What Employers Need to Know

In a decision that could reshape how the U.S. Department of Labor (DOL) enforces the H-2A agricultural guestworker program, the U.S. Court of Appeals for the Third Circuit has ruled in Sun Valley Orchards v. U.S. Department of Labor that employers facing substantial civil money penalties and back-pay awards are entitled to have their cases heard in an Article III court—not solely before the DOL’s in-house administrative law judges (ALJs).

This ruling follows the Supreme Court’s landmark 2024 decision in SEC v. Jarkesy, which struck down the SEC’s use of in-house tribunals to impose civil penalties for securities fraud. The Third Circuit applied the same reasoning to the H-2A context, holding that DOL’s enforcement action against Sun Valley—for alleged violations of its job order obligations to both H-2A and U.S. “corresponding” workers—was, in substance, a common-law breach-of-contract dispute seeking legal remedies.

What Happened in Sun Valley Orchards

Sun Valley, a New Jersey produce grower, was cited by DOL for numerous alleged violations in the 2015 season, including housing deficiencies, lack of promised kitchen access, charging for meals and beverages without notice, unsafe transportation and failure to meet the “three-fourths guarantee” of work hours. DOL’s Wage and Hour Division assessed more than $212,000 in civil penalties and over $369,000 in back wages.

Under DOL’s current rules, an employer who contests such findings must request a hearing before a DOL ALJ. That’s what Sun Valley did, and after the ALJ and DOL’s Administrative Review Board upheld most of the violations, the farm went to federal court—not to re-litigate the facts, but to challenge DOL’s authority to impose these penalties administratively.

The Third Circuit agreed with Sun Valley, reversing the district court’s dismissal and holding:

• Nature of the claim – The enforcement action resembled a breach-of-contract case because the H-2A job order operates as a work contract, and the penalties sought were legal in nature (civil money penalties and deterrent-based back wages).
• Public rights exception doesn’t apply – While H-2A has immigration elements, the violations here related to domestic employment conditions, not the admission or exclusion of foreign nationals. That placed the case outside the narrow “immigration exception” to Article III adjudication.
• No waiver – Sun Valley did not “consent” to ALJ adjudication because DOL gave no meaningful choice; exhaustion arguments were also waived by the government.

The bottom line: if DOL wants to impose civil money penalties and back-pay awards for alleged H-2A contract violations, it must proceed in federal court before an Article III judge.

Why This Matters for H-2A Employers

The decision has immediate and potentially far-reaching implications:

1. Challenge to DOL’s administrative enforcement model – For decades, DOL has relied on its own ALJs to enforce H-2A job order terms. If Sun Valley stands, DOL may have to file its cases in federal court, with all the procedural protections, evidentiary rules and appellate review that entails.
2. Stronger procedural safeguards – Article III courts mean employers get a jury trial right (in cases seeking legal remedies), full application of the Federal Rules of Evidence (e.g., hearsay rule applies in federal court, not in administrative proceedings) and independent judges with life tenure and salary protection.
3. Potential ripple effect nationwide – As of this writing, at least three other cases across the country have been stayed while district courts consider whether DOL has the authority to adjudicate such matters administratively, in light of Jarkesy, or must proceed in Article III courts. Employers facing pending ALJ hearings may wish to consult counsel about whether to raise similar constitutional challenges.
4. Settlement posture changes – DOL has historically used the cost and burden of ALJ litigation to leverage settlements. The prospect of federal-court proceedings—often more time-consuming and expensive for the agency—could shift the balance in negotiations.

Practical Takeaways for Employers

• Assess your risk profile now – Use an H-2A filing agent like Western Growers H-2A Services to review your H-2A compliance practices, especially housing, meals, transportation and hour guarantees. Strong documentation and consistent adherence to job order terms remain your best defense.
• Know your procedural rights – If cited for violations and ordered to pay civil money penalties or back wages, consider whether you can invoke Sun Valley to demand an Article III forum.
• Coordinate with counsel early – Given the evolving legal landscape, legal strategy should be developed before deciding whether to settle, proceed before an ALJ, or challenge DOL’s forum in federal court. This decision is all the more important in light of the Department of Homeland Security’s Farmworker Protection Rule, in which findings of wrongdoing by DOL could later be used by USCIS to prevent employers from using the H-2A program.
• Monitor ongoing litigation – The Sun Valley reasoning could be adopted or rejected by other circuits, in which case the Supreme Court may ultimately resolve the split. Staying informed will help you adapt quickly.

Why This Case Matters

The Sun Valley Orchards decision is a watershed moment for agricultural labor law enforcement. For H-2A employers, it signals that the government’s long-standing administrative process for imposing substantial penalties may no longer be the final word. Understanding both your compliance obligations and your constitutional rights will be essential to navigating DOL enforcement.

For questions about the Sun Valley Orchards decision or the H-2A program, contact the Western Growers H-2A Services team at [email protected].