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Mendoza v. Perez

United States Court of Appeals for the District of Columbia Circuit
Decided June 13, 2014 (2014)
ELI5:

Rule of Law:

Agency guidance that substantively alters the rights and obligations of regulated parties, such as by setting different wage and housing standards from those in existing legislative regulations, is a legislative rule subject to the Administrative Procedure Act's notice-and-comment requirements. U.S. workers who are qualified and available for jobs in a specific labor market, but are deterred from accepting employment by substandard conditions allegedly caused by such agency action, have competitor standing to challenge the action.


Facts:

  • The Department of Labor (DOL) administers the H-2A temporary foreign worker visa program, which requires employers to certify that hiring foreign workers will not adversely affect U.S. workers' wages and conditions.
  • General DOL regulations established minimum standards for most H-2A employers, including payment of the Adverse Effect Wage Rate (AEWR) and compliance with specific housing standards.
  • In August 2011, the DOL issued two Training and Employment Guidance Letters (TEGLs) creating 'special procedures' for employers of sheepherders, goatherders, and cattleherders.
  • These TEGLs allowed herder employers to pay lower wages (e.g., the prevailing wage instead of the higher AEWR) and meet lower housing standards than the general H-2A regulations required.
  • The plaintiffs are experienced U.S. workers who had previously worked as herders but left their jobs due to poor wages and working conditions prior to August 2011.
  • The plaintiffs asserted they were qualified, available, and would prefer to work as herders, but were deterred from seeking such jobs by the low pay and poor conditions they attributed to the special procedures established by the TEGLs.
  • At least one plaintiff, Mendoza, had been repeatedly offered a herding job by a former employer but declined because the offered pay had not improved.
  • The DOL issued the 2011 TEGLs without providing public notice or an opportunity for public comment.

Procedural Posture:

  • The plaintiffs, a group of U.S. herders, filed an action against the Department of Labor in the U.S. District Court for the District of Columbia.
  • Two employer associations, the Mountain Plains Agricultural Services and the Western Range Association, intervened on the side of the government.
  • The intervenors filed a motion to dismiss for lack of jurisdiction, and all parties filed cross-motions for summary judgment.
  • The district court (a court of first instance) granted the motion to dismiss, holding the plaintiffs lacked both Article III and prudential standing.
  • The plaintiffs appealed the dismissal to the U.S. Court of Appeals for the D.C. Circuit.

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Issue:

Does the Department of Labor violate the Administrative Procedure Act by issuing special procedures for H-2A herder visas, which set different wage and housing standards from general regulations, without undergoing public notice-and-comment rulemaking?


Opinions:

Majority - Judge Brown

Yes, the Department of Labor's promulgation of the TEGLs without notice and comment violates the Administrative Procedure Act because they are legislative, not interpretive or procedural, rules. First, the court held the plaintiffs have Article III standing under the competitor standing doctrine. The TEGLs cause a concrete injury by allowing increased competition from foreign labor under depressed wage and working conditions, directly harming the plaintiffs who are active participants in the herder labor market, even if not currently employed. Second, the court found the TEGLs are legislative rules because they create new substantive requirements and effectively amend the prior legislative regulations in 20 C.F.R. part 655. The TEGLs are not interpretive because they do not clarify an existing statute or regulation but rather supplement the INA’s broad mandate and create a 'special variance' from existing rules. They are not procedural because they substantially affect the rights and interests of herders and their employers by setting the minimum wage and working conditions, which is a substantive alteration of the regulatory scheme.



Analysis:

This decision reinforces the distinction between non-binding interpretive rules and binding legislative rules, limiting an agency's ability to make substantive policy changes through guidance documents without public input. It clarifies that creating industry-specific carve-outs that alter fundamental obligations like minimum wages constitutes legislative rulemaking under the APA. The ruling also broadens the practical application of competitor standing for workers, affirming that individuals need not be currently employed or actively applying for jobs with known substandard conditions to challenge agency actions that depress their labor market.

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