Petition — St. Regis Paper Co. v. Marshall

Supreme Court brief1979

Ask Donna

What actually matters in this document.

Text

IN THE

Supreme Court of the United States

No.7 f- ia oh.

St. Reais Paper CoMPAny, “Corporation

Petitioner

Ray MarsHAL.L, Secretary of Labor, e¢ al.

Respondents

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Guy FARMER

edtoitx S. Warpman(M s.)

Gary L. LIEBER

F'aRMER, SHIBLEY, McGuINN

RECEIVED & F1oop

’ 1120 Connecticut Ave., N.W.

APR 24 1979 Washington, D.C. 20036

Counsel for St. Regis

OFFICE OF THE CLERK Paper Company

SUPREME COURT, U.S.

MicHAEL A. ROBERTS

St. Regis Paper Company

633 3rd Ave.

New York, New York 10017

Of Counsel to St. Regis

Paper Company

Press oF Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

TABLE OF CONTENTS

Page

Ee ee nr ee ii

Nee ad sie eep see dé n bets O08 1

EE a re 2

Be I IED 5g onc ccccccccncccnccsseess 2

IV CownstitruTIonaL Provisions INVOLVED ............ 2

V =Reeutatory Provisions INVOLVED ............... 2

VI STATEMENT OF THE CASE ....... ccc ccccccccccecs 3

VII Reasons ror GRANTING THE WRIT .............. 6

A The Decision Below Raises Significant and Re-

eurring Problems Involving the Rights and

Responsibilities of All Government Contractors

Under Executive Order 11246 ................ 6

B The Debarment of a Contractor Without a

Prior Hearing Violates the Executive Order

and Denies It Due Process of Law .......... 8

C The Demand for Backpay and Other Retro-

spective Relief Violates the Executive Order

and Encroaches Upon the Jurisdiction Given by

Congress to the E.E.0.C. ....... sete eeeeees 11

D The Exhaustion Concept Was Misapplied to

Defeat The Ends of Justice ................ 17

eed peweweweseves es eet 22

Aprumprons A fmmouem G ..... 2. ccc ccc ccc cccccess la

ii TABLE OF CITATIONS

Page

CasEs:

Abbott Laboratories v. Gardner, 387 U.S. 136, 149

Ce i ec Ona ws fake Dah Rod Ree hed Bae UK 18

American Nursing Homes Assn v. Cost of Living Coun-

cil, 497 F.2d 909, 913 (10th Cir. 1974) ........... 19

Arnett v. Kennedy, 416 U.S. 134, 164 (1974) ......... 10

Ashland Oil Company of California v. Federal Energy

Administration, 389 F. Supp. 1119, 1123°(N.D.

EE Sih ceo6cis 9005845 Sb bosons bad PasoR RS 19

Boddie v. Connecticut, 401 U.S. 371, 378-79 (1971) ...10, 11

Chrysler Corporation v. Brown, —— U.S. ——, 47

U.S.L.W. 4434 (No. 77-922, April 18, 1979) ,....13, 14

Conrac Corp. v. United States, No. 773153-HP (C.D.

SR Ss rrr irre Ty Terr 9

Contractors Association of Eastern Pennsylvania v.

Secretary of Labor, 442 F.2d 159, 176 (3d Cir.

1971); cert. den., 404 U.S. 854 (1971) ....... 13, 14, 17

Diapulse Corporation of America v. Food and Drug

Administration, 505 F.2d 75, 78 (2d Cir. 1974) ... 19

Equal Employment Opportunity Commission v. Ameri-

ean Telephone & Telegraph Company, —— F.

Supp. ——, 13 FEP 392, 415 (E.D, Pa. 1976) .... 17

Equal Employment Opportunity Commission v. Ameri-

can Telephone & Telegraph Company, 506 F.2d

ee Sh co icc'es sw eiub caceee eons 17

Farkas v. Texas Instruments, Inc., 375 F.2d 629 (5th

Cir. 1967), cert. den., 389 U.S. 977 (1967) ....... 12

Farmer v. Philadelphia Electric Co., 329 F.2d 3 (3d

Se ME abo 540 ai ha aa leas Kav ave Nemorrss 12

Fuentes v. Shevin, 407 U.S. 67 (1972) ............... 10

Gardner v. Toilet Goods Association, 387 U.S. 167, 170

ED CEs Ch basa SKKe LACORS a Lene eks bR<eab enh a’ 18

Goss v. Lopez, 419 U.S. 565, 575 (1975) .............. 10

Illinois Tool Works v. Marshall, —— F. Supp. ——,

17 FEP 520, 522 (N.D. Ill. 1978) ............ 9, 19, 20

Table of Citations Continued ili

Page

International Harvester Co. v. Marshall, No. IP 77-

159-C (S.D. Ind. March 25, 1977) .............. 9

McKart v. United States, 395 U.S. 185, 193 (1969) ... 18

Myers & Myers, Inc. v. United States Postal Service,

527 F.2d 1252, 1259 (D.C. Cir. 1975) ............ 9

Pan American World Airways v. Marshall, 439 F.

ee Dy 6 ee 8-9

Sundstrand Corp. v. Marshall, —— F. Supp. ——, 17

ee Ce Ss ED 6k. bs 6 a's scp danccaecaxs 9

Texaco, Inc. v. Marshall, No. B-77-416-CA (E.D. Tex.

eR MEE Slack bg ent wat 30 Oo bk 9 ARS es 9

Toilet Goods Association v. Gardner, 387 U.S. 158, 162

Cer ey er mr rrererre. 4. fear 18

Traylor v. Safeway Stores, Inc., 402 F. Supp. 871

Cy Sle, EMS is Rian tT oA ERS eden 12

United States v. Duquesne Power & Light Company,

423 F. Supp. 507 (W.D. Pa. 1976) ............. 14, 15

United States v. East Texas Motor Freight System,

564 F.2d 179, 184 (Sth Cir. 1977) ............... 12

United States v. Lee Way Motor Freight, Inc., —— F.

Supp. ——, 15 FEP 1385, 1395-99 (W.D. Ok.

ss | Ee Mea Fat) ee oh mer Dwar ay 14-15, 17

Weber v. Kaiser Aluminum & Chemical Corp., 563 F.2d

216, 222 (5th Cir. 1977); cert. granted, —— US.

—, 47 U.S.L.W. 3401-02 (1978) .............. 16

Youngstown Sheet & Tubing Company v. Sawyer, 343

re ea aa ney kok kibhck ees « 17

CONSTITUTIONAL Provisions:

ey I ee ceed oeelee es cake 2

StaTuTEs AND REGULATIONS:

Title VII of the Civil Rights Act of 1964 ........ 12, 15, 16

United States Code Title 28 § 1254(1) .............. 2

iv Table of Citations Continued

Page

United States Code Title 40 § 486(a) ................ 13

Byvccutive Order BORED cciciccssctivusanesseseasene 15

Executive Order 11246 ............ 2, 3, 5, 6, 7, 8, 9, 11, 12,

13, 15, 16, 17, 19, 21

41 OF. BR. 6 GD-2SReE cic icnccanudae vacua 2,3

44 OP R. 4GDG2 25.00 cccsccsadpateasseeeeeee 2, 3,7

41 OF RR. SOG BS . cocceiccctaee ieee 2, 3, 8, 10

LeGaL PERIODICALS:

Morgan, ‘‘ Achieving National Goals Through Federal

Contracts: Giving Form to an Unconstrained Ad-

ministrative Process’’, 1974 Wis.L.Rev. 301, 309-

1B (ROVE) 2... cwsecnceecan hee aee tere eeeees 13

‘*Executive Order No. 11246: Presidential Power to

Regulate Employment Discrimination’’, 43 Mo.L.

Rev. 451, 477-82, 488-495 (1978) ............... 13, 14

MISCELLANEOUS:

Legislative History of the Equal Employment Oppor-

tunity Act of BOUG oo vsccsdstcncasuee ee ueeaneies

ks AOD iA SORA etl a EE, He Bi sales dela

ee st

ial ie eat Ane hae

IN THE

Supreme Court of the United States

No.

Sr. Reais Paper Company, A Corporation

Petitioner

Vv.

Ray MarsHALL, Secretary of Labor, et al.

Respondents

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

The Petitioner respectfully prays that a Writ of

Certiorari issue to review the judgment and opinicn

of the United States Court of Appeals for the Ten‘h

Circuit.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at

18 FEP 1635 (10th Cir. 1979). The District Court

opinion is reported at 14 FEP 1641 (Col. 1977). Copies

of these opinions are attached as Appendices A and B.

JURISDICTION

The Judgment of the Court of Appeals was entered

on January 31, 1979. The Court’s jurisdiction is in-

voked under 28 U.S.C. § 1254(1).

QUESTION PRESENTED

Whether under the Fifth Amendment and Executive

Order 11246 the Court below was correct in holding

that St. Regis, a government contractor, was required

to exhaust lengthy and futile administrative proced-

ures before resorting to the courts to determine the

legality of the Department of Labor’s regulations

which mandate:

a. De facto debarment from two contracts without a

prior hearing; and,

b. Exaction of retrospective remedies of back pay

and seniority for members of an “affected class’’.

CONSTITUTIONAL PROVISIONS INVOLVED

The Fifth Amendment to the United States Consti-

tution states in pertinent part:

No person ... shall be deprived of life, liberty

or property, without due process of law.

REGULATORY PROVISIONS INVOLVED

1. Executive Order 11246 is attached as Appendix C.

2. 41 C.F.R. § 60-1.26(a) (2), 41 C.F.R. § 60-2.1 and

41 C.F.R. § 60-2.2 are attached as Appendix D.

et SN em Via

STATEMENT OF THE CASE

St. Regis Paper Company is a major producer of

lumber, lumber products, paper and related products

in more than 100 facilities located throughout the na-

tion. St. Regis has a substantial number of government

contracts and subcontracts. As a primary and subcon-

tractor, St. Regis is covered by Executive Order 11246,

which requires government contractors to effectuate

non-discrimination in employment.

In February 1976, General Services Administration,

the designated compliance agency, conducted a com-

pliance review at a Company lumbermill in Libby,

Montana, and concluded that St. Regis had not met

established goals for the employment of women. GSA

accordingly issued a ‘‘show cause notice,” giving St.

Regis 30 days to correct the alleged deficiencies or face

debarment. The notice stated in part:

You are hereby advised that St. Regis Paper Com-

pany can be found non-responsible to perform any

government work until this show cause notice is

finally and favorably resolved.

This notice meant that St. Regis would not be eligi-

ble to receive any government contract or subcontract

until St. Regis had satisfied GSA that the alleged ‘‘de-

ficiencies” had been corrected. In fact, the OFCCP

regulations specifically provide for de facto debarment

without a prior hearing. 41 C.F.R. § 60-2.2(b). 41

C.F.R. § 60-1.26(a)(2) and 60-2.1(b) provide for re-

trospective make-whole remedies—including back pay

and retroactive seniority for an alleged ‘‘affected

class’’.

Se oe erm mT ten ee

OFCCP promised St. Regis that a hearing on the

‘‘substantial issues of law and fact’’ would be held.

These issues would include the validity of de facto de-

barment and retrospective remedies. Under the then-

existing regulations, OFCCP was obligated to provide

a separate hearing on these “‘substantial issues,’’ be-

fore proceeding to enforcement. Notwithstanding that

obligation and without any such hearing, the Depart-

ment of Labor issued a Complaint instituting enforce-

ment proceedings.

In the course of these enforcement proceedings, St.

Regis was formally advised by the Administrative Law

Judge assigned to the case that the issue of de facto de-

barment was not before him. He waffled on the issue of

retrospective make-whole remedies but eventually con-

cluded that the factual, but not the legal, issue was

before him. He made it clear that he would not and

could not, however, assert any authority to set aside

any agency regulations. As an appointee of the agency,

he could not question the validity of the regulations.

In short, the record shows that the two crucial issues

which St. Regis seeks to have decided by the courts will

never be decided in the administrative proceeding. Re-

sorting to these administrative procedures is therefore

a useless charade. These are legal issues going to gov-

ernment authority and they are ripe for judicial re-

view.

Faced with debarment and a fruitless administrative

proceeding, St. Regis filed a complaint in the United

States District Court for the District of Colorado

against the Secretary of Labor and others, seeking

declaratory judgment and injunctive relief.

St. Regis alleged that certain regulations promul-

gated by the OFCCP were arbitrary and capricious,

contrary to due process, and in excess of the authority

granted by Executive Order 11246. Specifically, the

complaint contended that the regulations which man-

dated the following procedures were unlawful: (1) de-

barment without a hearing; and (2) retrospective re-

lief for an ‘‘affected class’’. The complaint sought both

a judement that these regulations were unlawful and

unenforceable and appropriate injunctive relief re-

straining the Government from further enforcement

of said regulations.

The district court and the United States Court of

Appeals for the Tenth Circuit refused to reach the

merits.

To put this case in proper em, a few additional

facts may be useful.

We have referred to a March 22, 1976, show cause

notice issued by GSA to St. Regis. This notice alleged

‘*underutilization’’ of females. On June 2, 1976, St.

Regis, faced with the threat of loss of government con-

tracts, entered into a “conciliation’’ agreement with

GSA resolving the issue of underutilization of females

to GSA’s satisfaction without any admission of liabil-

ity. App. E. Before this conciliation agreement was en-

tered into, the GSA had issued a second show cause

notice seeking “retroactive awards of pay and service

credits” for the same alleged ‘‘affected class”. App. F.

An addendum to the conciliation agreement specifically

states that it resolves all issues except thoissues of

retroactive seniority and back pay to the alleged ‘‘af-

fected class’’ of females.

This was the only issue left unresolved by the con-

ciliation agreement of June 2, 1976.

vil

REASONS FOR GRANTING THE WRIT

The Decision Below Raises Significant and Recurring Problems

Involving the Rights and Responsibilities of All Government

Contractors Under Executive Order 11246.

The scope of Executive Order 11246 is all-encompas-

sing. All Federal contractors and subcontractors are

bound by its terms for all their operations and not for

just operations which have government contracts. A

high-ranking official of OFCCP has estimated that ap-

proximately 250,000 contractors employing 35 million

persons are covered by the Order.

The threshold issue before the Court is whether St.

Regis must first exhaust its administrative remedies.

However, the determination of that issue will turn in

large part on the nature and importance of the under-

lying issues presented, and an evaluation of the extent

to which an administrative proceeding is necessary and

productive as opposed to a direct judicial resolution of

the underlying issues.

These two underlying issues are: (1) whether the

OFCCP ean constitutionally and under the Executive

Order debar a contractor without any prior hearing,

and (2) whether OFCCP has the authority to exact

retrospective remedies of backpay and seniority.

St. Regis and government contractors generally are

constantly subjected to threats of debarment and con-

tract termination should they refuse to provide such

retrospective remedies, and are still being threatened

with debarment without prior hearing.

St. Regis respectfully contends that the courts below

were in error in refusing to decide these fundamental

and recurring issues as to the rights and responsibili-

ties of government contractors. Instead, the courts be-

low held that the Company must first exhaust its ad-

ministrative remedies. St. Regis further contends that

it has no administrative remedies, .

Contrary to the opinions below, the agency regu-

lations and operations at issue here constitute ‘‘final

agency action’’. They present purely legal issues which

can only be decided by the courts.

The on-going administrative proceeding is illusory

because its result is foreordained. It will not address

the urgent legal issues which only the courts have the

authority to resolve, and upon which the validity of the

administrative proceedings depend. The illusory na-

ture of the administrative procedure is illustrated by

the fact that in a pre-hearing conference held on Octo-

ber 20, 1978, the Administrative Law Judge ruled that

the regulations allowing the government to ‘‘passover”’

or declare a contractor ineligible for Federal contracts

without a hearing were not even at issue in the adminis-

trative proceeding.

Furthermore, as to the authority of the OFCCP to

exact back pay and other retrospective remedies, the

position of the Government is clear. Since the incep-

tion of this lawsuit, 41 C.F.R. § 60-2.1(b) has been re-

vised to specifically provide for backpay relief as a

remedy for violation of the Executive Order. These

OFCCP regulations constitute final agency action.

They are issued under the authority of the Secretary

of Labor—the same official who would hear the appeal

from an adverse decision of an Administrative Law

Judge, and they are binding on the Law Judge.

The regulations of the Department of Labor

(OFCCP) not only represent an unconstitutional ex-

tension of executive power, but are also in clear con-

travention of the Executive Order itself.

The Debarment of a Contractor Without a Prior Hearing Violates

the Executive Order and Denies It Due Process of Law.

The Government routinely issues show cause notices

debarring government contractors without a prior

hearing. The purported authority for such a practice

is an OFCCP regulation, 41 C.F.R. § 60-2.2(b) (at-

tached as Appendix D). It provides for a finding of

‘*non-responsibility’’ and debarment from government

contracts without a prior hearing. The only guarantee

which a contractor is given under the regulations is

that it will not be ‘‘passed over’’ more than twice with-

out receiving a hearing. The Executive Order forbids

debarment without prior hearing. Section 208(b) states

in pertinent part:

No order for debarment of any contractor from

further Government contracts under Section 209

(a)(6) shall be made without affording the con-

tractor an opportunity for a hearing.

Further, the practice denies contractors constitutional

due process.

The Government has argued in this and other cases

that a permanent ‘‘debarment” is distinguishable from

a ‘‘passover” for two contracts. This is a ludicrous

argument. It has been rejected by virtually all of the

lower courts which have ruled on this issue. In Pan

American World Airways v. Marshall, 439 F. Supp.

487 (S.D.N.Y. 1977), the court ruled that the “non-

responsibility’’ finding itself constituted ‘“‘debarment’”’ :

I have looked to the only definition of ‘‘debar-

ment’’ in the Order—the functional one contained

in Sections 208(b) and 209(a)(6)—and find that

a ‘‘debarment’’ occurs when an agency is ordered

to refrain from entering into future contracts

with a contractor. No minimum number of affected

contracts is required. The denial of the MAC con-

tract to Pan American without provision of the

opportunity for hearing required by the Order

constitutes an action by the agency ‘‘without ob-

servance of procedures required by’’ the Order.

[439 F. Supp. at 496; emphasis supplied. ]

Accord: Sundstrand Corp. v. Marshall, —— F. Supp.

—, 17 FEP 482 (N.D. Ill. 1978); Illinois Tool

Works v. Marshall, —— F. Supp. ——, 17 FEP 520

(N.D. Ill. 1978); Conrac Corp. v. United States, No.

773153-HP (C.D. Cal. Aug. 24, 1977); International

Harvester Co. v. Marshall, No. IP 77-159-C (S8.D. Ind.

March 25, 1977); Texaco, Inc. v. Marshall, No, B-77-

416-CA (E.D. Tex. August 23, 1977). See also Myers

& Myers, Inc. v. U.S. Postal Service, 527 F.2d 1252,

1259 (D.C. Cir. 1975), where the court noted ‘‘[t]he

fact that the Service did not label its actions as a de-

barment is inconsequential, for the Service cannot by-

pass these important procedural safeguards merely by

omitting the formal label to the sanction applied.”’

The OFCCP’s position that St. Regis is ineligible for

a Government contract without guaranteeing it a right

to a prior hearing raises not only a legal issue under

the Executive Order but also a constitutional question

under the due process clause of the Fifth Amendment.

The right of due process under law is constitutionally

mandated and neither subject to legislative or execu-

tive covntermand. In a number of recent cases, the

Court has carefully enunciated when the due process

right comes into play:

The applicability of the constitutional guarantee

of procedural due process depends in the first in-

stance on the presence of a legitimate “‘property”’

or “‘liberty’’ interest within the meaning of the

Fifth or Fourteenth Amendment. Governmental

deprivation of such an interest must be accompan-

ied by minimum procedural safeguards, including

some form of notice and hearing. [Arnett v. Ken-

nedy, 416 U.S. 134 at 164 (1974) (J. Powell,

Blackmun, concurring). ]

Due process protection can be read broadly so as to

reach ‘‘any significant property interest’’. Fuentes v.

Shevin, 407 U.S. 67, 87 (1972), citing Boddie v. Con-

necticut, 401 U.S. 371, 379 (1971). So long as the prop-

erty deprivation is not de minimis, due process rights

are constitutionally mandated. Goss v. Lopez, 419 U.S.

565, 575 (1975).

St. Regis has been and will continue to be subjected

to a significant ‘‘deprivation’’ of a substantial prop-

erty interest in maintaining and obtaining its govern-

ment contracts as a result of the Government’s finding

of nonresponsibility.

This significant deprivation of a property interest is

not cured by the OFCCP Regulations providing for a

possible pre-‘‘passover’’ hearing on substantial issues

of law and fact. Those Regulations clearly reveal that

opportunity for such a hearing is exclusively within

the discretion of the contracting officer or the Director

of OFCCP. 41 CFR Part 60-2.2(b). Although prom-

ised such a hearing, St. Regis has never given one.

It is well-settled that the right to a due process hear-

ing may be waived by the affected party but not denied

by the Government. Boddie v. Connecticut, supra at

378-379. St. Regis has not waived its right to a hearing

before debarment. To debar it without such hearing

deprives St. Regis of due process and violates the Ex-

ecutive Order.

The Demand for Backpay and Other Retrospective Relief Violates

the Executive Order and Encroaches Upon The Jurisdiction

Given by Congress to The E.E.O.C.

The entire basis for the on-going administrative pro-

ceeding is the demand for backpay and retrospective

seniority for an alleged ‘‘affected class’’ of females.

There is absolutely no basis for such retrospective

make-whole relief in the Executive Order.

The contractor’s obligations under the Order with

respect to employment are couched entirely in prospec-

tive terms, with emphasis on affirmative action pro-

grams. E.O. 11246, Part II, subpart B, § 202 (included

in Appendix C).

Section 209 of the Executive Order is the only pro-

vision in the Executive Order prescribing explicit sanc-

tions and penalties for violations of the Order. This

Section does not mention backpay, seniority relief or

any other type of retrospective remedy. Nowhere in

the Executive Order, and more specifically, nowhere in

Section 209, is there any “catchall” provision giving

the Secretary general authority to seek any type of

sanction beyond those sanctions specifically provided.

Section 209 is a finite list of sanctions that the Secre-

tary of Labor may employ. These are: (1) publication

of the names of violators; (2) recommending certain

violations to the Department of Justice for enforce-

ment; (3) recommending to the Equal Employment

Opportunity Commission and Department of Justice

that Title VII proceedings be instituted; (4) recom-

mending to the Department of Justice that criminal

proceedings be instituted; (5) cancellation, termina-

tion or suspension of existing contracts; and (6) de-

barment.

It is thus clear that the express terms of the Execu-

tive Order do not directly or indirectly empower the

Secretary of Labor to seek backpay, seniority credit or

any other type of retrospective relief for employment

discrimination. Such authority is solely vested in the

EEOC and the Department of Justice under Title VIT

of the Civil Rights Act of 1964. The Executive Order

reenforces this exclusive jurisdiction by its express

provision for referral of Title VII proceedings to the

EEOC and the Department of Justice.

This separation of jurisdiction is further supported

by United States v. East Texas Motor Freight System,

564 F.2d 179, 184 (5th Cir. 1977). In that case the

Court concluded that ‘‘nothing in this Order [Execu-

tive Order 11246] suggests any authority to direct ret-

roactive seniority benefits to third party discrimina-

tees.” Similarly, other courts have held that, unlike

Title VII, there is no authority under the Executive

Order for a private right of action. Traylor v. Safeway

Stores, Inc., 402 F. Supp. 871 (N.D. Cal. 1975) ; Far->

mer v. Philadelphia Electric Co., 329 F.2d 3 (3rd Cir.

1964); Farkas v. Texas Instruments, Inc., 375 F.2d

629 (5th Cir. 1967), cert. denied 389 U.S. 977 (1967).

The courts in these cases held backpay and other pri-

vate remedies were not available under the Executive

Order.

To the extent that the Executive Order has been

given any credence by the lower courts, such authority

has been shakily premised on the powers granted to the

President under the Federal procurement statute. Con-

tractors Association of Eastern Pennsylvania v. Secre-

tary of Labor, 442 F.2d 159 (3d Cir. 1971), cert. den.,

404 U.S. 854 (1971). 40 U.S.C. § 486(a) states:

The President may prescribe such policies and di-

rectives not inconsistent with the provisions of this

Act, as he shall deem necessary to effectuate the

provisions of said Act, which policies and direc-

tives shall govern the Administrator and Execu-

tive agencies in carrying out their respective func-

tions hereunder.

This is a weak reed upon which to hang the right to

invoke sanctions against a government contractor for

alleged discrimination and this rationale has been se-

verely criticized by commentators.’ Reservations as to

the legislative base for the Executive Order have re-

cently been expressed by this Court in the case of

Chrysler Corp. v. Brown, —— U.S. »47 U.S.L.W.

4434 (No. 77-922, April 18, 1979).? The Executive Or-

* der is certainly not an Act of Congress. Support for

* See Morgan, ‘‘ Achieving National Goals Through Federal Con-

tracts: Giving Form to an Unconstrained Administrative Process’’,

1974 Wis.L.Rev. 301, 309-313 (1974) ; ‘‘Exeeutive Order No. 11246:

Presidential Power to Regulate Employment Discrimination’’, 43

Mo.L.Rev. 451, 477-482 (1978).

?In this decision, the Court showed serious concern about the

validity and legislative support for the Executive Order and even

more concern about the regulations which seek to draw upon the

Executive Order for their legitimacy.

retrospective relief under the Order cannot be inferred

from the generalized procurement statutes which make

no reference to equal employment opportunity and cer-

tainly not to retrospective remedies. Further, the en-

tire thrust of the Executive Order itself relates to fu-

ture conduct and does not address itself to make-whole

remedies.

The Government position on these retrospective

remedies has been given little support by the lower

courts. One case, United States v. Duquesne Power and

Light Company, 423 F. Supp. 507 (W.D.Pa. 1976), has

adopted the Government’s position. That case has been

severely criticized by commentators.’ Other courts

which have also reviewed the Order have drawn a clear

distinction between authority for imposing prospective

sanctions as opposed to retrospective relief. This Court

itself, in Chrysler, stated, ‘‘[t]he origins for Executive

Order 11246 are somewhat obscure and have been

roundly debated by commentators and courts.”’ In Con-

tractors Association, the court stated:

Plaintiffs are not being discriminated against.

They are merely being invited to bid on a contract

with terms imposed by the source of the funds.

The affirmative action covenant is no different in

kind than other covenants specified in the invita-

tion to bid. The Plan does not impose a puntsh-

ment for past misconduct. It exacts a covenant for

present performance. [442 F.2d 159 at 176. (em-

phasis added). ]

In U.S. v. Lee Way Motor Freight, Inc., —— F.

Supp. ——, 15 FEP 1385, 1395-1399 (W.D.Oklahoma

1977), the court adopted the Report of the Special

Master with respect to his finding that individual retro-

2See e.g. ‘‘Presidential Power to Regulate Employment Dis-

crimination’’, supra at 488-495.

spective relief was not available under the Executive

Order. In specifically rejecting Duquesne, the decision

in Lee Way recognized not only the prospective nature

of the Executive Order but also the separate and dis-

tinct purposes of Title VII of the Civil Rights Act:

I conclude that E.O. 10925 [predecessor to E.O.

11246] was not intended to provide for actions by

the Government for breach of contract to recover

back pay or retroactive seniority for individuals

injured by the contractor’s noncompliance with

the E.0. Accordingly, the limits on individual re-

lief are those provided by 42 U.S.C. 2000e-6 [Title

VII]. [15 FEP 1385 at 1399.]

The distinction between the purposes and limitations

of Title VII and the Executive Order are significant.

By enacting Title VII, the Congress sought to establish

a wide-ranging program to eradicate employment dis-

crimination. The remedies for its violation are broad

and with the exception of limitations expressly set

forth in the statute itself, are all-encompassing. They

include due process protections which do not appear in

the OFCCP Regulations.

Under Title VII, upon a finding by the EEOC as to

whether or not there is probable cause to believe an

‘ employer has violated its provisions, suit may be

brought on a de novo basis in United States District

Court on the issue of discrimination. The EEOC has

no authority to enforce any sanctions or penalties

against an employer unless the employer either volun-

tarily accedes to their imposition, or it is ordered to do

so by a Federal court after the demands of due process

in the Federal court system have been met. Under

OFCCP regulations, the Department of Labor has

given itself the authority to impose various penalties,

including retrospective remedies and contract pass-

over, without opportunity for a prior due process hear-

ing for the contractor alleged to be in violation.

OFCCP regulations provide for such broad relief, not-

withstanding the fact that the sanctions available un-

der the Executive Order are severely limited. It was

not the intent of the Executive Order to trespass upon

the remedies available under Title VII. Title VII

remedies do include the award of individual backpay

and seniority credits. If the Executive Order mandated

such relief it would be trespassing on ground specifi-

cally reserved by Congress to the EEOC. The Fifth

Circuit in Weber v. Kaiser Aluminum & Chemical

Corp., 563 F.2d 216, 222 (1977), cert. granted, ——

U.S. — , 47 U.S.L.W. 3401-02 (1978), recognized this

distinction:

We must judge the legality of Kaiser’s training

ratio in light of both Title VII with its ‘‘make-

whole’’ objective, and Executive Order 11246, with

its mandate for affirmative action that does not it-

self discriminate.

The legislative history of Title VII is consistent

with the position taken here. The Senate defeated an

amendment to merge OFCCP with the EEOC. Senator

Saxbe succinctly described the distinction between the

Executive Order and the authority vested in the EEOC

under Title VII:

The Executive Order program should not be con-

fused with the judicial remedies for proven dis-

crimination which unfold in a limited and expen-

sive case by case basis. Rather, affirmative action

means that all Government contractors must de-

velop programs to insure that all share equally in

the jobs generated by the Federal Government’s

spending. Proof of overt discrimination is not re-

quired. [Legislative History of the Equal Employ-

ment Opportunity Act of 1972, p. 915.]

Since the OFCCP’s regulations and policies seeking

backpay and other retrospective relief exceed the scope

of the Executive Order, they are unlawful. See e.g.,

Contractors Association of Eastern Pennsylvania v.

Secretary of Labor, supra at 175; EEOC v. American

Telephone & Telegraph Company, —— F. Supp. —,

13 FEP 392, 415 (E.D.Pa. 1976) ; and U.S. v. Lee Way

Motor Freight, supra. Strict scrutiny of the Order is

necessary in view of its status as a creature of the Ex-

ecutive and as an asserted basis for promulgating

OFCCP regulations. The Third Circuit has stated:

While it is true that we have held that the regula-

tions issued under Executive Order 11246 have the

force and effect of law [citing Contractors Asso-

ciation | it is quite a different thing to say that the

Executive Order and regulations are themselves

statutes. This we cannot do. [Equal Employment

Opportunity Commission v. American Telephone

& Telegraph Company, 506 F.2d 735 at 740 (3rd

Cir. 1974).]

The Executive Branch cannot bootstrap its limited

authority so as to extract retrospective remedies under

the guise of agency regulations which themselves trans-

gress the Executive Order. By such method the Gov-

ernment is violating the separation of powers principle

* that has served as the bulwark of our Constitutional

system. See Youngstown Sheet & Tube Company v.

Sawyer, 343 U.S. 579 (1952).

The Exhaustion Concept Was Misapplied to Defeat The

Ends of Justice.

In determining whether jurisdiction lies for court

review of an agency action, the courts must determine

whether the issue is ripe for judicial resolution, while

at the same time assessing the correlative advantage of

a preliminary administrative proceeding. Abbott Lab-

oratories v. Gardner, 387 U.S. 136, 149 (1967) ; Totlet

Goods Association v. Gardner (Toilet Goods I), 387

U.S. 158, 162 (1967) ; Gardner v. Totlet Goods Associa-

tion (Toilet Goods II), 387 U.S. 167, 170 (1967). In

balancing these interests, it is to be emphasized that the

doctrine of exhaustion of remedies is not a rule of con-

stitutional construction but rather a rule of judicial

convenience, developed to avoid premature interven-

tion by the courts in administrative proceedings. It is

a flexible rule, subject to numerous exceptions. Abbott .

Laboratories v. Gardner, supra; McKart v. United

States, 395 U.S. 185, 193 (1969).

The threshold issue as decided by the Court in Ab-

bott is whether the action for which review is sought

constitutes ‘‘final agency action”. Where the action

sought to be reviewed constitutes final agency action

it is ripe for judicial review. The test of justiciability

is already met where purely legal questions of consti-

tutional or statutory authority are present, or where

as here, there are questions relating to the scope of the

Executive authority.

An examination of this case reveals that the agency

regulations and actions here constitute ‘*final’’ agency

action. As already explained, the two important issues

we raise will not even be addressed in the administra-

tive proceeding. To require St. Regis to exhaust a pro-

ceeding that is fruitless and the result foreordained is

a travesty and an unjustified burden.

There is no need for the development of an adminis-

trative record since the issues which St. Regis seeks to

raise relate to the authority of the Agency to act as it

has said it will act. Moreover, the OFCCP’s position on

the underlying questions raised by this petition are

firmly imbedded in agency regulations which are bind-

ing on those who will conduct and decide the ‘‘adminis-

trative” proceeding. The result is foreordained. Only

its legality is in issue. As the Second Circuit stated in

Diapulse Corporation of America v. Food and Drug

Administration, 505 F.2d 75, at 78 (2nd Cir. 1974) :

Since the issue here is whether the proposed fees

were legally authorized there is no need to develop

a detailed factual record for purposes of decision,

nor is there any area for the exercise of discretion.

And on this legal question of authorization, agency

expertise is of little help to a reviewing court.

Accord: American Nursing Homes Assn. v. Cost of

Inving Counetl, 497 F.2d 909, 913 (10th Cir. 1974);

Ashland Oil Company of California v. Federal Energy

Administration, 389 F. Supp. 1119, 1123 (N.D. Cal.

1975).

The likelihood that St. Regis as well as other Federal

contractors would be subjected to yet additional show

cause notices threatening de facto debarment is a cer-

tainty. In Illinois Tool Works v. Marshall, —— F.

Supp. ——, 17 FEP 520 (N.D. Ill. 1978), the court

- found de facto debarment violative of the plaintiff’s

due process rights. As to plaintiff’s standing to bring

the matter, the Court stated:

_ Since plaintiff is now obtaining the administra-

tive hearing which it originally sought, defendants

further assert that there is no longer a justiciable

controversy between the parties. However, the al-

leged violation of E.O. 11246 remains unchanged,

and therefore defendants could still disqualify the

plaintiff from government contracts and from sub-

contracts with other government contractors... .

Thus, plaintiff has alleged a governmental policy

which can adversely affect its interests, an alleged

violation of the Federal Constitution which is ca-

pable of repetition and which defendants cannot

render moot merely by granting an administrative

hearing. See Super Tire Engineering Co. v. Mc-

Corkle, 416 U.S. 115 (1974) at 125-26, Gray v.

Sanders, 372 U.S. 368 (1963); see also Atlantic

Richfield Co. v. Oil, Chemical & Atomic Workers

International Union, AFL-CIO, 447 F.2d 945, 947,

(7th Cir. 1971). [17 FEP at 522.]

With respect to exhaustion of remedies, [Jlinots Tool

further noted that issuance of a show cause notice, and

resulting status to a government contractor,

are steps in the administrative process which can

cause harm to the plaintiff, which can be repeated

... and which the plaintiff is entitled to have re-

viewed by this Court .... Therefore, the pending

administrative proceeding does not remove the al-

legedly unconstitutional harm which can be caused

by another letter to show cause. [Id., emphasis

supplied. ]

The Administrative Law Judge in the pending ad-

ministrative proceeding stated at a hearing held on

October 20, 1978, that the ‘‘pass-over”’ issue would not

be an issue in the case before him:

I thought I had indicated I had at an early pre-

hearing conference indicated the passover, whether

you [St. Regis] had been passed over for ccntracts

without a hearing, was not an issue in this case.

... [App. G.]

While not positing the issue of backpay and other

retrospective relief as a non-issue like that of the pass-

over, it is clear that the ALJ intended to convey the

impression that that was not what concerned him and

that he would give short shrift to it.

I also indicated that with regard to the scoy

the authority of the Secevtnsy in pore a

regulations and the constitutionality of the regu-

lations on their face, it is generally accepted that

Administrative Agencies and Administrative Law

Judges of those agencies, have to accept the va-

lidity of the regulations and the constituti

of the regulations. [App. G.] ee ead

CONCLUSION

For the above reasons, we respectfully submit that

the Petition for Certiorari should be granted. The Ex-

ecutive Order relating to equal employment obliga-

tions of government contractors had its genesis in 1941

and has undergone revision at various times and now

stands as Executive Order 11246. These changes have

been accompanied by a proliferation of Federal Regu-

lations purporting to draw their authority from the

Executive Order. The legitimacy of the Executive Or-

der is itself questionable. OFCCP apparently seeks to

duplicate and to a degree preempt the function of the

agency established by Congress to remedy violations

of equal employment rights—the KEOC. It is, we re-

spectfully suggest, time for this Court to examine these

competing structures and clarify the rules that apply.

Respectfully submitted,

Guy FARMER

JupITH S. WALDMAN

Gary L. LIEBER

FARMER, SHIBLEY, McGuUINN

& FLoop

1120 Connecticut Ave., N.W.

Washington, D.C. 20036

Counsel for St. Regis

Paper Company

MicHAEL A. ROBERTS

St. Regis Paper Company

633 3rd Ave.

New York, New York 10017

Of Counsel to St. Regis

Paper Company

APPENDIX

APPENDICES

TABLE OF CONTENTS

Page

AppEenDIxX A

St. Regis Paper Company v. Marshall, Opinion

of United States Court of Appeals for the Tenth

ee ee eEe LTE b.66 kok 4660s 4c 000 68's la

Appenpbix B

St. Regis Paper Company v. Usery, Opinion of

the United States District Court for the District

ee is 5 es 68-6 eens 0 Obes 8a

AppeNpDIx C

| 13a

AppenbDIx D

ee EE ENT | 27a

ee ss dw gee eh sce sd ee neds 28a

Ne Te ies eu Weveee seuss 30a

Appenpix E

Comenremenem Amroemoent ... 2.0... ccc ccc csscccess 34a

Appenpix F

Show Cause Notice 5/14/76 .............0.000e- 40a

AppEeNbDIx G

Portions of Hearing of October 20, 1978 in United

States Department of Labor v. St. Regis Paper

Company, Case No. 78-OFCC-1, in Administrative

Proceedings before the Department of Labor .... 46a

APPENDIX A

Sr. Reais Paper Co. v. MARSHALL

U.S. COURT OF APPEALS, TENTH CIRCUIT (DENVER)

St. Regis Paper Company v. Marshall, Secretary of

Labor, et al., No. 77-1280, January 31, 1979

* * * *

Appeal from the U.S. District Court for the District of

Colorado (14 FEP Cases 1641). Affirmed.

Before Setu, Chief Judge, and Lewis and McWiuI1aMs,

Circuit Judges.

Full Text of Opinion

Lewis, Circuit Judge:—Plaintiff brought this action in

the United States District Court for the District of Colo-

rado challenging certain regulations, policies and practices

of the Secretary of Labor, The General Services Adminis-

tration (GSA) and the Office of Federal Contract Compli-

ance Programs (OFCCP). This appeal is from a judgment

of that court dismissing the action for failure to exhaust

administrative remedies.

[Facts ]

In February, 1976, GSA conducted a routine inspection

* of plaintiff’s Libby, Montana facility to determine compli-

ance with Executive Order 11246, which requires govern-

ment contractors to agree not to engage in discriminatory

employment practices. GSA found that plaintiff had devi-

ated from its affirmative action program in the employment

of women, and a notice to show cause was issued on March

22, 1976, informing plaintiff that if it did not correct the

violations within 30 days or show cause for its failure to

do so, GSA would commence enforcement proceedings. The

notice also advised plaintiff that it could be found nonre-

sponsible to perform government contracts (i.e., “passed

over’) unless and until the show cause notice was resolved.

Plaintiff responded to the show cause notice by letter in

which it outlined actions to GSA by which it proposed to

correct the violation and requested GSA to rescind the

notice in order to avoid subjecting plaintiff to “de facto

debarment” from future government contracts. Plaintiff

also sent a telegram to Lawrence Lorber, the director of the

OFCCP pursuant to 41 C.F.R. § 60-2.2(b), seeking a deter-

mination that substantial issues of law or fact existed suffi-

cient to require that plaintiff be afforded a hearing’ prior

to determination of nonresponsibility. Mr. Lorber responded

favorably to plaintiff’s request and assured plaintiff that

it would not be passed over pending resolution of the issues.

By letter of April 8, GSA rejected plaintiff’s proposed

corrective measures, and a second review of the Libby fa-

cility was conducted a week later, where GSA found an

“affected class” of women who continued to suffer under

plaintiff’s alleged discriminatory practices. GSA recom-

mended actions to plaintiff to resolve the violations alleged

in the show cause notice and asked plaintiff to submit pro-

posed class remedies by May 3. GSA later issued a second

show cause notice based on the existence of an affected

class, which also warned plaintiff that it could be found

nonresponsible for failure to comply. GSA and plaintiff

entered into a conciliation agreement on June 2 which re-

solved the issues raised in the March 22 notice, and the

notice was withdrawn. Later that month, plaintiff wrote a

second §60-2.2(b) letter to the director of the OFCCP,

seeking a determination that it was entitled to a hearing on

the affected class issue prior to agency determination on

nonresponsibility. Plaintiff also requested that GSA adjudi-

cate in a consolidated administrative hearing all unresolved

issues of law or fact based on the Libby compliance reviews

and the two show cause notices. On June 2, 1976, the direc-

tor granted plaintiff’s requests and stated that plaintiff

would not be passed over for any contract awards pending

resolution of the issues. To date, however, no administrative

hearing has been held.

In addition to the administrative procedures outlined

above, on April 7 plaintiff filed its complaint in this action

with the district court, challenging the validity of the rele-

vant OFCCP regulations, both on their face and as admin-

istered. The trial court dismissed for failure to exhaust

administrative remedies.

It has long been a rule of judicial administration that:

[N]o one is entitled to judicial relief for a supposed

or threatened injury until the prescribed administra-

tive remedy has been exhausted. Myers v. Bethlehem

Corp., 303 U.S. 41, 50-51, 1A LRRM 575 (footnote

omitted).

This doctrine affords administrative agencies an oppor-

tunity to correct their own errors prior to judicial inter-

vention, thus mooting many issues before they reach the

courts. The exhaustion requirement also serves to maximize

efficient administrative process by preventing repeated ju-

dicial interruption. Additional reasons for the exhaustion

doctrine include respect for “notions of administrative au-

tonomy” and an interest in preserving the effectiveness of

agency operations, which could be threatened by “frequent

and deliberate flouting of administrative processes.” Mc-

Kart v. United States, 395 U.S. 185, 195; Christian v. New

York Department of Labor, 414 U.S. 614; Weinberger v.

Salfi, 422 U.S. 749, 765.

[ConTENTIONS]

Plaintiff argues that the present action is excepted from

the exhaustion requirement, however, on one or more of the

following grounds:

1. The complaint raises important questions of law in-

volving statutory interpretation and the constitutionality

of regulations, which are within the expertise of courts

rather than agencies.

2. Review by the agency would be expensive and fruitless

since the agency is not likely to void its own regulation.

3. Agency rules constitute “final agency action” subject

to pre-enforcement court review under the Administrative

Procedure Act.

4. Plaintiff is prejudiced by the administrative delay in

that it is subject to further show cause notices at its other

facilities and is subject to de facto debarment nationally

by virtue of the Libby show cause notice.

5. If plaintiff loses at the administrative level it will

likely be permanently debarred with no assurance of being

granted a stay pending court review.

We find these arguments to be unpersuasive and affirm

the judgment of dismissal.

First, the mere fact that a complaint raises questions of

statutory interpretation and constitutionality of regula-

tions does not exempt the action from the exhaustion doc-

trine. Uniroyal, Inc. v. Marshall, 7 Cir., 579 F.2d 1060, 17

FEP Cases 1207. Agency review of the challenged regula-

tions prior to judicial consideration is desirable even where

pure questions of law are concerned, in order to provide the

court with the benefit of the agency’s considered interpre-

tation of its enabling authority. Id. The administrative

process further preserves the opportunity for the agency

to correct an ill-conceived regulation and moot the issue

without judicial interference. See Toilet Goods Ass’n v.

Gardner, 387 U.S. 158; McKart v. United States, supra.

The desirability of full agency consideration is particularly

great where, as here, the plaintiff’s challenge is to the regu-

lation as applied to a specific set of facts, as well as on its

face, so that ultimate judicial review, if necessary, will

be facilitated by a complete administrative record. Mc-

Grath v. Weinberger, 10 Cir., 541 F.2d 249, cert. denied,

430 U.S. 933; Weinberger v. Salfi, supra.

[Seconp AssERTION ]

Plaintiff’s assertion that it would be subjected to need-

less expense if required to pursue its administrative remedy

is equally unconvincing. We refuse to assume that the ad-

ministrative authorities will arbitrarily deny plaintiff relief

to which he is entitled, United States v. Blair, 321 U.S.

730, and an administrative hearing cannot be deemed “fu-

tile” where plaintiff will be afforded a full opportunity to

present evidence and argue its position. Myers v. Bethle-

hem Corp., supra. The normal litigation expenses which

accompany pursuit of administrative relief likewise provide

no basis for excusing plaintiff from the normal requirement

that administrative avenues be fully explored before resort

is had to the courts. State of California ex rel. Christensen

v. F.T.C., 9 Cir., 549 F.2d 1321, cert. denied, 434 U.S. 876.

We need not be long detained by plaintiff’s contention

that it is not required to exhaust administrative remedies

since review is here sought of “final agency action” within

the meaning of 5 U.S.C. § 704. The cases cited by plaintiff

in support of this position deal with pre-enforcement chal-

lenges to agency rules or regulations where no further ad-

ministrative proceedings were contemplated. E.g., Abbott

Laboratories v. Gardner, 387 U.S. 136, 149. The Court in

Abbott Laboratories noted that agency action must not only

be “final” to be properly reviewable, but the controversy

_ Must also be “ripe,” in order to protect the agency from

premature judicial interference. Thus, even assuming that

final agency action is at issue here, since further and ade-

quate administrative relief has been requested but not ex-

hausted, the ripeness element fails and the courts need not

entertain the action.

*5 U.S.C. § 704 provides in pertinent part as follows:

Agency action made reviewable by statute and final agency

action for which there is no other adequate remedy in a court

are subject to judicial review.

Plaintiff vigorously asserts that it is prejudiced by admin-

istrative delay, in that it continues to be subject to show

cause notices at its other locations throughout the country,

and is subject to de facto debarment from government

contracts due to the outstanding show cause notice with re-

spect to the Libby facility. Plaintiff introduced some evi-

dence in the court below indicating that certain employees

of the defendants have erroneously stated to other federal

contracting officers that plaintiff is currently ineligible for

government contracts. As the district court noted, however:

{I]t is clearly evident that such statements are not

within the spirit of the regulations or departmental

policy as established by the individual named defend-

ants. It seems clear that such employee errors will be

corrected, if they have not already been corrected.

In any event, plaintiff has failed to show that it is, or

has been, entitled to any government contracts as low

bidder during the pendency of this lawsuit. R. Supp.

Vol. I, at 63.

We agree that plaintiff has made an insufficient showing

of irreparable injury to justify excusing it from the ex-

haustion requirement, particularly where it has received

svecific assurances from the director of OFCCP that it will

not be passed over pending resolution of the current dis-

pute.

The possibility that further show cause notices will be

issued to other of plaintiff’s facilities similarly fails to

justify creating an exception to the rule. Presumably, plain-

tiff will still be able to avail itself of the § 60-2.2(b) pro-

cedure that was employed here to escape a finding of non-

responsibility pending final determination of the legal ques-

tions here presented.

[Last ArGuMENT]

Lastly, plaintiff fails to qualify for exemption from the

exhaustion requirement by raising the possibility that it

could be permanently debarred at the administrative level

without assurance of being granted a stay pending judicial

review. Such hypothesizing of conceivable injury is far too

speculative and tenuous to mandate exemption from the

normal rule at this juncture.

The judgment of dismissal is accordingly,

AFFIRMED.

APPENDIX B

Sr. Recis Paper Co. v. Usery

U.S. DISTRICT COURT, DISTRICT OF COLORADO

St. Regis Paper Company v. Usery, Secretary of Labor,

et al., No. 76-F-375, March 8, 1977

On motion to dismiss employer’s action challenging issu-

ance of show-cause letter and procedures followed by US.

Government agencies in implementing it. Action dismissed.

Full Text of Opinion

SuHerMan G. Finesizver, District Judge :—Plaintiff, after

having been issued a show cause letter by the General Ser-

vices Administration under 41 CFR 60-1.28 for violation

of Executive Order 11246 relating to affirmative action pro-

grams, has brought this action for declaratory and injune-

tive relief. Plaintiff contends that the show cause notice

issued under the regulations, goes beyond the scope of the

authority granted under the executive order. Plaintiff also

complains that the procedures used by defendants will de-

prive plaintiff of the ability to compete for government con-

tracts without first affording it a hearing. Finally, plaintiff

states that publication of its alleged violation of affirmative

action obligations portends irreparable injury.

Defendants have filed a motion to dismiss the complaint

based on plaintiffs’ failure to exhaust administrative reme-

dies. For the reason stated below we grant the motion to

dismiss.

Plaintiff is a federal contractor with over 100 facilities

throughout the United States. As a contractor it must com-

ply with the affirmative action duties prescribed by Execu-

tive Order 11246 and the regulations promulgated there-

under by the Secretary of Labor. If a contractor is found

in violation of the Executive Order or regulations, the

particular agency in charge of compliance may issue a 30-

day show cause notice to the contractor. The contractor

must then either correct the violation within 30 days or

show cause why enforcement proceedings should not be

initiated.

The mere existence of a show cause notice may cause the

contractor to be passed over for federal contracts even if it

is the low bidder on the contract. The contractor will not

be passed over if the Director of the Office of Federal Con-

tract Compliance Programs determines that substantial

issues of law or fact exist with relation to the alleged viola-

tion. In such a case a hearing must be had prior to a find-

ing of “non-responsibility” and the contractor being passed

over. The show cause notice may be rescinded if the com-

pliance officer reaches some accommodation with the con-

tractor in its affirmative action performance.

A more permanent disbarment or termination of existing

federal contracts can also occur, but only after an eviden-

tiary hearing before a hearing officer. Final agency deci-

sions imposing sanctions are subject to judicial review

under the terms of the Administrative Procedure Act, 5

U.S.C. §§ 551 et seq.

Plaintiff was issued a 30-day show cause notice on March

22, 1976. A conciliation agreement was reached between

plaintiff and compliance officer/defendant Santistevan on

- June 6, 1976 and the notice was rescinded. A second 30-day

show cause notice was issued on May 14, 1976 which alleged

non-compliance with a claimed duty to provide restitution

to an “affected class” of female employees who had sub-

mitted employment applications before the issuance of

Executive Order 11246.

On June 29, 1976 defendant Lorber determined that “a

substantial issue of law or fact has been raised” concerning

the issue of restitution to an affected class “and that St.

Regis will not, therefore, be passed over without a hear-

ing.” (Exhibit 11 to defendant’s Motion.)

10a

Some “evidence” exists that certain government person-

nel have mistakenly indicated to federal contracting officers

that plaintiff is to be passed over. Other evidence wong

that such information is contrary to the present position 0

the Department of Labor, and that plaintiff should not be

passed over while the issues of law and fact remain out-

standing.

Plaintiff filed this lawsuit prior to participating in any

hearings on the May 14, 1976 show cause notice. The Tenth

Circuit has stated that it is “axiomatic that a litigant must

exhaust his administrative remedies ... as a prerequisite

to invoking the jurisdiction of the federal court. Martinez

y. Richardson, 472 F.2d 1121 (10th Cir. 1973). Plaintiff in-

sists, however, that in cases where the issues revolve around

statutory interpretation the exhaustion doctrine does not

apply. In such cases, plaintiff contends, the courts are as

well equipped, if not better equipped, to make the necessary

determinations. Agency expertise is simply not relevant to

issues of statutory interpretation, so it 1s argued. In sup-

port of its position plaintiff cites McGee v. United States,

402 U.S. 479 (1971); MecKart v. United States, 395 US.

185 (1969) ; and Ashland Oil Co. v. Federal Energy Admin-

istration, 389 F.Supp. 1119 (N.D. Calif. 1975).

While all the cases cited contain language indicating that

exhaustion is not required where statutory interpretation

is at issue, all contain a factual element not evident here:

in each of the cases the action appealed from was final

agency action.

In a recent pronouncement from the Tenth Circuit, the

court noted, quoting Professor Davis: “We commit to ad-

ministrative agencies the power to determine constitutional

applicability [of legislation to particular facts], but we do

not commit to administrative agencies the power to deter-

mine constitutionality of legislation.’’ McGrath v. Wein-

berger, 541 F.2d 249, 251 (10th Cir. 1975). The instant suit

is based on the constitutionality of the agency's application

lla

of the Executive Order to a particular set of facts—that of

an affected class. Thus, under the McGrath rationale, we

find the doctrine of exhaustion of remedies applies.

Of course, a mere finding that the doctrine initially ap-

plies does not end our inquiry. “When the administrative

remedy is wholly inadequate and a federal question is

plainly presented, or where the delay in attempting to ex-

haust administrative remedies would be prejudicial and

cause irreparable injury” judicial review is proper despite

a failure to exhaust. Frost v. Weinberger, 375 F.Supp. 1312

(.D.N.Y. 1974, citing Martinez v. Richardson, 472 F.2d

1121 (10th Cir. 1973). In the instant case we do not believe

that the administrative remedy is wholly inadequate nor

that an attempt to exhaust such remedies would subject

plaintiff to irreparable injury. As stated by the Supreme

Court in McGee, supra, “a strict exhaustion requirement

tends to ensure that the agency have additional opportuni-

ties ‘to discover and correct its own errors,’ and thus may

help to obviate all occasion for judicial review.’’ McGee at

484. At this point, the defendants have had no formal oppor-

tunity to review plaintiff’s arguments. Defendant Lorber

has admitted that there exist “substantial issues of law and

fact.” The agency should be given the initial opportunity to

interpret the Executive Order under which it functions.

To do otherwise would be to allow judicial review prior to

every original application of a statute or executive order by

an administrative agency.

The Supreme Court in McKart followed a similar logic.

There the Court observed that it is “generally more effi-

cient for the administrative process to go forward without

interpretation than it is to permit the parties to seek aid

from the courts at various intermediate stages. The very

same reasons lie behind judicial rules sharply limiting inter-

locutory appeals.” 395 U.S. at 194.

If we were presented with a circumstance which indicated

irreparable injury to plaintiff should judicial consideration

12a

be denied, our decision would be modified. In this case, how-

ever, plaintiff has failed to demonstrate a real case of irrep-

arable injury. Plaintiff has indicated that certain employees

of the defendants have incorrectly stated to other federal

contracting officers that plaintiff is not eligible for govern-

ment contracts at the present time. Nonetheless, it is clearly

evident that such statements are not within the spirit of

the regulations or departmental policy as established by the

individual named defendants. It seems clear that such em-

ployee errors will be corrected, if they have not already

been corrected.

In any event, plaintiff has failed to show that it is, or has

been, entitled to any government contracts as low bidder

during the pendency of this lawsuit. Without such an en-

titlement, and without a demonstration that plaintiff was

denied any contract, we cannot find that any irreparable in-

jury exists or is threatened. Finally, plaintiff is not being

denied government contracts without a prior hearing. Thus,

we find no reasons for taking this case out of the general

exhaustion requirement.

Our ruling is buttressed by the memorandum opinion of

the District of Columbia Circuit in Kerr Glass Mfg. Corp.

v. Usery, unpublished, No. 75-2225 (Jan. 27, 1977) which

involved similar facts.

Order

Defendants’ Motion to Dismiss for Failure to Exhaust

Administrative Remedies, filed September 29, 1976, is

granted.

The Motion of the Equal Employment Advisory Council

to File a Brief as Amicus Curiae, and its Motion for an Ex-

tension of Time to File, filed February 24, 1977, is denied.

In light of our dismissal, all other pending motions are

moot.

The complaint and cause of action is dismissed.

l3a

APPENDIX C

E.O. 11246 on Nondiscrimination Under Federal Contracts

Following is the text of Executive Order 11246, signed by

President Johnson September 24, 1965, and reads as last

amended by Executive Order 12086, effective October 8,

1978.

Executive Order 11246 also was amended by Executive

Order 11375, signed October 13, 1967.

Under and by virtue of the authority vested in me as

President of the United States by the Commission and

statutes of the United States, it is ordered as follows:

Part I—Nondiscrimination in Government Employment

Kp. Note: Sees. 101-105, barring discrimination in federal

employment on account of race, color, religion, sex, or na-

tional origin, were superseded by Executive Order 11478.

These provisions called for affirmative-action programs for

equal opportunity at the agency level under general super-

vision of the Civil Service Commission; establishment of

complaint procedures at each agency with appeal to the

Commission; and promulgation of regulations by CSC.

Part II—Nondiscrimination in Employment by Government

Contractors and Subcontractors

Ep. Note: Executive Order 12086, signed by President

Carter consolidated federal contract compliance authority

for equal employment opportunity and affirmative action in

the Labor Department’s Office of Federal Contract Compli-

ance Programs. The order, effective October 8, 1978, elimi-

nated the compliance functions of the following 11 agencies:

Departments of the Treasury; Defense; Interior; Com-

merce ; Heath, Education, and Welfare; Housing and Urban

l4a

Development; Transportation; Energy; Environmental

Protection Agency; General Services Administration, and

Small Business Administration. .

Susppart A—Duvuties oF THE SECRETARY OF LaBOoR

Sec. 201. The Secretary of Labor shall be responsible for

the administration and enforcement of Parts II and III of

this Order. The Secretary shall adopt such rules and regu-

lations and issue such orders as are deemed necessary and

appropriate to achieve the purposes of Parts II and III of

this Order.

Suspart B—Conrractors’ AGREEMENTS

Sec. 202. Except in contracts exempted in accordance with

Section 204 of this Order, all Government contracting agen-

cies shall include in every Government contract hereafter

entered into the following provisions:

“During the performance of this contract, the contractor

agrees as follows:

‘(1) The contractor will not discriminate against any

employee or applicant for employment because of race,

color, religion, sex, or national origin. The contractor will

take affirmative action to ensure that applicants are em-

ployed, and that employees are treated during employment,

without regard to their race, color, religion, sex, or national

origin. Such action shall include, but not be limited to the

following: employment, upgrading, demotion, or transfer;

recruitment or recruitment advertising; layoff or termina-

tion; rates of pay or other forms of compensation; and

selection for training, including apprenticeship. The con-

tractor agrees to post in conspicuous places, available to

employees and applicants for employment, notices to be

provided by the contracting officer setting forth the provi-

sions of this nondiscrimination clause.

15a

(2) The contractor will, in all solicitations or advertise-

ments for employees placed by or on behalf of the con-

tractor, state that all qualified applicants will receive con-

sideration for employment without regard to race, color

religion, sex, or national origin.

(3) The contractor will send to each labor union or rep-

resentative of workers with which he has a collective bar-

gaining agreement or other contract or understanding, a

notice, to be provided by the agency contracting officer ad-

vising the labor union or workers’ representative of the

contractor’s commitments under Section 202 of Executive

Order N o. 11246 of September 24, 1965, and shall post copies

of the notice in conspicuous places available to employees

and applicants for employment.

“(4) The contractor will comply wi isi

: ply with all provisions of

Executive Order No. 11246 of September 24, 1965, and of

the rules, regulations, and relevant ord

ot takes. ’ rders of the Secretary

(5) The contractor will furnish all information and re-

ports required by Executive Order No. 11246 of September

24, 1965, and by the rules, regulations and orders of the

Secretary of Labor, or pursuant thereto, and will permit

access to his books, records, and accounts by the contract-

ing agency and the Secretary of Labor for purposes of

investigation to ascertain compliance with such rules, regu-

lations, and orders.

“6) In the event of the contractor’s noncompliance with

the nondiscrimination clauses of this contract or with any

of such rules, regulations, or orders, this contract may be

cancelled, terminated, or suspended in whole or in part and

the contractor may be declared ineligible for further Gov-

ernment contracts in accordance with procedures author-

ized in Executive Order No. 11246 of September 24, 1965

and such other sanctions may be imposed and remedies in.

voked as provided in Executive Order No. 11246 of Sep-

l6a

tember 24, 1965, or by rule, regulation, or order of the Sec-

retary of Labor, or as otherwise provided by law.

“(7) The contractor will include the provisions of para-

graphs (1) through (7) in every subcontract or purchase

order unless exempted by rules, regulations, or orders of

the Secretary of Labor issued pursuant to Section 204 of

Executive Order No. 11246 of September 24, 1965, so that

such provisions will be binding upon each subcontractor or

vendor. The contractor will take such action with respect

to any subcontract or purchase order as may be directed

by the Secretary of Labor as a means of enforcing such

provisions including sanctions for noncompliance : Provided,

however, “that in the event the contractor becomes involved

in, or is threatened with, litigation with a subcontractor or

vendor as a result of such direction, the contractor may re-

quest the United States to enter into such litigation to pro-

tect the interests of the United States.”

See. 203. (a) Each contractor having a contract contain-

ing the provisions prescribed in Section 202 shall file, and

shall cause each of his subcontractors to file, Compliance

Reports with the contracting agency or the Secretary of

Labor as may be directed. Compliance Reports shall be

filed within such times and shall contain such information

as to the practices, policies, programs, and employment

policies, programs, and employment statistics of the con-

tractor and each subcontractor, and shall be in such form,

as the Secretary of Labor may prescribe.

(b) Bidders or prospective contractors or subcontractors

may be required to state whether they have participated in

any previous contract subject to the provisions of this Or-

der, or any preceding similar Executive order, and in that

event to submit, on behalf of themselves and their proposed

subcontractors, Compliance Reports prior to or as an initial

part of their bid or negotiation of a contract.

lective bargaining agreement or other contract or under-

17a

standing with a labor union or an agency referring workers

or providing or supervising apprenticeship or training for

such workers, the Compliance Report shall include such

information as to such labor union’s or agency’s practices

and policies affecting compliance as the Secretary of Labor

may prescribe: Provided, That to the extent such informa-

tion is within the exclusive possession of a labor union or

an agency referring workers or providing or supervising

apprenticeship or training and such labor union or agency

shall refuse to furnish such information to the contractor,

the contractor shall so certify to the Secretary of Labor as

part of its Compliance Report and shall set forth what

efforts he has made to obtain such information.

(d) The Secretary of Labor may direct that any bidder

or prospective contractor or subcontractor shall submit, as

part of his Compliance Report, a statement in writing,

signed by an authorized officer or agent on behalf of any

labor union or any agency referring workers or providing

or supervising apprenticeship or other training, with which

the bidder or prospective contractor deals, with supporting

information, to the effect that the signer’s practices and

policies do not discriminate on the grounds of race, color,

religion, sex, or national origin, and that the signer either

will affirmatively cooperate in the implementation of the

policy and provisions of this Order or that it consents and

agrees that recruitment, employment, and the terms and

conditions of employment under the proposed contract shall

be in accordance with the purposes and provisions of the

Order. In the event that the union, or the agency shall re-

fuse to execute such a statement, the Compliance Report

shall so certify and set forth what efforts have been made to

secure such a statement and such additional factual mate-

rial as the Secretary of Labor may require.

Sec. 204. The Secretary of Labor may, when he deems

that special circumstances in the national interest so re-

quire, exempt a contracting agency from the requirement

18a

of including any or all of the provisions of Section 202 of

this Order in any specific contract, subcontract, or purchase

order. The Secretary of Labor may, by rule or regulation,

also exempt certain classes of contracts, subcontracts, or

purchase orders (1) whenever work is to be or has been

performed outside the United States and no recruitment of

workers within the limits of the United States 1s involved ;

(2) for standard commercial supplies or raw materials ; (3)

involving less than specified amounts of money or specified

numbers of workers; or (4) to the extent that they involve

subcontracts below a specified tier. The Secretary of Labor

may also provide, by rule, regulation, or order, for the

exemption of facilities of a contractor which are in all

respects separate and distinct from activities of the con-

tractor related to the performance of the contract : Pro-

vided, That such an exemption will not interfere with or

impede the effectuation of the purposes of this Order: And

provided further, That in the absence of such an exemption

all facilities shall be covered by the provisions of this

Order.

Suppart C—Powers AND DUTIES OF THE SECRETARY OF LABOR

AND THE ConTRACTING AGENCIES

Sec. 205. Each contracting agency shall be primarily re-

sponsible for obtaining compliance with the rules, regula-

tions, and orders of the Secretary of Labor with respect to

contracts entered into by such agency or its contractors.

All contracting agencies shall comply with the rules of the

Secretary of Labor in discharging their primary responsl-

bility for securing compliance with the provisions of con-

tracts and otherwise with the terms of this Order and of

the rules, regulations, and orders of the Secretary of Labor

issued pursuant to this Order. They are directed to coop-

erate with the Secretary of Labor and to furnish the Secre-

tary of Labor such information and assistance as he may

require in the performance of his functions under this

19a

Order. The Secretary of Labor shall be responsible for

securing compliance by all Government contractors and sub-

contractors with this Order and any implementing rules or

regulations. All contracting agencies shall comply with the

terms of this Order and any implementing rules, regula-

tions, or orders of the Secretary of Labor. Contracting

agencies shall cooperate with the Secretary of Labor and

shall furnish such information and assistance as the Secre-

tary may require.

Sec. 206. (a) The Secretary of Labor may investigate the

employment practices of any Government contractor or

subeontractor to determine whether or not the contractual

provisions specified in Section 202 of this Order have been

violated. Such investigation shall be conducted in accord-

ance with the procedures established by the Secretary of

Labor.

(b) The Secretary of Labor may receive and investigate

complaints by employees or prospective employees of a

Government contractor or subcontractor which allege dis-

crimination contrary to the contractual provisions specified

in Section 202 of this Order.

Sec. 207. The Secretary of Labor shall use his best efforts,

directly and through interested Federal, State, and local

agencies, contractors, and all other available instrumentali-

ties to cause any labor union engaged in work under Gov-

ernment contracts or any agency referring workers or pro-

viding or supervising apprenticeship or training for or in

the course of such work to cooperate in the implementation

of the purposes of this Order. The Secretary of Labor

shall, in appropriate cases, notify the Equal Employment

Opportunity Commission, the Department of Justice, or

other appropriate Federal agencies whenever it has reason

to believe that the practices of any such labor organization

or agency violate Title VI or Title VII of the Civil Rights

Act of 1964 or other provision of Federal law.

Sec. 208. (a) The Secretary of Labor, or any agency,

officer, or employee in the executive branch of the Govern-

oOo EEE J

20a

ment designated by rule, regulation, or order of the Sec-

retary, may hold such hearings, public or private, as the

Secretary may deem advisable for compliance, enforcement,

or educational purposes.

(b) The Secretary of Labor may hold, or cause to be

held, hearings in accordance with Subsection (a) of this

Section prior to imposing, ordering, or recommending the

imposition of penalties and sanctions under this Order. No

order for debarment of any contractor from further Gov-

ernment contracts under Section 209(a)(6) shall be made

without affording the contractor an opportunity for a hear-

ing.

Suspart D—SancTions AND PENALTIES

Sec. 209. (a) In accordance with such rules, regulations,

or orders as the Secretary of Labor may issue or adopt, the

Secretary may:

(1) Publish, or cause to be published, the names of con-

tractors or unions which it has concluded have complied or

have failed to comply with the provisions of this Order or

of the rules, regulations, and orders of the Secretary of

Labor.

(2) Recommend to the Department of Justice that, in

cases in which there is substantial or material violation or

the threat of substantial or material violation of the con-

tractual provisions set forth in Section 202 of this Order,

appropriate proceedings be brought to enforce those pro-

visions, including the enjoining, within the limitations of

applicable law, of organizations, individuals, or groups who

prevent directly or indirectly, or seek to prevent directly

or indirectly, compliance with the provisions of this Order.

(3) Recommend to the Equal Employment Opportun-

ity Commission or the Department of Justice that appro-

priate proceedings be instituted under Title VII of the

Civil Rights Act of 1964.

2la

(4) Recommend to the Department of Justice that

criminal proceedings be brought for the furnishing of false

information to any contracting agency or to the Secretary

of Labor as the case may be.

(5) After consulting with the contracting agency, direct

the contracting agency to cancel, terminate, suspend, or

cause to be cancelled, terminated, or suspended, any con-

tract, or any portion or portions thereof, for failure of the

contractor or subcontractor to comply with the equal em-

ployment opportunity provisions of the contract. Contracts

may be cancelled, terminated, or suspended absolutely or

continuance of contracts may be conditioned upon a pro-

gram for future compliance approved by the Secretary of

Labor.

(6) Provide that any contracting agency shall refrain

from entering into further contracts, or extensions or other

modifications of existing contracts, with any noncomplying

contractor, until such contractor has satisfied the Secretary

of Labor that such contractor has established and will carry

out personnel and employment policies in compliance with

the provisions of this Order.

(b) Pursuant to rules and regulations prescribed by the

Secretary of Labor, the Secretary shall make reasonable

efforts, within a reasonable time limitation, to secure com-

pliance with the contract provisions of this Order by meth-

ods of conference, conciliation, mediation, and persuasion

before proceedings shall be instituted under subsection

(a)(2) of this Section, or before a contract shall be can-

celled or terminated in whole or in part under Subsection

(a)(5) of this Section.

Sec. 210. Whenever the Secretary of Labor makes a de-

termination under Section 209, the Secretary shall

promptly notify the appropriate agency. The agency shall

take the action directed by the Secretary and shall report

the results of the action it has taken to the Secretary of

22a

Labor within such time as the Secretary shall specify. If

the contracting agency fails to take the action directed

within thirty days, the Secretary may take the action

directiy.

Sec. 211. If the Secretary of Labor shall so direct, con-

tracting agencies shall not enter into contracts with any

bidder or prospective contractor unless the bidder or pe

spective contractor has satisfactorily complied with “7

provisions of this Order * submits a program for compli-

ance acceptable to the ‘retary of Labor.

Sec. 212. When a cus react has been cancelled or termi-

nated under Section 209(a)(5) or a contractor has been de-

barred from further Government contracts under Section

209(a)(6) of this Order, because of noncompliance with the

contract provisions specified in Section 202 of this Order,

the Secretary of Labor shall promptly notify the Comp-

troller General of the United States.

Suppart E—Certiricates oF MERIT

Sec. 213. The Secretary of Labor may provide for issu-

ance of a United States Government Certificate of Merit

to employers or labor unions, or other agencies which are

or may hereafter be engaged in work under Government

contracts, if the Secretary is satisfied that the personnel

and employment practices of the employer, or that the

personnel training, apprenticeship, membership, grievance

and representation, upgrading, and other practices and

policies of the labor union or other agency conform to the

purposes and provisions of this Order.

Sec. 214. Any Certificate of Merit may at any time be

suspended or revoked by the Secretary of Labor if the

holder thereof, in the judgment of the Secretary, has failed

to comply with the provisions of this Order.

Sec. 215. The Secretary of Labor may provide for the

exemption of any employer, labor union, or other agency

23a

from any reporting requirements imposed under or pursu-

ant to this Order if such employer, labor union, or other

agency has been awarded a Certificate of Merit which has

not been suspended or revoked.

PART III—Nondiscrimination Provisions in Federally

Assisted Construction Contracts

Sec. 301. Each executive department and agency which

administers a program involving Federal financial assist-

ance shall require as a condition for the approval of any

grant, contract, loan, insurance, or guarantee thereunder,

which may involve a construction contract, that the appli-

cant for Federal assistance undertake and agree to incor-

porate, or cause to be incorporated, into all construction

contracts paid for in whole or in part with funds obtained

from the Federal Government or borrowed on the credit of

the Federal Government pursuant to such grant, contract,

loan, insurance, or guarantee, or undertakings pursuant to

any Federal program involving such grant, contract, loan,

insurance, or guarantee, the provisions prescribed for Gov-

ernment contracts by Section 203 of this Order or such

modification thereof, preserving in substance the con-

tractor’s obligations thereunder, as may be approved by

the Secretary of Labor, together with such additional pro-

visions as the Secretary deems appropriate to establish and

protect the interest of the United States in the enforcement

of those obligations. Each such applicant shall also under-

take and agree (1) to assist and cooperate actively with the

Secretary of Labor in obtaining the compliance of con-

tractors and subcontractors with those contract provisions

and with the rules, regulations, and relevant orders of the

Secretary, (2) to obtain and to furnish to the Secretary

of Labor such information as the Secretary may require

for the supervision of such compliance, (3) to carry

out sanctions and penalties for violation of such obliga-

tions imposed upon contractors and subcontractors by the

Secretary of Labor pursuant to Part II, Subpart D, of this

24a

Order, and (4) to refrain from entering into any contract

subject to this Order, or extension or other modification of

such a contract with a contractor debarred from Govern-

ment contracts under Part II, Subpart D, of this Order.

Sec. 302. (a) ‘‘Construction contract’’ as used in this

Order means any contract for the construction, rehabilita-

tion, alteration, conversion, extension, or repair of build-

ings, highways, or other improvements to real property.

(b) The provisions of Part II of this Order shall apply

to such construction contracts, and for purposes of such

application the administering department or agency shall

be considered the contracting agency referred to therein.

an applicant for Federal assistance or, as determined by

agency regulation, other program participant, with respect

to whom an application for any grant, contract, loan, insur-

ance, or guarantee is not finally acted upon prior to

the effective date of this Part, and it includes such an

applicant after he becomes a recipient of such Federal

assistance.

Sec. 303. (a) The Secretary of Labor shall be responsible

for obtaining the compliance of such applicants with their

undertakings under this Order. Each administering depart-

ment and agency is directed to cooperate with the Secre-

tary of Labor, and to furnish the Secretary such informa-

tion and assistance as the Secretary may require in the

performance of the Secretary’s functions under this Order.

(b) In the event an applicant fails and refuses to com-

ply with the applicant’s undertakings pursuant to this

Order, the Secretary of Labor may, after consulting with

the administering department or agency, take any or all

of the following actions: (1) direct any administering de-

partment or agency to cancel, terminate, or suspend in

whole or in part the agreement, contract or other arrange-

ment with such applicant with respect to which the failure

or refusal occurred; (2) direct any administering depart-

25a

ment or agency to refrain from extending any further as-

sistance to the applicant under the program with respect to

which the failure or refusal occurred until satisfactory

assurance of future compliance has been received by the

Secretary of Labor from such applicant; and (3) refer the

case to the Department of Justice or the Equal Employ-

ment Opportunity Commission for appropriate law en-

forcement or other proceedings.

applicant pursuant to Clause (1) or (2) of Subsection (b)

without notice and opportunity for hearing.

Sec. 304. Any executive department or agency which im-

poses by rule, regulation, or order requirements of non-

discrimination in employment, other than requirements im-

posed pursuant to this Order, may delegate to the Secre-

tary of Labor by agreement such responsibilities with re-

spect to compliance standards, reports, and procedures as

would tend to bring the administration of such require-

ments into conformity with the administration of require-

ments imposed under this Order: Provided, That actions

to effect compliance by recipients of Federal financial as-

sistance with requirements imposed pursuant to Title VI

of the Civil Rights Act of 1964 shall be taken in conformity

with the procedures and limitations prescribed in Section

602 thereof and the regulations of the administering de-

partment or agency issued thereunder.

PART IV—Miscellaneous

Sec. 401. The Secretary of Labor may delegate to any

officer, agency, or employee in the Executive branch of the

Government, any function or duty of the Secretary under

Parts II and III of this Order.

Sec. 402. The Secretary of Labor shall provide adminis-

trative support for the execution of the program known as

the ‘‘Plans for Progress.’’

26a

Sec. 403. (a) Executive Orders Nos. 10590 (January 18,

1955), 10722 (August 5, 1957), 10925 (March 6, 1961), 11114

(June 22, 1963), and 11162 (July 28, 1964), are hereby

superseded and the President’s Committee on Equal Em-

ployment Opportunity established by Executive Order No.

10925 is hereby abolished. All records and property in the

custody of the Committee shall be transferred to the Civil

Service Commission and the Secretary of Labor, as appro-

priate.

(b) Nothing in this Order shall be deemed to relieve any

person of any obligation assumed or imposed under or

pursuant to any Executive Order superseded by this Order.

All rules, regulations, orders, instructions, designations,

and other directives issued by the President’s Committee

on Equal Employment Opportunity and those issued by the

heads of various departments or agencies under or pursu-

ant to any of the Executive orders superseded by this

Order, shall, to the extent that they are not inconsistent

with this Order, remain in full force and effect unless and

until revoked or superseded by appropriate authority. Ref-

erences in such directives to provisions of the superseded

orders shall be deemed to be references to the comparable

provisions of this Order.

Sec. 404. The General Services Administration shall take

appropriate action to revise the standard Government con-

tract forms to accord with the provisions of this Order and

of the rules and regulations of the Secretary of Labor.

See. 405. This Order shall become effective 30 days after

the date of this Order.

27a

APPENDIX D

OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS

DEPARTMENT OF LABOR

Rules and Regulations

Chapter 60—Office of Federal Contract Compliance Programs,

Equal Employment Opportunity, Department of Labor

Part 60-1—Obligations of contractors and subcontractors

§ 60-1.26 Enforcement proceedings.

(a) General. Violations of the Order, equal opportunity

clause, the regulations in this chapter, or of applicable con-

structionm industry equal employment opportunity require-

ments, may result in the institution of administrative or

judicial enforcement proceedings to enforce the Order and

to seek appropriate relief. Violations may be found based

upon, inter alia, any of the following: (i) The results of a

complaint investigation; (ii) analysis of an affirmative

action program; (iii) the results of an on-site review of

the contractor’s compliance with the Order and its imple-

menting regulations; (iv) a contractor’s refusal to submit

an affirmative action program; (v) a contractor’s refusal

to allow an on-site compliance review to be conducted ; (vi)

a contractor’s refusal to supply records or other informa-

tion as required by these regulations or applicable con-

struction industry requirements; or (vii) any substantial

or material violation or the threat of a substantial or ma-

terial violation of contractual provisions of the Order, or

of the rules or regulations issued pursuant thereto.

(2) If the investigation of a complaint, or a compliance

review, results in a determination that the Order, equal

opportunity clause or regulations issued pursuant thereto,

have been violated, and the violations have not been cor-

rected in accordance with the conciliation procedures in

this chapter, OFCCP may institute an administrative en-

forcement proceeding to enjoin the violations, to seek ap-

28a

propriate relief (which may include affected class and back

pay relief), and to impose appropriate sanctions, or any

of the above. However, if the contractor refuses to submit

an affirmative action program, or refuses to supply records

or other requested information, or refuses to allow the

OFCCP access to its premises for an on-site review;

and if conciliation efforts under this chapter are unsuccess-

ful, OFCCP, notwithstanding the requirements of this

chapter, may go directly to administrative enforcement

proceedings to enjoin the violations, to seek appropriate

relief, and to impose appropriate sanctions, or any of the

above. Whenever the Director has reason to believe that

there is substantial or material violation or the threat of

substantial or material violation of the contractual provi-

sions of the Order or of the rules, regulations or orders

issued pursuant thereto, he/she may refer the matter to the

Solocitor of Labor to institute administrative enforcement

proceedings as set forth in this section or refer the matter

to the Department of Justice to enforce the contractual

provisions of the Order, to seek injunctive relief (including

relief against noncontractors, including labor unions, who

seek to thwart implementation of the Order and regula-

tions) and to seek such additional relief, including back

pay, as may be appropriate. There are no procedural pre-

requisites to a referral to the Department of Justice by the

Director, and such referrals may be accomplished without

proceeding through the conciliation procedures in this chap-

ter, and a referral may be made at any stage in the pro-

cedures under this chapter: Provided, That no order for

debarment from further contracts or subcontracts pursuant

to section 209(a)(6) of the Order shall be made without

affording the contractor an opportunity for a hearing,

either administrative or judicial.

Part 60-2—Affirmative action programs

Pursuant to Executive Order 11246, sections 201, 205,

211 (30 F.R., 12319), and 41 CFR 60—1.6, 60—1.28, 60—

29a

1,29, 60—1.40, Title 41 of the Code of Federal Regulations

is hereby amended by adding a new Part 60—2 to read as

set forth below.

Authority: 5 U.S.C. 093(a)(3)(B); 29 CFR 2.7; Section

201, E.0, 11246, 30 FR 12319, and E.O. 11375, 32 FR 14303.

Suppart A—GeneRAL

§ 60-2.1 Title, purpose and scope.

(a) This part shall also be known as ‘‘Revised Order

No. 4’’ and shall cover nonconstruction contractors. Sec-

tion 60-1.40 of this chapter, affirmative action compliance

programs, requires that within 120 days from the com-

mencement of a contract each prime contractor or subcon-

tractor with 50 or more employees and (1) a contract of

$50,000 or more; or (2) Government bills of lading which,

in any 12-month period, total or can reasonably be ex-

pected to total $50,000 or more; or (3) who serves as a

depository of Government funds in any amount; or (4)

who is a financial institution which is an issuing and paying

agent for U.S. savings bonds and savings notes in any

amount, develop a written affirmative action compliance

program for each of its establishments. A review of com-

pliance surveys indicates that many contractors do not

have affirmative action programs on file at the time an

establishment is visited by a compliance investigator. This

part details the review procedure and the results of a

contractor’s failure to develop and maintain an affirmative

action program and then sets forth detailed guidelines to

be used by contractors and the Government in developing

and judging these programs as well as the good faith ef-

fort required to transform the programs from paper com-

mitments to equal employment opportunity. Subparts B

and C of this part are concerned with affirmative action

plans only.

30a

(b) Relief, including back pay where appropriate, for

members of an affected class who by virtue of past discrim-

ination continue to suffer the present effects of that dis-

crimination, shall be provided in the conciliation agreement

entered into pursuant to § 60-60.6 of this title. An ‘taffected

class’’ problem must be remedied in order for a contractor

to be considered in compliance. Section 60-2.2 herein per-

taining to an acceptable affirmative action program is also

applicable to the failure to remedy discrimination against

members of an ‘‘affected class.’’

§ 60-2.2 Agency action.

(a) Any contractor required by § 60-1.40 of this chapter

to develop an affirmative action program at each of its

establishments who has not complied fully with that section

is not in compliance with Executive Order 11246, as

amended (30 F.R. 12319). Until such programs are de-

veloped and found to be acceptable in accordance with the

standards and guidelines set forth in §{ 60-2.10 through

60-2.32, the contractor is unable to comply with the equal

employment opportunity clause. An affirmative action plan

shall be deemed to have been accepted by the Government

at the time the appropriate OFCCP field, area, regional, or

national office has accepted such plan unless within 45 days

thereafter the Director has disapproved such plan.

(b) If, in determining such contractor’s responsibility

for an award of a contract, it comes to the contracting

officer’s attention, through sources within his agency or

through the Office of Federal Contract Compliance Pro-

grams or other Government agencies, that the contractor

has no affirmative action program at each of its establish-

ments, or has substantially deviated from an approved

affirmative action program, or has failed to develop or im-

plement an affirmative action program which complies with

the regulations in this chapter, the contracting officer shall

declare the contractor/bidder nonresponsible and so notify

3la

the contractor and the Director unless he can otherwise af-

firmatively determine that the contractor is able to comply

with his equal employment obligations. Any contractor/

bidder which has been declared nonresponsible in accord-

ance with the provisions of this section may request the

Director to determine that the responsibility of the con-

tractor/bidder raises substantial issues of law or fact to the

extent that a hearing is required. Such request shall set

forth the basis upon which the contractor/bidder seeks

such a determination. If the Director, in his/her sole discre-

tion, determines that substantial issues of law or fact exist,

an administrative or judicial proceeding may be com-

menced in accordance with the regulations contained in

§ 60-1.26 or the Director may require the investigation or

compliance review be developed further or additional con-

ciliation be conducted: Provided, That during any pre-

award conferences, every effort shall be made through the

processes of conciliation, mediation and persuasion to de-

velop an acceptable affirmative action program meeting the

standards and guidelines set forth in §§ 60-2.10 through 60-

2.32 so that, in the performance of his contract, the con-

tractor is able to meet its equal employment obligations in

accordance with the equal opportunity clause and applica-

ble rules, regulations, and orders: Provided further, That

a contractor/bidder may not be declared nonresponsible

more than twice due to past noncompliance with the equal

opportunity clause at a particular establishment or facility

without receiving prior notice and an opportunity for a

hearing.

(c)(1) Immediately upon finding that a contractor has

no affirmative action program, or has deviated substan-

tially from an approved affirmative action program, or has

failed to develop or implement an affirmative action pro-

gram which complies with the requirements of the regu-

lations in this chapter, that fact shall be recorded in the in-

vestigation file. Whenever administrative enforcement is

contemplated, the notice to the contractor shall be issued

32a

giving him 30 days to show cause why enforcement pro-

ceedings under section 209(a) of Executive Order 11246,

as amended, should not be instituted. The notice to show

cause should contain:

(i) An itemization of the sections of the Executive Order

and of the regulations with which the contractor has been

found in apparent violation, and a summary of the condi-

tions, practices, facts or circumstances which give rise to

each apparent violation;

(ii) The corrective actions necessary to achieve compli-

ance or, as may be appropriate, the concepts and principles

of an acceptable remedy and/or the corrective action re-

sults anticipated ;

(iii) A request for a written response to the findings, in-

cluding commitments to corrective action or the presenta-

tion of opposing facts and evidence; and

(iv) A suggested date for the conciliation conference.

(2) If the contractor fails to show good cause for his

failure or fails to remedy that failure by developing and im-

plementing an acceptable affirmative action program with-

in 30 days, the case file shall be processed for enforcement

proceedings pursuant to §60-1.26 of this chapter. If an

administrative complaint is filed, the contractor shall have

20 days to request a hearing. If a request for hearing has

not been received within 20 days from the filing of the ad-

ministrative complaint, the matter shall proceed in accord-

ance with Part 60-30 of this chapter.

(3) During the “show cause” period of 30 days, every

effort will be made through conciliation, mediation, and

persuasion to resolve the deficiencies which led to the de-

termination of nonresponsibility. If satisfactory adjust-

ments designed to bring the contractor into compliance are

not concluded, the case shall be processed for enforcement

proceedings pursuant to § 60-1.26 of this chapter.

33a

(d) During the “show cause” period and formal proceed-

ings, each contracting agency must continue to determine

the contractor’s responsibility in considering whether or

not to award a new or additional contract.

34a

APPENDIX E

Conciliation Agreement

In the matter of:

U.S. GeneraL Services ADMINISTRATION

Orrice or Contract CompLiANce, Recion 8

Sr. Reais Paper CoMPANY

Lumser & Piywoop Drvision

Lipsy, Montana 59923

A show cause notice having been filed March 22, 1976,

against St. Regis Paper Company, Lumber & Plywood Di-

vision, Libby, Montana (hereinafter referred to as the

“Contractor”) as a result of certain deficiencies in its Af-

firmative Action Program determined by the General Ser-

vices Administration, Office of Contract Compliance, Region

8 (hereinafter referred to as “GSA”) the parties do re-

solve to conciliate this matter as follows:

I. GeneraL PROVISIONS

1. It is understood that this Agreement does not constitute

an admission-by the Contractor of any violation of Ex-

ecutive Order 11246, as amended, and is entered into

on a voluntary basis to reaffirm and further the Con-

tractor’s policy of providing Equal Employment Op-

portunity for all persons without regard to race, color,

religion, sex, or national origin.

2. Subject to the performance by the Contractor of all

promises and representations contained herein, the Con-

tractor’s obligations to GSA in the resolution of this

matter shall be deemed to be fulfilled.

3. Nothing herein is intended to relieve the Contractor

from compliance with Executive Order 11246, as

amended, and the rules and regulations promulgated by

the U.S. Department of Labor, Office of Federal Con-

35a

tract Compliance Programs, and the GSA reserves the

right to monitor such compliance.

. The Contractor, having made the commitments in IT be-

low to correct certain deficiencies, the GSA, pursuant

to authority granted under 41 CFR 60-1.20 (b), finds

the Contractor in compliance with Executive Order

11246, as amended, and the regulations of the Depart-

ment of Labor issued pursuant thereto, with the excep-

tion of certain issues in litigation.

. This determination of compliance is specifically condi-

tioned on the Contractor’s continued application of good

faith efforts to meet said commitments.

. The Contractor is hereby notified that the making of

these commitments does not preclude future determina-

tions of non-compliance based on a finding that the com-

mitments are not sufficient to achieve compliance.

. All specified commitments made by the Contractor in

this agreement are for the purpose of bringing said

Contractor into a posture of compliance with Executive

Order 11246, as amended, and its affirmative action re-

quirements, and are not an admission of liability to any

individual persons.

. This determination of compliance shall have no effect

on any pending claim or claims of discrimination filed

against the Contractor pursuant to any federal, state,

or local laws. Neither shall this determination of com-

pliance be considered to have determined or resolved

any questions of law or fact upon which the validity

of any such claim or claims may depend.

36a

37a,

II. Speciric Provisions All parties have read this agreement and accept the pro-

1. The Contractor has established the following goals for visions contained herein.

the employment of women in the job categories indi-

eated for the remainder of 1976: St. Regis Paper Company

Category No. Percentage Date June 2, 1976 By /s/ M. A. Roserrs

Craftsmen (skilled) 3 1% M. A. Roberts

Operatives (semi-skilled) 10 4% Corporate Manager EEO

Laborers (unskilled) 41 13% St. Regis Paper Company

150 E. 42nd Street

2. The GSA has accepted the above goals with the proviso New York, New York 10017

that it will perform a follow-up on-site inspection in

January, 1977, for the purpose of reviewing the estab- Date 6-2-76 By /s/ Dennis J. SANTISTEVAN

lished goals and determining whether the percentage General Services Administration

goals are properly established for the year 1977.

3. The Confractor will document all good faith effort to

recruit women in the job categories in which they are

underutilized, as follows:

a. In view of the possibility that current female

clerical employees might be interested in pro-

duction jobs that may become available, the

Personnel Department will consult with each

such employee to advise them of their eligibility.

The attached form will be completed by each,

and witnessed by a personnel representative. If

such an employee desires, she will be given an

equal opportunity to be assigned to such a job

when it is available.

b. Employment procedure will be modified during

any period when females are underutilized in a

job group or category, to provide greater oppor-

tunity to reduce the underutilization and if pos-

sible reach parity. During such periods, all fe-

male applicants will be advised of their eligibil-

ity for available production jobs, as well as for

clerical jobs, depending upon their qualifications.

38a

ATTACHMENT

ST. REGIS PAPER COMPANY

Libby, Montana

Equal Employment Opportunity

Affirmative Action

I understand I am eligible for a job in a production unit

at a Libby Operation of St. Regis Paper Company, de-—

pending upon my qualifications for the specific job avail-

able.

I was —— was not —— interested in a production job at

the time I applied for work. If so, I did —— did not —— in-

dicate my interest in a production job to the Company.

I am —— am not —— interested at this time in trans-

ferring to a production job. If not, I understand I may

advise the Personnel Department at any time of my interest

in doing so.

I understand that if I transfer to a production job I

will retain my full company service (my last date of hire)

for purpose of employee benefits.

Date:

Employee Signature

Witness

39a

ADDENDUM TO CoNCILIATION AGREEMENT

Under i. Generat Provisions, page 1, part 4 shall be

changed to read as follows:

4. The Contractor, having made the commitments in II

below to correct certain deficiencies, the GSA, pursuant

to authority granted under 41 CFR 60-1.20(b), finds the

Contractor in compliance with Executive Order 11246,

as amended, and the regulations of the Department of

Labor, issued pursuant thereto, with the exception of -

those issues contained in a show cause notice issued to

St. Regis Paper Company on May 14, 1976, concerning

the contract compliance status of the Libby, Montana

facility.

Under II. Speciric Provisions, page 3, add the following:

4. The physical stature requirement referred to in the

March 22, 1976, letter have been discontinued.

Date June 2, 1976 By /s/ M. A. Roserts

M. A. Roberts

Corporate Manager EEO

St. Regis Paper Company

150 E. 42nd Street

New York, New York 10017

Date 6-2-76 By /s/ Dennis J. SANTISTEVAN

General Services Administration

5/14/76

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Mr. W. R. Haselton, President

St. Regis Paper Company

633 Third Avenue

New York, New York 10017

Dear Mr. Haselton:

Reference is made to the Contract Compliance Review

which was conducted at Libby, Montana facility April 14,

1976. Additional references to my letter to Mr. M. A. Rob-

erts, dated April 22, 1976, which raises new issues relating

to the identification of an affected class of female appli-

cants and female employees at the Libby facility. Under

date of April 29, 1976, Mr. William A. Gershuny responded

to my letter to Mr. Roberts. Mr. Gershuny’s letter fails to

address itself to these new issues. Accordingly, this agency

is issuing the Notice to Show Cause why enforcement pro-

ceedings under Section 209(b) of Executive Order 11246,

as amended, should not be instituted.

This Show Cause Notice is based upon the charge of the

existence of the affected class of females as stated above.

The names of the female class members are listed on the

attachment to this letter.

This Show Cause Notice is issued in addition to the

Show Cause Notice dated March 22, 1976. You are cau-

tioned that the two Notices are based upon different

grounds and, therefore, each requires appropriate correc-

tive action.

4la

The circumstances which prompt this Notice are the re-

sult of additional information gained concerning the defi-

ciencies which were addressed in the March 22, 1976 30-day

Show Cause Notice. In connection with this notification,

you are required to take steps to correct the fact that some

female applicants and current female employees are today

suffering the effects of past discrimination. The corrective

action must commence with a case-by-case evaluation of

injury inflicted, and be matched with remedies that will

make whole those injured parties. The remedies should in-

clude, but will not be limited to, employment and retro-

active awards of pay and service credits. Should you not

correct the deficiencies within 30 days or show cause for

your failure to do so, proceedings will be instituted as

required by Executive Order 11246, as amended, and Re-

vised Order No. 4 of the United States Department of

Labor. These proceedings may include a notice of pro-

posed cancellation or termination of existing Federal con-

tracts or subcontracts and debarment from future con-

tracts and subcontracts.

It remains the sincere desire of this agency to continue

all feasible efforts to assist you in preventing the necessity

of having to take such severe action. In this regard, I re-

main available to confer or meet with you at any mutually

42a

agreed upon time and date. Additional conferences or meet-

ing will not, however, extend the 30 day period.

Sincerely,

/s/ Dennis J. SANTISTEVAN

Dennis J. Santistevan

Acting Regional Director

Office of Contract Compliance

ec: Mr. Douglas Kilmer

Resident Manager

St. Regis Paper

Company

General Delivery

Libby, Montana 59923

Mr. Roy P. McCrary

EEO Coordinator

St. Regis Paper

Company

P.O. Box 1593

Tacoma, Washington

98401

Mr. M. A. Roberts

Corporate Manager

EEO

St. Regis Paper Company

633 Third Avenue

New York, New York 10017

Director, OFCC

AARD—OFCC—Region 8

AR(4)

Commissioner—F

Official file—8ARC

Reading file—S8ARC

8ARC ;RCBewean :bn :5/12/76

43a

Concurrence:

ee Te ee Pee PR Ce Pe Te Meee eee

Assistant Regional Director,

Office of Contract Compliance

bee Mwibah a Gide RSE Cenc vowed s cace i er eee

Regional Counsel

ce:

Region 1 Region 4 Region 7

Region 2 Region 5 Region 9

Region 3 Region 6 Region 10

Information Copy: Regional Administrator—8A

44a

ATTACHMENT

30-Day Show Cause Notice

dated May 12, 1976

1. All female applicants who applied for employment for

other than clerical jobs between January 1976 to present,

and were qualified for entry level production (laborers)

jobs at a time when the company was hiring males, but

were nevertheless not considered for these positions.

Paula Halstead

Kathy B. Schmasow

Aloe Mitchell

Jo Claire Phillips

Cherly Brock

O. Maurie Tilton

Joann Ringsbye

Helen L. Stoddard

Marilyn Kair

Linda Robertzian

Betty Larson

Debbie Hansen

Carrol Brock

Lindy Mellem

Elizabeth J. Pritchard

Myrtle A. Robertson

Phyllis Anderson

Devi L. Olsen

Shirley Woods

Shery Carlson

Clarise T. Britton

Myrna Nartens

Pat Smith

Margaret M. Smith

Lena McCallum

Doris Underwood

Joanne EK. Serne

Suzette L. Howlett

Karen EK. Stephens

Bobette Lynne Wade

Dixie A. Wicks

Barbara Clemmons

Renee Siefke

Susan A. Smith

Deborah Wilke

Linda Sharp

LouAnn Smith

Sherry McKean

Peggy Cann

Dorothy Olsbury

Cindy Hagen

Tina Briggs

Kerri Everett

Bethene Candee

Lillian Martinez

Younda Montgromery

Janet Schmidig

Lucy Platts

Valerie Redd

Lynn Ingrum

Barbara Cassidy

45a

2. Current female clerical employees who were qualified

for production work at time of hire during period when

the company was hiring males, and who did not express a

preference only for clerical work.

3. Female employees hired into labor/production jobs

who were not considered for employment at the time of

their original application, this group includes but is not

limited to:

Edna Meely Gail I. Burrows

Carla K. Couture Regina Hovland

Bonnie Wood

4. All former female clerical employees who were quali-

fied for production work at the tir e of hire during a period

when the company was hiring males, and who did not ex-

press a preference only for clerical work.

46a

APPENDIX G

UNITED STATES DEPARTMENT OF LABOR

OFFICE OF ADMINISTRATIVE LAW JUDGES

Case No. 78-OFCC-1

In the Matter of

Unitrep States Department oF Lasor, Plaintiff

VS.

Sr. Reais Paper Company, Defendant

Chart Room, Seventh Floor

Vanguard Building

1111 Twentieth Street, N.W.

Washington, D.C.

Friday, October 20, 1978

Hearing in the above-entitled case was convened, pur-

suant to notice, at 11:30 a.m., the Honorable Garvin LEE

Ouiver, Administrative Law Judge, presiding.

APPEARANCES:

Jean E. Davis, Esq., Suzan Curastarn, Esq., and Gary

M. Burr, Esq., Office of General Counsel, U.S. Depart-

ment of Labor, Washington, D.C., on behalf of plaintiff.

JupirH S. Watpman, Esq., and Guy Farmer, Esq.,

Farmer, Shibley, McGuinn & Flood, Bender Building,

Washington, D.C. 20036, accompanied by: Michael A.

Roberts, Manager, Equal Employment Opportunity;

on behalf of defendant.

Juper Ourver: No.

Mr. Farmer: We had raised another question as to that.

JupGe Ourver: Yes.

47a

With regard to scope of the authority of the Secretary

to promulgate the 1977 regulations, 41 CFR 60-2.2(b) and

(c), I think I indicated that I understood that to be relating

perhaps to the jurisdiction of this Office to hear such com-

plaints and to proceed with an enforcement proceeding.

And you informed me that you were more concerned

about the regulation dealing with passover.

Mr. Farmer: Without a hearing.

Jupce Outver: Yes, without a hearing.

I also indicated that with regard to the scope of the au-

thority of the Secretary in promulgating regulations and

the constitutionality of the regulations on their face, it is

generally accepted that Administrative Agencies and an

Administrative Law Judge of those agencies, have to ac-

cept the validity of the regulations and the constitution-

ality of the regulations.

However, I will rule on that question in such a tashion

that you will be able to preserve those issues for review

by the Secretary and the courts if necessary; and I will

also interpret the regulations and the Executive Order in

light of the facts developed in this case, and in light of

constitutional law, whatever.

I believe we then moved on to the passover.

Mrs. Watpman: Your Honor, excuse me.

In your last statement I perhaps mistakenly understood

you to include then both in our Roman A-I and II, then

our reference to 41 CFR 60-2.1(b) as well as 60-2.2(b) and

(c).

Are you saying you would rule on those, or make some

determination of those at the end of this proceeding?

You then stated “on the passover”, but I thought we had

just discussed that in our Section 60-2(b) and (ce).

48a

Mr. Farmer: Yes, I thought we had already covered the

passover question; perhaps you have some other thought in

mind.

Juper Ouiver: I though I had indicated I had at an early

prehearing conference indicated the passover, whether you

had been passed over for contracts without a hearing,

was not an issue in this case; and I indicated to you that

upon reconsideration I thought the purpose of an admin-

istrative proceeding was to allow the administrative offi-

cials to correct their own errors.

And, so, if despite the assurance you will not be passed

over, you can show that you have been, then that should

be brought to the attention of the Secretary in my pro-

posed decision and order, and should be dealt with as part

of your defense in this case.

Mr. Farmer: Yes, you did make that statement; that is

correct. As part of our defense we could, would be per-

mitted to show if we desired or could, the government did

not comply with its own regulations; or that they Nad

actually passed us over without a hearing.

That is what my notes indicate. I think that is the same

thing that you said.

Jupce Ouiver: Yes.

Mrs. Watpman: Your Honor, I think to the extent we dis-

cussed, we can show that the government—not all the gov-

ernment employees did, in fact, comply with the govern-

ment’s instructions and procedures. We are more likely to

be able to prove, establish that as a point. We do have a

deposition from the Bureau of Engraving which estab-

lishes there was at least one government employee that did

not know that we were declared not responsible; and to

go to the next step and prove we were passed over might

be impossible of proof.

49a

But to the extent I believe that we can establish that not

all government employees were properly notified that we

were not—no longer to be considered nonresponsible; would

that constitute sufficient proof to leave open the question

of the validity of the fact of the dormant issue for your

resolution.

JupGce Outver: Ms. Davis?

Ms. Davis: That is not my understanding of what you

had ruled. I do not believe that their being able to prove

that in fact some official within the contracting scheme did

not receive the notices, that we believe were sent out, is

sufficient to raise the question of the validity of the regula-

tions in the manner in which they would choose to do so.

I think that it is our position, of course, we took all the

necessary steps to insure that in fact they would not be

passed over; and there may be a factual question as to

whether or not disseminated information was in fact re-

layed to everyone; but I do not think that can go to the

point—as far as I would choose to go on it.

Mr. Farmer: I would say I think I am somewhat confused

at this point.

I did not understand that the Judge, your Honor, was

going to rule on the validity of the regulations. The regu-

lation permits passover without hearing. It is discretionary

as to whether or not they give you an assurance they will

not pass you over under the regulation.

Jupce Ouiver: Yes.

Mr. Farmer: They may or may not do that.

I understood only—just for clarification, and not that

this is particularly in our favor—that you had said that

we could show that we were, having been promised we

would not be passed over, we were in fact passed over; that

that would be an issue that you would allow us to proceed

on.

50a

But I did not understand you were saying that even if

we showed that, that you would then rule on the validity

of the regulation.

I am just seeking clarification.

Jupee Oxiver: That is my understanding.

Ms. Davis: Yes.

Jupce Ouiver: Mr. Farmer stated it.

Mrs. WatpMan: I think you just lost me.

I guess what I understood was that in the event we could

establish that the government policy, notwithstanding that

they had said we were not to be passed over, that that in-

formation did not reach everyone it was to have reached;

and that we could establish that some contracting officer

did tell someone that we were nonresponsible; that that

would be sufficient to raise the question of whether or nof

the government had the right—the Secretary of Labor had

the right—to say you could be passed over without a hear-

ing under the Executive Order.

Jupce Ouiver: No, that was not my intention. But I

merely wanted to let you know that if you could show that

the government had violated its own regulations, then there

would probably be a remedy for that; and that I would

entertain that defense on your part; and, if appropriate,

recommend a remedy for that.

Mrs. WatpMan: So then to clarify, there would be no

ruling in any event on whether or not the Secretary had

the right to promulgate this de facto departmental [sic-

debarment] regulation under the Executive Order.

Jupce Oxuiver: No. Not from what I see in the case, it is

not my intention to rule on that case, on that motion; be-

cause I see the facts in this case as we discussed; it seems

that prior to the declaration of nonresponsibility you did

state that there were substantial issues in the case; and

5la

at that point you were assured by the government that you

would not be passed over.

I merely indicated if you had proof to the contrary, that

should be allowed as a defense; and there should be some

remedy for it.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.