W. Willard Wirtz, Secretary of Labor v. Baldor Electric Company
1964 U.S. App. LEXIS 4869, 337 F.2d 518 (1964)
Rule of Law:
When a government agency relies solely on confidential survey data to establish a quasi-legislative rule, such as a minimum wage determination, and the accuracy of that data is challenged, the agency must either disclose the underlying data for examination and rebuttal or provide independent evidence to substantiate its findings to satisfy the procedural due process requirements of the Administrative Procedure Act.
Facts:
- The Department of Labor initiated an administrative proceeding to determine prevailing minimum wages in the fractional and integral branches of the electric motors and generators industry, as required by the Walsh-Healey Act.
- The Bureau of Labor Statistics (BLS) conducted a survey by sending questionnaires to 775 establishments, with a pledge of confidentiality, to ascertain wage data for covered workers.
- BLS compiled six summary tables from the wage data of 216 firms, 212 of which responded to the questionnaire and 4 were estimated, but did not identify the individual firms in the tables.
- The National Electrical Manufacturers Association (NEMA), a trade association for the appellees, obtained independent wage data from 61 companies that had received BLS questionnaires and found discrepancies between their data and the data reported to BLS.
- NEMA applied to the Hearing Examiner for a subpoena duces tecum, requesting the completed questionnaire forms, lists of establishments surveyed, and related correspondence, arguing these documents were necessary to evaluate the BLS tabulations and assist in cross-examination due to potential widespread misunderstanding of the questionnaire.
- Department counsel argued that disclosing the data would violate the pledge of confidentiality given to firms and states, and would severely hinder future data collection efforts by the BLS.
Procedural Posture:
- The Secretary of Labor initiated an administrative proceeding to determine prevailing minimum wages in the electric motors and generators industry under the Walsh-Healey Act.
- An administrative hearing was held before a Hearing Examiner regarding the proposed wage determination.
- The Hearing Examiner denied the National Electrical Manufacturers Association's (NEMA) application for a subpoena duces tecum seeking underlying survey data and denied NEMA's motion to strike the Bureau of Labor Statistics (BLS) wage tables and testimony.
- The Secretary of Labor reviewed and upheld the Hearing Examiner's rulings, subsequently issuing the minimum wage determination.
- NEMA and several member companies sued the Secretary of Labor in the United States District Court, challenging the wage determination.
- The District Court set aside the Secretary's minimum wage determination.
- The Secretary of Labor appealed the District Court's order to the United States Court of Appeals for the District of Columbia Circuit.
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Issue:
Does the Secretary of Labor's refusal to disclose the underlying confidential survey data, which forms the sole basis for a minimum wage determination, violate the procedural safeguards for cross-examination and rebuttal required by the Administrative Procedure Act and the Walsh-Healey Act, especially when uncontradicted evidence casts serious doubt on the survey's accuracy and reliability?
Opinions:
Majority - Washington, Circuit Judge
Yes, the Secretary of Labor's refusal to disclose the underlying confidential survey data, while relying solely on summary tabulations, violated the procedural safeguards of the Administrative Procedure Act (APA) and the Walsh-Healey Act, and the determination was not supported by substantial evidence. The Fulbright Amendment made the APA applicable to Walsh-Healey wage determinations, requiring them to be made "on the record after opportunity for a hearing," which includes the right to present rebuttal evidence and conduct cross-examination "for a full and true disclosure of the facts." While summary tabulations are admissible, the underlying documents must be introduced or made available for rebuttal and cross-examination, a principle supported by Powhatan Mining Co. v. Ickes. The Secretary's claims of confidentiality, though understood, do not override these statutory procedural commands. The court emphasized that the government has the option to withhold confidential material at the risk of not proving its case, or to produce the material for examination. In this case, the appellees presented "impeaching evidence" (discrepancies, affidavits, and expert testimony) that cast serious doubt on the survey's reliability, particularly regarding the definition of "covered worker" and resulting errors. Despite this, the Secretary offered no evidence to substantiate the accuracy of the underlying data. Therefore, the Secretary's determination was unsupported by "reliable, probative, and substantial evidence" as required by the APA. The court also clarified that Section 10(b) of the Walsh-Healey Act confers standing only upon "adversely affected or aggrieved" persons, meaning manufacturers paying wages lower than the determined minimum, not merely any manufacturer in the industry. If one or more plaintiffs are found to have standing, the court's injunction should apply to the entire industry due to the quasi-legislative nature of the wage determination, preventing unfair competitive advantages and upholding the public interest. In a supplemental opinion, the court accepted the District Court's finding that five companies had standing because they paid wages lower than the Secretary's determination and sought government contracts, facing direct and immediate financial injury, and rejected the Secretary's proposals for supplementing the record as still relying on confidential, unauditable data.
Analysis:
This case significantly strengthened due process rights in administrative proceedings, particularly in quasi-legislative rulemaking where agencies rely on their own data. It established that an agency's need for confidentiality, while valid, cannot completely insulate its factual findings from scrutiny when those findings are challenged and serve as the sole basis for a rule impacting a whole industry. The ruling encourages agencies to either ensure their data is auditable or be prepared to provide independent corroboration when relying on confidential surveys. It also clarified the standing requirements for challenging such determinations, ensuring that only genuinely 'adversely affected' parties can litigate, thereby preventing purely speculative lawsuits.
