil service
protections, however, are outside the scope of this Sidebar).
Although ALJs subject to APA removal protections are a minority of all agency adjudicators, ALJs still
play a significant role adjudicating important disputes within agencies such as the SEC, Social Security
Administration (SSA), Department of Health and Human Services, National Labor Relations Board
(NLRB), and the Federal Energy Regulatory Commission (FERC). In all, as of 2018, 27 agencies
employed at least one ALJ. Accordingly, the APA’s adjudication procedures and removal protections play
an important role in federal agency adjudications. Changes to ALJ’s APA removal protections (for
example, from court decisions) will be felt acutely in agencies that are required by statute to abide by the
APA’s formal adjudication requirements, but will have little impact on agencies that engage in informal
adjudications.

Congressional Research Service
3
The Jarkesy Decision
The APA’s removal protections for ALJs implicate the President’s constitutional authority to remove
executive branch officers. Article II of the Constitution limits removal protections for “officers” of the
United States. Article II distinguishes principal officers (which generally includes Cabinet-level officials,
heads of agencies, and the like) from inferior officers (officials who are subject to the direction of
principal officers). In general, the Supreme Court has held that officers of any kind cannot be insulated
from presidential control by multiple layers of for-cause removal protections. Certain inferior officers,
however, may enjoy removal protections so long as their duties are narrowly defined and they are
supervised by a principal officer.
Just how far Congress could go in insulating SEC ALJs from presidential removal authority is the subject
of the Jarkesy decision. In its 2018 opinion Lucia v. SEC, the Supreme Court deemed ALJs employed by
the SEC “inferior officers” and thus subjected them to constitutional limitations on removal protections.
The Fifth Circuit in Jarkesy took the next step, holding that SEC ALJs were unconstitutionally insulated
from presidential control by two layers of for-cause removal protections.
Jarkesy involved an SEC enforcement action for securities fraud against George Jarkesy. After an
evidentiary hearing, an SEC ALJ concluded that Jarkesy committed securities fraud. Jarkesy appealed to
the Commission, which affirmed the ALJ’s decision and imposed various penalties on Jarkesy. Jarkesy
then appealed to the Fifth Circuit, arguing, among other things, that the SEC’s ALJs were
unconstitutionally insulated from presidential control by multiple layers of for-cause removal protection.
A divided panel of the Fifth Circuit agreed with Jarkesy, holding (among other points) that the two layers
of for-cause removal protections for SEC ALJs violated Article II of the Constitution.
The Jarkesy panel rested its decision on two Supreme Court decisions: Free Enterprise Fund v. Public
Company Accounting Oversight Board and Lucia v. SEC. Free Enterprise Fund involved a constitutional
challenge to the removal protections of the members of the Public Company Accounting Oversight Board
(PCAOB). The PCAOB is housed within the SEC, and its members could only be removed for cause by
the SEC after a hearing in front of the MSPB. Moreover, the parties in Free Enterprise Fund stipulated
that the members of the SEC could be removed only by the President for cause, effectively creating a
second layer of protection for members of the PCAOB—one layer of removal protections for the
members and a second layer of protections for their superiors.
The Court in Free Enterprise Fund held that by creating two layers of statutory removal protection,
Congress had “contraven[ed] the President’s constitutional obligation to ensure the faithful execution of
the laws.” Under Article II, the Court reasoned, the President is accountable to the electorate for the
actions of the executive branch, but that accountability is undermined when the President loses the ability
to control the actions of executive branch officers through the authority to remove those officers. In the
case of the PCAOB, two layers of removal protections meant that the President could not remove a
member of the PCAOB even if good cause existed because the Commission (with the consent of the
MSPB)—not the President—was the body vested with the authority to determine when good cause
existed. Accordingly, the Court explained, “[t]he result is a Board that is not accountable to the President,
and a President who is not responsible for the Board.”
Free Enterprise Fund did not do away with all removal protections, however. The Court re-affirmed its
long-standing precedent that one layer of removal protection is permissible in certain circumstances.
Namely, the Court said that inferior officers who do not exercise policymaking or administrative authority
and are charged with only limited duties may be made removable for cause. The Court has not articulated
a bright line rule that identifies which executive branch employees may be granted this protection. What
is clear, however, is that if an executive branch employee is deemed an officer, that person must be
appointed consistent with the requirements of the Constitution’s Appointments Clause and cannot be
unduly insulated from presidential control.

Congressional Research Service
4
This is where Lucia v. SEC comes in. Lucia held that SEC ALJs are inferior officers for the purposes of
the Appointments Clause of the Constitution. Although Lucia reached that conclusion in addressing a
constitutional challenge to how ALJs are appointed, Free Enterprise Fund shows that it carries
implications for how they can be removed. Justice Breyer raised the point in his dissent, reasoning that if
Free Enterprise Fund applied to ALJs as inferior officers, their removal protections might also be
unconstitutional.
The Jarkesy decision takes the step that Justice Breyer thought likely to follow from Lucia and Free
Enterprise Fund—finding that SEC ALJs are unconstitutionally insulated from presidential control by
two layers of for-cause removal protections.
What Is the Practical Significance of Jarkesy?
For agencies that use ALJs in the traditional APA sense (like the SEC), Jarkesy represents a significant
curtailment of the independence the APA created for ALJs as a safeguard against unfair and biased
adjudications. According to a 2018 Office of Personnel Management survey, the majority of ALJs are
employed by agencies whose heads enjoy some level of removal protection. The SSA employs more than
1,600 ALJs, and the SSA commissioner is removable by the President only for “neglect of duty or
malfeasance in office.” Although the Department of Justice has interpreted the commissioner’s removal
restriction as unconstitutional, no court has ruled on the issue. Other agencies that employ relatively large
numbers of ALJs and whose heads enjoy removal protections include the NLRB, FERC, and the
Occupational Safety and Health Review Commission. A change to removal protections for ALJs within
these agencies may have a significant impact on how cases are decided. There is some research
demonstrating that adjudicators without removal protections are less independent from their parent
agency. Based on this research, some have argued that by subjecting ALJs to greater political
accountability, decisions like Free Enterprise Fund, Lucia, and Jarkesy may also increase the likelihood
that ALJ decisions will reflect pro-agency bias.
Adjudications before non-ALJ adjudicators, however, are now common practice across the federal
bureaucracy, with non-ALJ adjudicators outnumbering ALJs by a factor of five. The Patent and
Trademark Office, for example, employs by far the greatest number of non-ALJs—7,856 patent
examiners. The Internal Revenue Service and the Department of Veterans Affairs also employ significant
numbers of non-ALJs. The 2018 ACUS survey of administrative adjudicators found, however, that three
types of non-ALJ adjudicators out of the 37 types identified in the survey enjoyed some kind of removal
protection. Future court decisions about the constitutionality of ALJ removal protections will likely have
little impact on the vast majority of non-ALJs who already lack APA-like removal protections.
Considerations for Congress
As an initial matter, Jarkesy is a Fifth Circuit decision. The Supreme Court has yet to weigh in on this
particular issue. Whether ALJs of any kind, and SEC ALJs in particular, can be shielded from removal by
two layers of removal protections is still an open question in other jurisdictions. In jurisdictions subject to
Jarkesy or a similar rule, Congress’s ability to insulate administrative adjudicators from at-will removal is
limited by Article II of the Constitution. Congress has few statutory options to enhance removal
protections for ALJs (although it may have more options for non-ALJs). Existing removal protections for
some ALJs, however, may still be constitutional. If an ALJ is housed in an agency whose head the
President may remove at will, that single layer of protection may still be within constitutional bounds so
long as the ALJ is an inferior officer, has limited duties, and does not exercise policymaking or
administrative authority. ALJs are inferior officers and are limited by the APA from engaging in activities
that are inconsistent with their duties as ALJs. Moreover, adjudication is traditionally seen as distinct from
policymaking.

Congressional Research Service
5
The Supreme Court, however, recently cast doubt on the distinction between adjudication and
policymaking, at least for executive branch officials. In a 2020 case, the Court declared that all power
wielded by the executive branch is necessarily executive, even if the duties of certain executive branch
officials take on a judicial or legislative quality. Administrative adjudicators “are still exercising executive
power and must remain dependent upon the President.” Taken to its logical extent, this reasoning might
call into question all removal protections, even those for inferior officers. When given the opportunity to
strike down removal protections for patent judges (inferior officers), however, the Court declined. Instead,
the Court permitted the patent judges to retain their removal protections so long as their decisions were
reviewable by a principal officer. A court, however, is unlikely to uphold a statute that adds additional
layers of removal protections for ALJs who already enjoy them.
Congress’s ability to restrict ALJ removal at so-called independent agencies is more limited. Independent
agencies are “independent” primarily because the agency heads (usually a commission or a board) enjoy
some form of removal protection. In light of Free Enterprise Fund, Lucia, and Jarkesy, it is unlikely that
Congress could provide ALJs employed by independent agencies with any kind of removal protection.
If Congress were persuaded by the Supreme Court’s reasoning that the President should have more
control over ALJs within executive branch agencies, it could do away with the APA’s removal protections
for ALJs altogether by amending the APA. Federal agencies have decades of experience using non-ALJs
to preside over adjudications and may be a resource for Congress were it to decide to amend the APA in
this fashion. Nevertheless, just as bestowing removal protections on agency adjudicators has
constitutional implications for the President’s ability to control the executive branch, stripping ALJ
removal protections may also raise due process and pro-agency bias concerns like those commonly raised
before the APA was enacted.
Another issue that Congress may choose to examine is removal restrictions for non-ALJs. For non-ALJs
employed by agencies headed by someone the President can remove at will and who do not already enjoy
some kind of removal protection, Congress might be able to increase their independence from their parent
agency by affording them removal protections enjoyed by ALJs. For example, Congress could amend the
APA to include non-ALJs. Nonetheless, because non-ALJs are not always subject to the same limitations
on the kinds of non-adjudicatory activities they can engage in, it is not clear that every non-ALJ would be
eligible for removal protections under the Supreme Court’s current jurisprudence limiting removal
protections to those inferior officers who do not engage in policymaking. Moreover, given the Supreme
Court’s recent characterization of executive power, it is still an open question whether adding even one
layer of removal protection for non-ALJs classified as inferior officers would exceed Congress’s
constitutional authority.

Author Information

Benjamin M. Barczewski

Legislative Attorney

Disclaimer

Congressional Research Service
6
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

LSB10823 · VERSION 1 · NEW