On July 29, 2025, the Court of Appeals for the Third Circuit ruled that the Department of Labor unconstitutionally assessed more than $500,000 in penalties and back wages against a New Jersey farm in connection with its employment of nonimmigrant seasonal farm workers under the H-2A visa program. The case, Sun Valley Orchards, LLC v. U.S. Department of Labor, is likely the first of many circuit court decisions extending the impact of the Supreme Court's decision, SEC v. Jarkesy, to employment related enforcement actions. As set forth below, the Sun Valley Orchards decision suggests that employers may have strong arguments that DOL and NLRB administrative adjudication of employment claims related to wage-and-hour, whistleblower, and unfair labor practices violations may be unconstitutional.
For context, on June 27, 2024, in SEC v. Jarkesy, the Supreme Court vacated a $300,000 penalty awarded by an Administrative Law Judge (ALJ) in an SEC enforcement action for violations of laws and rules protecting shareholders and investors from fraud. The Court held the Seventh Amendment required the SEC to proceed in federal court before a jury, and that the "public rights exception" to the Seventh Amendment and Article III did not apply.
The Jarkesy Court's Seventh Amendment analysis first looked at whether the cause of action brought and remedies sought resemble those historically available in courts of common law. If so, then the Seventh Amendment presumptively applies and requires a jury trial. In the case of the SEC's enforcement action, the cause of action resembled common law fraud actions, and the remedies – monetary penalties – were an example of a quintessential legal remedy. The Court then went on to discuss the "public rights" exception to the Seventh Amendment. Whereas Article III of the Constitution vests "[t]he judicial Power of the United States" in Article III courts (Art. III § 1), such that only Article III courts could adjudicate federal law disputes involving "private rights," the Supreme Court has historically allowed executive or legislative adjudication of disputes involving "public rights." Under a 1977 Supreme Court decision, Atlas Roofing Co. v. OSHA, this exception had been read broadly to allow Congress to delegate enforcement under almost any statutory scheme to ALJs. However, in Jarkesy, the Court rejected the broad reading of Atlas Roofing and made clear that the public rights exception would be applied narrowly to those matters that "historically could have been determined exclusively by the executive and legislative branches," such as cases involving "the collection of revenue; aspects of customs law; immigration law; relations with Indian tribes; the administration of public lands; and the granting of public benefits."
The impacts of the Jarkesy Court's interpretation of Atlas Roofing and the Article III distinction between "private rights" and "public rights" are playing out across the country, as evidenced by the dizzying array of lawsuits challenging ALJ adjudication of employment-related claims sprang up almost immediately after Jarkesy was decided.1 The Third Circuit's decision in Sun Valley Orchards is a prime example.
Sun Valley Orchards is a New Jersey farm that employed nonimmigrant foreign seasonal workers under the H-2A visa program. The H-2A visa program requires participating employers to, inter alia, post a job order detailing the workers' rights to pay, facilities, and other benefits. The job order, in the absence of any other written agreement with the workers, operates as a contract that the DOL can enforce against the employer. The DOL investigated Sun Valley Orchards and cited it for a host of violations of H-2A rules incorporated into the job order concerning housing, transportation, meals, and wages provided to its workers. The agency assessed more than $200,000 in civil penalties and more than $300,000 in back wages. Following DOL regulations, Sun Valley Orchards challenged the agency's determination before a DOL ALJ, who largely affirmed the DOL's findings. Sun Valley Orchards then sought review of the ALJ's decision before the DOL's Administrative Review Board and a federal District Court, which both affirmed the ALJ's decision.
On appeal, the Third Circuit disagreed, holding that the DOL's enforcement of wage and facilities requirements under an H-2A job order was akin to a breach of contract action that involved core "private rights" that fall within the jurisdiction of Article III courts. Although the Third Circuit recognized that the H-2A program involved elements of legislative and executive power over immigration and foreign policy, the Third Circuit declined to extend the public rights exception to the DOL's enforcement of provisions of H-2A job orders. Instead, the Third Circuit held that the public rights immigration-law exception only extends to actions principally involving "the admission and exclusion of aliens," whereas the DOL's enforcement action against Sun Valley Orchards principally involved the rights of workers in their domestic employment. Accordingly, the Court vacated more than a half-million dollars in penalties and back wages.
Key Takeaways
The Third Circuit's holding that DOL's H-2A enforcement actions seeking penalties and back pay must belong in Article III courts under Jarkesy spells trouble for federal ALJ adjudication of employment-related claims. Under Sun Valley Orchards, employers likely have strong arguments that agency proceedings such as DOL enforcement of wage-and-hour requirements under its worker visa programs, NLRB adjudication of unfair labor practices claims, and DOL adjudication of whistleblower claims may all violate Article III of the Constitution.
Employers should consult with experienced counsel to ensure they are preserving constitutional arguments before agency tribunals and to consider whether and when to raise constitutional arguments in federal court.
Footnote
1. See, e.g., Energy Transfer LLP b. Chavez-Deremer, No. 25-1258 (N.D. Tex. May 16, 2025) (claiming DOL ALJ adjudication of whistleblower claims under the Pipeline Safety Improvement Act violates Seventh Amendment and Article III); Kenric Steel, LLC v. U.S. DOL, OSHA, No. 1:24-cv-09221 (D.N.J. Sept. 17, 2024) (claiming DOL ALJ adjudication of OSHA safety standards violations violates Seventh Amendment and Article III); Purdue Farms Inc. v. Su, No. 5:24-cv-00477 (E.D.N.C. Aug. 20, 2024) claiming DOL ALJ adjudication of whistleblower claims under the Food Safety Modernization Act violates Seventh Amendment and Article III); Aunt Bertha v. NLRB, No. 4:24-cv-00798 (claiming NLRB agency award of consequential damages violates Seventh Amendment and Article III) (Aug. 20, 2024); YAPP USA Automotive Systems, Inc. v. NLRB, No. 24-12173(Aug. 19, 2024 (same) ; Comcast Corp. v. U.S. DOL, No. 1:24-cv-01401 (Aug. 9, 2024) (claiming DOL ALJ adjudication of whistleblower claims under the Section 806 of the Sarbanes-Oxley Act of 2002 violates Seventh Amendment and Article III).
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