A recent United States Supreme Court case and new executive order will change the way federal agencies hire administrative law judges (“ALJs”), and together are expected to increase ALJs’ accountability to the heads of their agencies. On June 21, 2018, the United States Supreme Court held in Lucia v. Securities and Exchange Commission that the SEC’s administrative law judges (ALJs) are “Officers of the United States” who must be appointed, pursuant to the Constitution’s Appointments Clause, by the President, courts of law or a head of a department. The SEC’s staff members (rather than the Commission) had been appointing the agency’s ALJs, which the Court held does not satisfy the constitutional requirement.
The case started when the SEC instituted an administrative proceeding against petitioner Lucia. The ALJ who heard the case determined that Lucia had violated the Investment Advisers Act. On appeal to the SEC, Lucia argued that the ALJ deciding his matter had not been properly appointed, but the SEC rejected the argument, as did the D.C. Circuit.
Lucia filed a petition for certiorari before the Supreme Court. Up until then, the U.S. government had defended the SEC’s position, but in filing its response to Lucia’s petition, the government switched its position and encouraged the Supreme Court to grant review. The Supreme Court therefore appointed an amicus curiae to defend the SEC’s position. As a result of its decision, the Supreme Court decided that Mr. Lucia was entitled to a new hearing, before a different ALJ. The case left open the question of how its ruling affects other administrative judges at other agencies.
Following the Supreme Court’s decision, on July 10, 2018, President Trump issued an executive order that changes the process by which federal agencies select ALJs, which has typically involved the Office of Personnel Management (“OPM”) screening ALJs based on fixed criteria, including performance on a civil service exam, and hiring ALJs within the competitive service. Under President Trump’s order, federal agencies will make their own hiring decisions and not use the OPM screening process, and will appoint ALJs under the excepted service. An OPM memorandum issued with the executive order clarifies that the order applies only to new appointments beginning July 10, 2018, and incumbent ALJs will remain in the competitive service so long as they remain in their current positions.