Supreme Court Hears Challenge to Labor Department’s In-House Fines

The Supreme Court heard arguments Nov. 10 on whether farm employers who violate foreign guest worker visa rules should be fined through agency hearings or in a federal court.

Several justices pressed the federal government’s theory of the case hard, though it was unclear whether that would translate into a majority against it.

The Department of Labor is trying to overturn a ruling by the U.S. Court of Appeals for the Third Circuit. The appeals court held that the case against Sun Valley Orchards, a fruit and vegetable farm in New Jersey, had to proceed in federal district court rather than through the Labor Department’s administrative process.

An administrative law judge had ordered the farm to pay hundreds of thousands of dollars in penalties and back wages for allegedly violating H-2A visa program rules. The department’s Administrative Review Board upheld that decision.

The visa program permits employers to recruit seasonal migrant farmworkers to address worker shortages. The employers are required to provide fair pay and various amenities, including housing. The appeals court ruled the company was entitled to go to federal court because the dispute involved private rights more akin to employment law than immigration.

The case turns on SEC v. Jarkesy, a ruling that when the government acts like a private party—enforcing a contract or collecting a debt—it has to use what lawyers call an Article III court, a real federal court with a lifetime-appointed judge, and not its own hearing officer.

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The exception is for public rights, where the government is exercising core sovereign power rather than suing the way anyone else would. Here, the government says fining farms for breaking wage and housing promises tied to the H-2A foreign guest worker program counts as that kind of sovereign power exercised in the immigration field. The employer’s attorney says the dispute is about farm labor conditions and not about who gets to come into the country.

“That classic public rights dispute doesn’t convert to private rights just because the government requires employers to embed those federal regulations in their contracts as a further enforcement mechanism,” she said.

Justice Clarence Thomas seemed to disagree. “So then you can’t really rely on immigration as a basis for this?” he asked.

Chief Justice John Roberts seemed skeptical of the government’s reliance on Oceanic Steam Navigation Co. v. Stranahan (1909), in which the court upheld fines against a steamship company for bringing in passengers with contagious diseases.

He questioned whether the logic behind the decision applied to fining a farm nowadays for things like wages or living amenities.

“It seems to me you’re still trying to … extend that broad authority beyond the justification of its application,” Roberts told Harris.

In other words, Roberts seemed to see a gap between a penalty tied to the act of bringing someone across the border and one tied to conditions long after arrival.

Addressing Robert E. Johnson, attorney for Sun Valley Orchards, Justice Elena Kagan said the case seemed to be about “a kind of visa fraud or immigration fraud.”

She said the employer makes certifications in order to obtain foreign workers, vowing to treat them in a way that “will not undercut domestic workers. And then allegedly does the opposite.”

“So that’s a kind of immigration fraud … at the outset,” Kagan said.

Justice Sonia Sotomayor pushed back on the farm’s argument that “immigration power stops at the border.”

She said the court has long allowed administrative proceedings for deportation even of noncitizens who have lived in the United States for years.

Sotomayor seemed concerned about what impact a ruling in this case could have on other areas of the law.

“So what’s the best way for you to lose? What’s the most narrow way for you to lose?” the justice asked Harris, drawing laughter. She added quickly that she wasn’t predicting the government would lose.

Later, in her rebuttal, Harris said “the least bad” loss for the government would be a ruling that lets the Labor Department impose the penalty first, followed by a full review in federal court in which a judge would look at the case from scratch, without deferring to the agency’s decision.

The Supreme Court is expected to rule on the case by June or July 2027.