Appendix — Breen v. International Ladies' Garment Workers' Union

. ) a Office - Supreme Court, U.S. |

} FILED

88 ;

1791 MAY 1 wee

W ALEXANOER L. STEVAG

CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

LUELLA BREEN, ET AL.,

Petitioners,

v-

INTERNATIONAL LADIES' GARMENT

WORKERS' UNION, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Joseph D. Alviani

Robert R. Ruddock

Wayne S. Henderson

Jean M. DeLuca

New England Legal Foundation

55 Union Street

Boston, Massachusetts 02108

(617) 367-0174

Counsel for Petitioners

NO.

IN THE

SUPREME COURT OF THE UNITED STATES

LUELLA BREEN, ET AL.,

Petitioners,

Vv.

INTERNATIONAL LADIES' GARMENT

WORKERS' UNION, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR DI OF COL A CIRCUIT

APPENDIX

Joseph D. Alviani

Robert R. Ruddock

Wayne S. Henderson

Jean M. DeLuca

New England Legal Foundation

55 Union Street

Boston, Massachusetts 02108

(617) 367-0174

Counsel for Petitioners

Le

11.

111.

TABLE OF CONTENTS

International Ladies' Garment

Workers’ Union v. Donovan; United

States Court of Appeals for the

District of Columbia Circuit

A. Opinion of the court 1

B. Order of Judgment 65

C. Order Denying Suggestion

for Rehearing „„ %è ˙ „„ „4 66

International Ladies! Garment

Workers’ Union v. Donovan; United

States District Court for the

District of Columbia

A. Memorandum of the court 67

B. Plaintiffs' Amended

Complaint U 26160620 665.4 2 8O 104

C. Plaintiffs' Motion for

Summary Judeneannt?n˖ 143

United States Department of Labor

A. Regulations; 29 CFR Part 530 146

B. Notice of Hearing;

45 Fed. Reg. 805853883 157

C. Notice of Proposed Rulemaking;

46 Fed. Reg. 25108 +*--*-sse-> 161

D. Final Rule;

46 Fed. Reg. 5034 167

—— ie

Notice: This opinion is subject to formal revision before publication

in the Federal Reporter or U.S.App.D.C. Reports. Users are requested

to notify the Clerk of any formal errors in order that corrections may be

made before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 82-2133

INTERNATIONAL LADIES’ GARMENT WoRKERS’ UNION, et al.,

APPELLANTS

V.

RAYMOND J. DONOVAN, et al.

Appeal from the United States District Court

for the District of Columbia

(D.C. Civil Action No. 81-2606)

Argued September 12, 1983

Decided November 29, 1983

Stephen J. Pollak with whom S. Elizabeth Gibson, An-

drew H. Marks and Max Zimny, were on the brief, for

appellants.

Marilyn S. G. Urwitz, Attorney, Department of Jus-

tice, with whom J. Paul McGrath, Assistant Attorney

General, Robert S. Greenspan, Attorney, Department of

Bills of costs must be filed within 11 days after entry of judgment. The

court looks with disfavor upon motions to file bills of costs out of time.

2

Justice, and Ruth Peters, Attorney, Department of Labor,

were on the brief for appellees, Donovan, et al.

Joseph D. Alviani and Robert R. Ruddock, were on the

brief, for appellees, Breen, et al.

Patricia A. Embrey was on the brief, for appellee,

Stowe Woolens, Ltd.

Before: WRIGHT and EDWARDS, Circuit Judges, and

McGowan, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge EDWARDS.

EDWARDS, Circuit Judge: This action arises out of the

decision of the Secretary of Labor (hereinafter “the

Secretary”) to rescind longstanding restrictions on the

employment of workers in their homes (homeworkers)

in the knitted outerwear industry. 46 Fed. Reg. 50,349

(1981). The knitted outerwear industry consists of those

firms that knit from yarn and, in the same establishment,

further manufacture, dye or finish knitted garments, gar-

ment sections, or accessories for use as external apparel,

and those firms that manufacture bathing suits from any

purchased fabric. 29 C.F.R. § 530.1 (f) (1981) (rescinded

by 46 Fed. Reg. 50,349 (1981)). This industry employs

approximately 63,000 production workers. 46 Fed. Reg.

50,349 (1981).

The appeilants—knitted outerwear manufacturers and

manufacturers’ associations, labor organizations repre-

senting factory workers in the industry, and state labor

law enforcement officials—brought suit, principally ar-

guing that the rescission was arbitrary and capricious

within the meaning of 10 (e) of the Administrative

Procedure Act (hereinafter the APA“), 5 U.S.C. § 706

(2)(A) (1982). Their concern is that when homework-

ers are employed it is not possible effectively to enforce

the minimum wage, overtime compensation and child la-

bor provisions of the Fair Labor Standards Act of 1938

(hereinafter “the Act”), 29 U.S.C. 58 201-219 (1976 &

3

Supp. V 1981). They also claim that payment of sub-

minimum wages to homeworkers in the industry will

cause competitive injury to employers complying with

the Act and will drive down the wages of all employees

in the industry. The District Court denied the appel-

lants’ motion for summary judgment and granted sum-

mary judgment for the appellees.

Because we find that the Secretary’s decision was ar-

bitrary and capricious, we reverse the decision of the

District Court and vacate the action of the Secretary

rescinding restrictions on the employment of homework-

ers. We will remand the case to the District Court with

instructions to return the matter to the Secretary for

further proceedings, as may be appropriate, consistent

with the opinion of this court.

I. BACKGROUND

A. The History of Restrictions on Industrial Homework

To appreciate the significance of the Secretary’s de-

cision, one must first understand the historical context

in which it arose. The concerns about industrial home-

work raised by the appellants echo those voiced by critics

of substandard labor conditions throughout this century.

See WaGE & Hour Dr., U.S. DEr'r or LABOR, IN THE

MATTER OF THE RECOMMENDATION OF INDUSTRY COMMIT-

TEE No. 32 FOR A MINIMUM WAGE RATE IN THE KNITTED

OUTERWEAR INDUSTRY AND INDUSTRIAL HOME WoRK IN

THE KNITTED OUTERWEAR INDUSTRY, FINDINGS AND

OPINION OF THE ADMINISTRATOR 13 (1942) (hereinafter

“1942 FINDINGS”), reprinted in I Joint Appendix (J. A.

79 (“The problems inherent in [homework] have been

recognized for a long period of time.”). The history of

legislative attempts to remedy such concerns evinces an

evolving recognition of the need for restriction, rather

than mere regulation, of industrial homework in indus-

tries in which it is pervasive.

4

Regulation of homework was initially undertaken by

the states around the turn of the century. Between 1871

and 1904, twelve states enacted statutes either barring

conversion of homes into industrial workshops or requir-

ing inspection and registration of homework. Comments

of International Ladies’ Garment Workers’ Union 10

(July 1, 1981) (hereinafter “ILGWU Comments”), re-

printed in II J.A. 308. In the early 1900’s, commissions

in at least two of these states reported that regulatory

efforts had been failures. Id. at 13, II J.A. 311 (quoting

reports from Pennsylvania and Massachusetts). A com-

mission in New York found that

chlome work means unregulated manufacturing car-

ried on beyond the possibility of control as to hours

of women’s work, child labor, night work of minors

or cleanliness and sanitation of work places. From

the point of view of the community the greatest ob-

jection to home work is its essential lawlessness.

Quoted in 1942 FINDINGS, supra, at 13, reprinted in

IJ. A 79 (footnote omitted).

By the mid-1930’s, there was increasing support for

the prohibition of homework.' Under the National Indus-

The comments received during the Department of Labor’s

notice and comment rulemaking in 1981 included submissions

from five former Secretaries of Labor—Peter Brennan, Wil-

lard Wirtz, Ray Marshall, Arthur Goldberg and John Dunlop.

These Secretaries criticized the proposal to legalize homework

and cited a number of reports from the 1930˙8:

In the 1930’s, a study of the Bureau of Women and Chil-

dren of the Pennsylvania Department of Labor concluded :

“Homework can never be regulated. No matter how strin-

gent the regulations, how great the enforcement, how

honest the investigators, the sweatshop conditions will

continue to exist unless homework is abolished.”

In a study of homework in Rhode Island, the Women’s

Bureau said flatly: “Effective regulation of homework

— 3 —— —U c

5

trial Recovery Act, codes of fair competition were drawn

up for 556 industries, and provisions for regulation or

prohibition of homework were included in 118. Approxi-

mately one hundred of the codes “provided for the com-

plete abolition of homework.” BRANCH OF RESEARCH &

STATISTICS, WAGE & Hour & PUBLIC CONTRACTS Dru.,

DEP’T OF LABOR, EMPLOYMENT OF HOMEWORKERS UNDER

THE FAIR LABOR STANDARDS ACT 15 (1959) (hereinafter

“1959 REPORT“), reprinted in II J. A. 489. The National

Industrial Recovery Act subsequently was found uncon-

stitutional by the Supreme Court in Schechter Poultry

Corp. v. United States, 295 U.S. 495 (1935). However,

one year later the United States’ Children’s Bureau re-

ported on the relative effectiveness of prohibition and

regulation under the codes prior to Schechter:

Great gains were made where the codes prohibited

the giving out of home work. But in the industries

in which home work was still permitted, even though

limited by certain regulations, the ancient evils

continued to exist and to constitute a menace to the

higher labor standards that had been achieved for

factory workers.

is impossible.“ In particular, it pointed out, “the pre-

vention of child labor is practically impossible.”

A special committee appointed by President Roosevelt

to review the administration of the National Industrial

Recovery Act concluded that “homeworkers did not come

to enjoy code wage standards, even in industries where

the regulations were severe and enforcement was exact-

ing. . . The provisions failed most conspicuously in regu-

lating hours of employment and child labor. It was found

that only complete prohibition could eradicate the evils

of industrial homework.”

Comments of Peter Brennan (May 21, 1981), reprinted in

I J. A. 172-73; Comments of Willard Wirtz, Ray Marshall and

Arthur Goldberg (May 25, 1981), reprinted in I J.A. 174-75;

Comments of John T. Dunlop (June 1, 1981), reprinted in

I J. A. 176-77 (hereinafter collectively referred to as Secre-

taries’ Comments”).

6

U.S. CHILDREN’S BUREAU, INDUSTRIAL HOMEWORK UNDER

THE NATIONAL RECOVERY ADMINISTRATION 21 (1936),

quoted in ILGWU Comments, supra, at 14, reprinted in

II J.A. 312 (footnote omitted).

In 1938, Congress passed the Fair Labor Standards Act

of 1938,? the “central aim” of which “was to achieve, in

those industries within its scope, certain minimum labor

standards.“ Mitchell v. Robert DeMario Jewelry, Inc.,

361 U.S. 288, 292 (1960). See also Southland Gasoline

Co. v. Bayley, 319 U.S. 44, 48 (1943). The Act estab-

lished minimum hourly wages for employees,* limited the

number of hours employees could work without receiving

overtime compensation,“ and prohibited oppressive child

labor.* Section 11(c) of the Act required employers to

keep and make available records of employees’ wages and

hours.’ Shortly after passage of the Act, the Adminis-

trator (hereinafter “the Administrator“) of the Wage

and Hour Division (hereinafter “the Division”) issued a

2 Pub. L. No. 75-718, 52 Stat. 1060 (1938) (codified as

amended at 29 U.S.C. §§ 201-219 (1976 & Supp. V 1981) ).

It is clear, however, that the Act was also concerned with

the employment consequences of achieving this objective. See

id. § 2 (b), 62 Stat. at 1060 (codified as amended at 29 U.S.C.

§ 202(b) (1976)) (“It is hereby declared to be the policy of

this Act, through the exercise by Congress of its power to

regulate commerce among the several States, to correct and

as rapidly as practicable to eliminate the conditions above

referred to in such industries without substantially curtailing

employment or earning power.“).

Id. § 6, 62 Stat. at 1062-63 (codified as amended at 29

U.S.C. § 206 (1976 & Supp. V 1981) ).

d. §7, 62 Stat. at 1063-64 (codified as amended at 29

U.S.C. § 207 (1976 & Supp. V 1981) ).

Id. § 12, 62 Stat. at 1057 (codified as amended at 29 U.S.C.

§ 212 (1976) ).

Id. §11(c), 62 Stat. at 1066-67 (codified at 29 U.S.C.

§211(c) (1976)).

7

statement interpreting the Act to cover workers whether

they worked at home or in the factory. See 1959 REPORT,

supra, at 18, reprinted in II J.A. 492. All employers of

homeworkers were required to keep special records in-

dicating the identity of homeworkers and the time worked

and piece rates paid with respect to each lot of work

issued. See 1942 FINDINGS, supra, at 19-20, reprinted in

I J.A. 85-86. Employers were also required to obtain

handbooks from the Division and distribute them to

homeworkers they employed so that the homeworkers

would have records of times worked and rates paid.

These handbooks would be retained by the homeworker

except during the time necessary for the employer to

complete a periodic entry required by the regulations.

Id. at 20, I J. A. 86.

Soon after the promulgation of these regulations, pres-

sures to prohibit homework intensified. A number of

states had taken such action,“ and a 1940 national con-

ference on labor legislation composed of government rep-

resentatives from almost every state recommended that

the Division seriously consider prohibition of industrial

homework. Id. at 13, I J.A. 79. Between 1941 and 1943,

the Division held hearings “for seven industries in which

homework was most prevalent and in which violations

of the Fair Labor Standards Act had been a problem”

(1959 REPORT, supra, at 19, reprinted in II J. A. 493):

the jewelry, knitted outerwear, gloves and mittens, but-

ton and buckle, embroidery, handkerchief and women’s

apparel industries.

One outgrowth of these hearings, and the related in-

vestigations of the Division, was a series of reports issued

In 1935, New York passed a law prohibiting homework in

certain specified industries. 1959 REPORT, supra, at 16, re-

printed in II J.A. 490. By 1942, nine states had passed laws

authorizing “prohibition of home work directly or by industry

orders. Five states [had] prohibited home work on knitted

outerwear entirely or in the manufacture of specific products.”

1942 FINDINGS, supra, at 18, reprinted in I J. A. 79.

8

by the Division. Because the reports represent the most

comprehensive analysis by the Department of Labor (here-

inafter “the Department”) of homework and methods of

regulating it, we deem it appropriate to summarize at

length the conclusions of the report dealing with the

knitted outerwear industry.“ The Administrator reported

that officials charged with enforcing the Act “are of the

opinion that there is almost universal violation of the

record-keeping requirements of the Wage and Hour Di-

vision with respect to home workers.” 1942 FINDINGS,

supra, at 22, reprinted in I J.A. 88. Actual inspection of

fifty-six employers revealed that forty-five “were in vio-

lation of the record-keeping provisions in one manner or

another.” Id. at 20, I J. A. 86. This study also found that

only twelve of the fifty-two employers for whom informa-

tion was available were violating neither the wage nor

the hour provisions of the Act with respect to home-

workers. Id. at 22, I J.A. 88. Moreover, the employers

violating either the wage or the hour provisions of the

Act employed ninety-five percent of the total homework-

ers in the study,“ and employers violating both provisions

accounted for more than two-thirds of the total. Jd. To

determine the extent of violations within each firm, the

Division interviewed 430 homeworkers. This study re-

vealed that approximately seventy percent of these work-

ers earned less than the minimum wage of thirty-five

cents per hour and twenty-three percent earned less than

twenty cents per hour. The average wage for home-

The 1942 findings included by the parties in the Joint

Appendix deals specifically with the knitted outerwear in-

dustry. Findings were issued by the Administrator for all

seven industries at issue, and both parties to this appeal in-

dicate that these findings contain similar data. Appellees’

brief, p. 9 n.7; Appellants’ brief, p. 8 n.5.

10 The study involved 1,577 homeworkers, a significant per-

centage of the estimated 6,000 to 8,000 homeworkers employed

in the industry at the time. 1942 FINDINGS, supra, at 14, 22,

reprinted in I J.A. 80, 88.

9

workers in the sample group was twenty-seven cents per

hour, less than eighty percent of the minimum wage. Id.

at 23, I J. A. 89.

The Administrator then examined the underlying rea-

sons for the violation rate and concluded that [t] here

are many opportunities for evasion of the minimum wage

standards which are inherent in the home work practice.”

Id. at 26, I J.A. 92. One of the impediments to enforce-

ment of minimum wages was the difficulty of ascertain-

ing the identity of homeworkers:

If the employer chooses to omit names of homework

employees from his pay roll, there is almost no ef-

fective means of check-up since the workers may be

scattered through the city or the State. Even where

the list of names is properly kept, there is no means

of ascertaining how many persons in the famil:

may have been actually engaged in the work. The

constant change in address of low-income families

and the high turnover in home work employees com-

plicate the problem of finding the home worker.

Id.

Even when workers could be identified, it was difficult

to obtain accurate records of the number of hours each

employee had worked, necessarily burdening efforts to en-

sure compliance with minimum wage, maximum hour,

and overtime provisions of the Act. The Administrator

found that:

It is obvious, however, that the employer can have no

certain knowledge of the number of hours spent by

the home worker. Even with the best of intentions

the home worker has many interruptions and is

frequently unable to keep an accurate record of

hours worked. Fear that work will be withdrawn

if the home worker is unable to make the minimum

is a strong incentive to falsify records.

Id.

10

Testimony by Division officials also indicated that the

foregoing problems made investigation of wage and hour

violations vastly more difficult when homeworkers were

involved. The Division’s Regional Director for Con-

necticut, New Jersey and New York testified that “an

investigation in a home work industry takes anywhere

from two weeks to two months, that is, to be able to get

time studies and the information necessary to insure a

complete inspection, whereas, the average inspector can

complete one or two cases a week of factory inspection.”

Id. at 27, I J.A. 93 (quoting testimony of Arthur J.

White).

When violations were discovered, compensating home-

workers was onerous. Complex employer-employee rela-

tionships (often involving middlemen) made it “difficult

to determine where to place the responsibility for viola-

tions” in the industry: “[c]ontractors usually have more,

than one jobber, necessitating several individual negotia-

tions and frequently manufacturers disclaim liability for

1 The problem involved when inspecting factory conditions

contrasted to those problems which confront us when

inspecting home work conditions are distinctly different

in approach, time consumption and results obtained. The

inspector in one or two visits to a factory is able to

interview a sufficient number of employees and is also

able to check records pertinent to their employment. He

can, therefore, substantially determine the scope and

seriousness of violations uncovered or compliance on the

part of the employer. As against this comparatively

simple procedure, home work investigations involve visits

to homes of home workers, scattered as they are through-

out every part of the City of New York and every part

of the region. Frequently our inspectors must make more

than one visit for the purpose of interviewing them. Each

home worker interviewed constitutes almost as much in-

spection work as does an entire inspection of a fair sized

factory establishment.

1942 FINDINGS, supra, at 27, reprinted in I J.A. 93 (quoting

testimony of Arthur J. White) (footnote cmitted).

11

contractors’ violations.” Id. at 29, I J. A. 95. Additionally,

the responsible parties were often bankrupt by the time

the Division obtained judgment against them. Id.

These considerations led the Administrator to conclude

that:

The extensive evidence in the record can leave no

doubt of the high incidence of ubminimum employ-

ment of home workers in the Knitted Outerwear In-

dustry. The record shows that industrial homework

furnishes a ready means of circumventing or evad-

ing the minimum wage order for this industry, that

the existing requirements of the Act have been

evaded by these means and that the continuation of

home work will endanger the standards of factory

employment.

Id. at 30-81, I J.A. 96-97.

The Administrator then considered whether violations

could be controlled if the Division undertook time studies

and fixed piece rates for homework, and concluded that

this was not an effective enforcement option. First, be-

cause of wide variations in the productivity of individual

workers, establishing an average piece rate resulted in

“only the roughest kind of approximation of actual in-

dividual hours worked.” Id. at 32, I J. A. 98. This prob-

lem was exacerbated by variations in “size of yarn, or

closeness or looseness of stitch,” id. at 33, I J.A. 99 (quot-

ing testimony of Anna L. Hoffer), as well as different

combinations of styles, sizes and color. Id. at 32, I J. A.

98.2 Even if a piece rate could be identified, the Admin-

12 The extent of this problem was witnessed under the Na-

tional Industrial Recovery Act, Pub. L. No. 73-67, 48 Stat.

195 (1933) (codified at 15 U.S.C. §§ 701-712 (1984)), held

unconstitutional in Schechter Poultry Corp. v. United States,

295 U.S. 495 (1935). The N. R. A. code for the industry lasted

one year and 5 months but during this entire period efforts

to establish minimum piece rates for home work were unsuc-

cessful.” 1942 FINDINGS, supra, at 18, reprinted in I J.A. 84.

12

istrator found that there was no effective way to use the

rate to protect the wage rights of individual homework-

ers.“ The record also indicated that employers would

still have “many ways of reducing the earnings of the

home worker, even if you.do pay her the prescribed piece

work rate.” Id. at 32, I J.A. 98 (quoting testimony of

Julius Traugot). Hence, the Administrator concluded

that “effective enforcement of the minimum wage order

for the Knitted Outerwear Industry cannot be expected

with respect .to industrial home workers by the piece-

rate method and that * is required.“ Id. at 34,

I J. A 100.

The Administrator soon deted on the information con-

tained in the Division reports and prohibited homework in

the seven industries studied, unless homeworkers came

within certain narrow exceptions. The regulation appli-

cable to the knitted outerwear industry authorized the

issuance of special homework certiffeates to workers who

were unable to adjust to factory work because of physical

or mental disability, or were unable to leave home because

their »resence was required to care for an invalid in the

home.

18 The Act does not authorize the payment of a piece rate

which is “commensurate” with applicable minimum hourly

rates. Consequently, no average rate or piece rate ad-

justed with a percentage allowance can be considered a

proper rate of compensation unless make-up is paid to

the worker who does not earn the hourly minimum. Such

make-up pay can be calculated only on the basis of records

of hours worked and, as has been seen, such information

cannot be obtained. It would, therefore, be necessary

either to adopt the alternative of setting the piece rate

at the level of the home worker of the least productivity

which is not feasible from the business standpoint, or to

adopt the equally unfeasible alternative from an adminis-

trative standpoint of setting individual piece rates for

each home worker in each of the numerous operations

to which he may be assigned.

Id. at 32, I J. A. 98 (footnote omitted).

e .

13

The authority of the Administrator to take such action

was upheld in Gemsco, Inc. v. Walling, 324 U.S. 244

(1945) ,2* and this authority was explicitly conferred by

act of Congress in 1949. In amending the Act, Congress

provided that:

The Administrator is authorized to make such reg-

ulations and orders regulating, restricting, or pro-

hibiting industrial homework as are necessary or

appropriate to prevent the circumvention or evasion

of and to safeguard the minimum wage rate pre-

scribed in this Act, and all existing regulations or

orders of the Administrator relating to industrial

* are hereby continued in full force and

ect.

Fair Labor Standards Amendments of 1949, Pub. L. No.

81-398, § 9, 63 Stat. 910, 916-17 (1949) (codified at 29

U.S.C. §211(d) (1976)). With the Division’s authority

14 In reviewing a petitioner’s challenge to restrictions in the

embroidery industry, the Court said:

[f the prohibition [i. e., restrictions] cannot be made,

the floor for the entire industry falls an- the right of the

homeworkers and the employers to be free from the pro-

hibition destroys the right of the much larger number of

factory workers to receive the minimum wage. This is

true not merely as a matter of inference from evidence

having only prospective and predictive value. It is proved

conclusively by the Administrator’s experience in attempt-

ing by regulatory methods to secure compliance with the

previously prevailing lower committee“ rate. His experi-

ence is borne out by that of state and federal authorities

prior to the Fair Labor Standards Act. Attempts to main-

tain minimum wages by regulating homework have failed

generally of their purpose. This failure, after fair trial, is

responsible for the Administrator’s resort to prohibition

in the present order. ;

$24 U.S. at 252-54 (footnotes omitted). The Court found that

in light of the Administrator’s findings, restriction was within

his statutory authority both “by necessity to avoid self-

nullification and by its explicit terms.” 324 U.S. at 255.

id

to restrict homework thus firmly established, the Division

adhered to this method of controlling homework abuses

until the Secretary’s decision in 1981.

B. The Secretary's Action

On December 5, 1980, the Division published a notice

of hearings to obtain information on the situation with

respect to industrial homework and the extent to which

it might bear “on the Secretary’s statutory responsibility

‘to prevent the circumvention or evasion of and to safe-

guard the minimum wage rate prescribed’ in the Fair

Labor Standards Act.” 45 Fed. Reg. 80,555 (1980).

Hearings were subsequently held in Burlington, Vermont

and Washington, D.C. At the hearings, opposition to the

restrictions on homework came almost entirely from

homeknitters (and their representatives) from Vermont,

and government officials from Vermont.

On May 5, 1981, the Division published a notice propos-

ing removal of the restrictions on homework in the seven

industries. 46 Fed. Reg. 25,108 (1981). The Department

indicated that its “primary concern is the protection of

workers from the illegal payment of subminimum wages,”

and requested additional information on the effects of its

proposal on the Act’s minimum wage provisions, the seven

currently restricted industries and small businesses. Id.

at 25,109.

Following receipt and consideration of more than 10,000

comments, the Secretary “decided to remove the restric-

tions on the employment of homeworkers in the knitted

outerwear industry and to retain such restrictions in the

remaining six incustries.” 46 Fed. Reg. 50,348 (1981).

This decision was based primarily on the finding that

“substantial curtailment of employment opportunities and

18 In 1959, prohibitions were removed from the manufacture

of hand fashioned jewelry on certain Indian reservations. 29

C.F.R. § 530.12 (b) (1960).

’

f

15

earning power will result from a continuation of the re-

strictions on industrial homework in the knitted outer-

wear industry. No such demonstration was made with

regard to industrial homework in the other six industries

[and consequently] it appears reasonable to remove the

restrictions in the knitted outerwear industry only.” Id.

at 50,349.

The Secretary indicated that in conjunction with the

removal of the restrictions the Department would under-

take “a concerted compliance effort in this industry.” The

Secretary suggested that such an effort could be effective:

Since it appears that homeworkers will comprise only

a small percentage of the approximately 63,000 pro-

duction employees in this industry, an effective en-

forcement program is feasible. When the restric-

tions were established in knitted outerwear, almost

40 years ago, effective oversight of homework in

this industry was not possible as it was estimated

that homeworkers constituted more than 20 percent of

the workforce, the enforcement program of the De-

partment was newly established, and acceptance of

the principle of a minimum wage among covered

employers was much less prevalent than at present.

Id.

On October 27, 1981, the appellants brought an action,

pursuant to section 10(b) of the APA, 5 U.S.C. § 703

(1982), to enjoin the Secretary’s rescission of the re

strictions on homework in the knitted outerwear industry.

Tne appellants alleged that the Secretary’s decision to

rescind exceeded his statutory authority under section 11

(d) of the Fair Labor Standards Act of 1938, 29 U.S.C.

§ 211(d) (1976), was arbitrary and capricious within the

meaning of section 10(e) of the APA, 5 U.S.C. § 706(2)

(A) (1982), and was not accompanied by an adequate

statement of basis and purpose as required by section 4(b)

of the APA. 5 U.S.C. § 553 (e) (1982).

16

While the District Court held that the appellants did

have standing to sue, it rejected their challenges to the

rescission. The court found that the appellants’ argurient

concerning the alleged limitations of the Secretary’s statu-

tory authority was not supported by the language or

history of section 11(d), International Ladies’ Garment

Workers’ Union v. Donovan, Civ. No. 81-2606, mem. op.

at 6 (D. D. C. July 23, 1982), reprinted in II J.A. 608, and

the appellants do not raise this argument on appeal. The

court then indicated that in deciding whether the rescis-

sion was arbitrary and capricious, the court should review

the rescission with “extreme deference.” The court rea-

soned that because the determination of how the minimum

wage law can best be enforced is “within the special

competence of the Executive Branch,” this determination

should be set aside “only if there is virtually no evidence

to support it.“ Id. at 9, II J. A. 611. Finding that the

Secretary had satisfied this minimal standard, the District

Court upheld his decision.

II. STANDING AND CAUSE OF ACTION

The appellants -have brought this action primarily to

redress injuries resulting from payment of subminimum

wages by homeworker employers. They allege that this

unfair competition will injure factory employers by caus-

ing them to lose markets and profits. Factory employees,

in turn, will be injured because their employers will be

forced to reduce wages and lay off workers.

The appellees argue that as a threshold matter the

appellants have neither a cause of action nor standing to

sue. Both arguments are largely based on the same

premise: sections 16 and 17 of the Act, 29 U.S.C. 88 216,

217 (1976 & Supp. V 1981), lay “out a distinct and de-

tailed statutory mechanism for judicial enforcement of

[the Act] specifically by employees who are themselves

denied the minimum wage, or by the Secretary on behaif

17

of such employees.” Appellees’ brief, p. 34.°* The appellees

argue that this statutory mechanism was intended to be

exclusive, and hence forecloses judicial review of agency

action under the APA. In the appellees’ view, it also

means that the appellants are not “within the zone of

interests” protected by the Fair Labor Standards Act and

consequently do not have standing to sue under the APA.

16 The pertinent language of § 16 provides:

(b) Any employer who violates the provisions of section

206 or section 207 of this title shall be liable to the em-

ployee or employees affected in the amount of their unpaid

minimum wages, or their unpaid overtime compensation,

as the case may be, and in an additional equal amount as

liquidated damages. Any employer who violates the pro-

visions of section 215(a) (3) of this title shall be liable

for such legal or equitable relief as may be appropriate

to effectuate the purposes of seciton 215(a) (3) of this

title, including without limitation employment, reinstate-

ment, promotion, and the payment of wages lost and an

additional equal amount as liquidated damages. An ac-

tion to recover the liability prescribed in either of the

preceding sentences may be maintained against any em-

ployer (including a public agency) in any Federal or State

court of competent jurisdiction by any one or more em-

ployees for and in behalf of himself or themselves and

other employees similarly situated. No employee shall be a

party plaintiff to any such action unless he gives his con-

sent in writing to become such a party and such consent

is filed in the court in which such action is brought.

(c) ... The Secretary may bring an action in any court

of competent jurisdiction to recover the amount of unpaid

minimum wages or overtime compensation and an equal

amount as liquidated damages.

29 U.S.C. 5 216 (b), (e) (Supp. V 1981). The pertinent lan-

guage of § 17 provides:

The district courts . . . shall have jurisdiction, for cause

shown, to restrain violations of section 215 of this title,

including in the case of violations of section 215 (a) (2) of

this title the restraint of any withholding of payment of

minimum wages or overtime compensation found by the

court to be due to employees

29 U.S.C. § 217 (1976).

18

Initially, we must consider the appellants’ contentions

that the appellees are foreclosed from raising the cause of

action argument by their failure to raise it below, and

from raising both the cause of action and standing argu-

ments by their failure to file a cross appeal. See Wiscon-

sin Bankers Association v. Robertson, 294 F.2d 714 (D.C.

Cir.), cert. denied, 368 U.S. 938 (1961). Because “the

question of standing goes to this court’s jurisdiction, we

must decide the issue” in spite of the waiver arguments

raised by the appellants. Southern Mutual Health As-

sociation v. Califano, 574 F.2d 518, 522 (D.C. Cir. 1977).

See generally Insurance Corp. of Ireland v. Com-

pagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982)

(because subject-matter jurisdiction is an Article III

requirement, a party does not waive the requirement by

failing to challenge jurisdiction early in the proceed-

ings; additionally, a court, including an appellate court,

will raise lack of subject-matter jurisdiction on its own

motion’’). ‘

The issue of whether a complaint has properly stated a

Federal cause of action is generally viewed as going to

the merits, but it may be dismissed on jurisdictional

grounds where the Federal action “clearly appears to be

immaterial and made solely for the purpose of obtaining

jurisdiction or where such a claim is wholly insubstan-

tial and frivolous.” Bell v. Hood, 327 U.S. 678, 682-83

(1946). While we think it clear that the appellants’ as-

sertion of a cause of action is neither wholly insubstan-

tial nor frivolous and consequently we could reject the

appellees’ cause of action argument because of their fail-

ure to raise it below, cf. Mount Healthy City Board of

Education v. Doyle, 429 U.S. 274, 279 (1977) (where

plaintiff’s allegation that his rights were violated and

he was entitled to relief was “not so patently without

merit as to fail the test of Bell v. Hood. .. the question

as to whether the respondent stated a claim Lor relief

under § 1331 is not of the jurisdictional sort which the

19

Court raises on its own motion”), we will address the

appellees’ argument to resolve any jurisdictional un-

certainties. See Regents of the University of California

v. Bakke, 488 U.S. 265, 380 (1978) (White, J., con-

curring) (“if we are not obliged to [consider whether

a private cause of action exists], it is at least advisable

to address this threshold jurisdictional issue”). Cf.

Morris v. Washington Metropolitan Area Transit Au-

thority, 702 F.2d 1037, 1040-42 (D.C. Cir. 1983) (rais-

ing sua sponte doubts about existence of direct remedy

under Constitution and, while remanding on other

grounds, directing the district court to permit parties to

amend pleadings to address this issue).

The appellants argue that they have stated a valid

cause of action and are entitled to judicial review under

section 10(a) of the APA, 5 U.S.C. § 702 (1982), which

provides that “a person suffering legal wrong because of

agency action, or adversely affected or aggrieved by

agency action within the meaning of a relevant statute,

is entitled to judicial review thereof.” Despite the ap-

parent force of the appellants’ position, the appellees con-

tend that this right to review of the Secretary’s action is

foreclosed in this case by section 10 of the APA, which

prevents courts from reviewing actions under the APA

where “statutes preclude judicial review.” 5 U.S.C.

§ 701(a) (1) (1982).

We find the appellees’ contentions to be wholly unper-

suasive. The burden on the appellees in advancing an

argument against judicial review is a heavy one, and we

conclude that they have completely failed to satisfy that

burden. “The legislative material elucidating that semi-

nal act [the APA] manifests a congressional intention

that it cover a broad spectrum of administrative actions,

and this Court has echoed that theme by noting that

the Administrative Procedure Act’s ‘generous review pro-

visions’ must be given a ‘hospitable’ interpretation.”

Abbott Laboratories v. Gardner, 387 U.S. 136, 140-41

20

(1967) (quoting Shaughnessy v. Pedreiro, 349 U.S. 43,

51 (1955)) (footnote omitted). We have indicated that

under the APA there is “a strong presumption of re-

viewability that can be rebutted only by a clear showing

that judicial review would be inappropriate.” NRDC,

Inc. v. SEC, 606 F.2d 1031, 1043 (D.C. Cir. 1979). Ac-

cord Dunlop v. Bachowski, 421 U.S. 560, 567 (1975)

(absent express statutory prohibition of review, the

Secretary bears a “heavy burdea of overcoming the

strong presumption that Congress did not mean to pro-

hibit all judicial review of his decision”); Abbott La-

boratories, 387 U.S. at 140 (“judicial review of a final

agency action by an aggrieved person will not be cut

off unless there is persuasive reason to believe that such

was the purpose of Congress”); Rusk v. Cort, 369 U.S.

367, 379-80 (1962) (requiring “clear or convincing” evi-

dence of congressional intent to make “broadly remedial

provisions” of the APA unavailable to review acts under

the Immigration and Nationality Act).

The appellees do not suggest that any statute explicitly

precludes review of the Secretary’s decision, but argue

that preclusion should be implied from the Act’s pro-

vision for actions by underpaid employees, or the Secre-

tary, to recover unpaid wages. The suggestion that

provision of such an action evidences a clear and con-

vincing intent to exclude all other judicial relief, and in

particular the right of aggrieved parties to challenge

allegedly arbitrary and capricious actions by the Secre-

tary, borders on the incredible. As we recently indicated,

in rejecting a very similar argument, [a] private right

of action . . . is addressed to suits by private litigants

against private parties allegedly acting in violation of a

statutory command. The instant action, seeking judicia!

redress of alleged administrative misconduct, is a dis-

tinct form of proceeding ... .” Common Cause v. Depart-

ment of Energy, 702 F.2d 245, 249 n.30 (D.C. Cir. 1983)

citations omitted). See also Abbott Laboratories, 387 U.S.

at 141 (quoting L. JAFFE, JUDICIAL CONTROL OF Ab-

MINISTRATIVE ACTION 357 (1965)) (“ The mere fact

21

that some acts are made reviewable should not suffice

to support an implication of exclusion as to others.

The right of review is too important to be excluded on

such slender and indeterminate evidence of legislative

intent.’ ”’).

Moreover, rather than providing proof of an inten to

restrict review, an analysis of the language and history

of the Act compels allowance of the review sought in

this case. The language and history unmistakably evi-

dence an intent to protect all covered employees and em-

ployers from the economic consequences of subminimum

wages paid to a small sector of the labor force. Section

2(a) of the Act, indicates that

[t]he Congress finds that the existence, in industries

engaged in commerce or in the production of goods

for commerce, of labor conditions detrimental to the

maintenance of the minimum standard of living

necessary for health, efficiency, and general well-

being of workers (1) causes commerce and the chan-

nels and instrumentalities of commerce to be used

to spread ahd perpetuate such labor conditions among

the workers of the several States . . fand] (3)

constitutes an unfair method of competition in

commerce.

29 U.S.C. 8 202 (a) (1976). Similarly, the House Re-

port argued that following passage of the Act

[n]o employer in any part of the United States in

any industry affecting interstate commerce need

fear that he will be required by law to observe wage

and hour stancards higher than those applicable to

his competitors. No employee . . need fear that the

fair labor standards maintained by his employer will

be jeopardized by oppressive labor standards main-

tained by those with whom his employer competes.

H.R. REP. No. 2182, 75th Cong., 3d Sess. 6-7 (1938).

See also Lerwill v. Inflight Services, Inc., 379 F. Supp.

690, 696 (N.D. Cal. 1974) (“The Act serves a public and

a private purpose. Its enforcement provisions are in-

tended to protect workers and their families, whom the

22

Act is intended to benefit, see 29 U.S.C. § 202 (1976),

but it is also intended to protect the employers who com-

ply with its terms.“), affd sub nom. Lerwill v. Inflight

Motion Pictures, Inc., 582 F.2d 507 (9th Cir. 1978).

This concern was reiterated by Congress in the Fair

Labor Standards Amendments of 1961.“ Congress

amended sections 16(b) and 17 of the Act to permit the

Secretary to commence actions seeking payment of back

wages due to employees because of minimum wage and

overtime violations, even absent a request for such action

by. employees. Section 12, 75 Stat. 65, 74-75 (1961)

(codified as amended at 29 U.S.C. $§ 216(b), 217 (1976 &

Supp. V 1981)). See H.R. Rep. No. 75, 87th Cong., Ist

Sess. 28 (1961). The House Report explained the need

for this change:

Under the present provisions of the act, the Secre-

tary of Labor has no authority to require the pay-

ment of minimum wages and overtime compensa-

tion not paid in compliance with the law, except

where an employee requests that an action be

brought by the Secretary of Labor. This limitation

has impeded the Secretary in his efforts to enforce

the act since many employees who have not been paid

in compliance with the act are hesitant about re-

questing legal action against their employers.

Id. at 27-28. The Report argues that the amendments

“would increase the level of compliance with the statute,

and would protect complying employers from the unfair

wage competition of the noncomplying employers.

17 Pub. L. No. 87-30, 75 Stat. 65 (1961) (codified as amended

in scattered sections of 29 U.S.C. §§ 201-219 (1976 & Supp. V

1981) ).

18 Id. at 28 (emphasis added). See Hodgson v YB Quezada,

498 F.2d 5, 6 (9th Cir. 1974) (“[The restraint embodied in

Section 17 serves at least two important purposes: it serves

to increase the effectiveness of the Act by depriving a violator

of any gains resulting from his violation, and it protects those

employers who comply with the Act from unfair competition

by those who do not comply.”) ; Wirtz v. Malthor, Inc., 391

F.2d 1, 8 (9th Cir. 1968) (same).

23

The legislative history also suggests that the protec-

tion sought for all covered employers and employees will

be jeopardized unless those parties are entitled to ju-

dicial review of the Secretary’s actions. First, there may

be occasions when the interests of underpaid employees

are such that ihey cannot be expected to bring actions

which will, in effect, protect employers complying with

the Act and their employees.“ The 1961 amendments

make it clear that protection of the latter parties’ in-

terests does not depend on private actions by underpaid

employees; the Secretary may bring actions to enforce

the Act even absent the consent of the underpaid em-

19 In some circumstances, this will be because the underpaid

workers are not in a position to sue for back wages, even

though they might like to do so. See H.R. Rep. No. 75, 87th

Cong., Ist Sess. 28 (1961) (employees may be hesitant about

requesting legal action against their employers). In other

circumstances, the interests of underpaid employees and com-

plying employers (and their employees) may be in conflict.

Such would be the case if the underpaid employees feared

retaliation (or serious economic consequences for their em-

ployer, which might ultimately have adverse consequences for

the employees) resulting from any action (including one

brought by the Secretary) against their employer, and yet

the 1961 amendments do authorize such an action. The appel-

lees argue that the instant case also involves conflicting inter-

ests, because restrictions on homework will “bar the home-

knitters’ very livelihood.” Appellees’ brief, p. 38 n.20. Never-

theless, there is no question that the Secretary does have the

authority to impose such restrictions. See 29 U.S.C. § 211 (d)

(1976). Hence, it is evident that the Act does authorize the

Secretary to take action that may be contrary to the perceived

interests of some underpaid employees. Indeed, in at least

some respects, minimum wage laws are inherently contrary

to the interests of those underpaid employees who may not

be employable at all at the minimum wage.

We do not mean to suggest that Congress was not primarily

concerned with the well-being of underpaid employees. See

Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 n.18 (1945).

Our point is that this was not the sole congressional concern,

and is clear from the Act that there may be times when

the Secretary should take certain actions to enforce the Act

despite the protestations of some underpaid employees.

24

ployees. Second, the Act reflects a recognition of the limi-

tations of actions for back wages as a means of assuring

compliance with the Act. This is evidenced by section

11(d), which authorizes the Secretary to regulate, and if

necessary prohibit, homework. 29 U.S.C. § 211(d) (1976).

Hence, it is apparent that effective protection of the in-

terests of complying employers and their employees sig-

nificantly depends on reasonable actions by the Secretary.

We therefore conclude that permitting the appellants to

seek judicial review to insure that such actions are not

arbitrary and capricious is entirely consistent with the

language, history and purposes of the Act.”

The foregoing discussion permits us to dispose quickly of

the challenges to the appellants’ standing to sue. The

crux of thé appellees’ position is that the appeliants do not

fall within the “zone of interests” protected by the Act.

See generally Association of Data Processing Service Or-

ganizations v. Camp, 397 U.S. 150, 153-54 (1970). We

have indicated th: in applying the zone of interests test

we “must discern whether the interest asserted by a

party in the particular instance is one intended by

Congress to be protected or regulated by the statute un-

der which suit is brought.” Control Data Corp. v. Bald-

rige, 655 F.2d 283, 293-94 (D.C. Cir.) (footnote omitted),

2 It is also clear that this protection cannot be provided by

simply permitting underpaid employees to seek review of the

Secretary’s actions. See note 19 supra. Furthermore, it is very

questionable whether the appellees’ position would even per-

mit underpaid employees—in this case homeworkers—to chal-

lenge the Secretary’s actions, since the Act has already pro-

vided a “distinct and detailed statutory mechanism” for en-

forcement of their rights. Appellees’ brief, p. 34. Moreover,

homeworkers who are not working because of restrictions

might be in a particularly weak position to assert a right to

review because they can hardly be considered to be members

of the class of underpaid employees. The hardship such parties

might have to endure further illustrates the folly of the ap-

pellees’ attempt to insulate the Secretary’s action from the

safeguards provided by the APA.

25

cert. denied, 454 U.S. 881 (1981). Additionally, ‘slight’

beneficial indicia will be sufficient to sustain a party’s

assertion of standing.” Id. at 295. The earlier discus-

sion in this section reveals that there are clear indicia

that compliant employers and their employees are with-

in the zone of interests protected by the Fair Labor

Standards Act. Consequently such parties are persons

“adversely affected or aggrieved by agency action within

the meaning of a relevant statute,” 5 U.S.C. § 702

(1982), and (assuming they meet the other tests for

standing) have standing to sue under the APA. Sierra

Club v. Morton, 405 U.S. 727, 732-83 (1972); Barlow v.

Collins, 397 U.S. 159, 164-65 (1970); Association of

Data Processing Service Organizations, 397 U.S. at 153-

57 (1970). Hence, we reject the suggestion that the

manufacturers, manufacturers’ associations and labor or-

ganizations * do not satisfy the zone of interests test

in this case.”

For a recent discussion of this test, see American Friends

Service Comm. v. Webster, No. 81-1735, slip op. at 35-52 (D.C.

Cir. Sept. 30, 1983).

22 The appellees do not, and could not reasonably, claim that

the fact that manufacturers’ associations and labor organiza-

tions are suing in a representative capacity presents additional

complications in this case. See Hunt v. Washington State

Apple Advertising Comm’n, 432 U.S. 333, 343 (1977) (“Thus

we have recognized that an association has standing to bring

suit on behalf of its members when: (a) its members would

‘otherwise have standing to sue in their own right; (b) the

interests it seeks to protect are germane to the organization’s

purpose; and (c) neither the claim asserted nor the relief

requested requires the participation of individual member: in

the lawsuit.”).

28 The appellees have also suggested that where the plaintiffs’

interests diverge from the interests of those whom a statute

is designed to protect, the plaintiffs have no standing to sue.

The appellees read our decisions in Cooper & Brass Fabricators

Council, Inc. v. Department of the Treasury, 679 F.2d 951

(D.C. Cir. 1982), and Control Data Corp., 655 F.2d 283, too

broadly. In both of these cases, we explained that there was

26

The appellees also suggest in a footnote that the relief

sought by the appellants—reimposition of restrictions—

will not redress the injuries they claim. Appellees’ brief,

pp. 38-39 n.21. It is well-established that to have stand-

ing a party must allege an injury that “ ‘fairly can be

traced to the challenged action’ and ‘is likely to be re-

dressed by a favorable decision.’” Valley Forge Christian

College v. Americans United for Separation of Church

and State, Inc., 454 U.S. 464, 472 (1982) (quoting Simon

v. Eastern Kentucky Welfare Rights Organization, 426

U.S. 26, 38, 41 (1976)).** The appellees argue that to

satisfy this standard, the appellants must show that if re-

strictions are reimposed, employers of homeknitters will

employ factory labor. This position reflects a serious mis-

understanding of the nature of the appellants’ alleged in-

juries. The appellants allege that unfair competition (i. e.,

payment of subminimum wages) from homeworker em-

ployers will injure factory employers paying lawful wages

and the resulting pressures to lay off workers and reduce

wages will injure factory employees. We must accept

these allegations as true for purposes of determining

standing. See Warth v. Seldin, 422 U.S. 490, 502 (1975).

no evidence indicating an intent in the pertinent statutes to

protect or benefit the plaintiffs and that the protection sought

by the plaintiffs was inconsistent with the purposes of these

statutes. 679 F.2d at 953; 655 F.2d at 295. In contrast, it is

clear that the Fair Labor Standards Act was intended to

protect compliant employers and their employees as well as

underpaid employees. Efforts to insure that any competing

interests of these parties are resolved by the Secretary in a

rational manner, and that the Act is rationally enforced, are

certainly consistent with this statutory intent.

*% Accord Bryant v. Yellen, 447 U.S. 352, 368 (1980) (find-

ing standing where ‘it was “likely” that relief requested by

plaintiffs would result in benefit they hoped for) ; Gladstone,

Realtors v. Village of Bellwood, 441 U.S. 91, 100 (1979)

(plaintiffs’ injury must be “likely to be redressed if the re-

quested relief is granted”) ; Safir v. Dole, No. 81-2271, slip op.

at 8 (D.C. Cir. Sept. 30, 1983) (same).

27

The alleged injuries can be redressed by controlling the

source of the unfair competition (i.e., restricting employ-

ment of homeworkers); in other words, whether home-

worker employers thereafter decide to employ factory

workers simply has no relevance to the appellants’ claims.

Cf. Simon, 426 U.S. at 45 n.25 (“The complaint in Data

Processing alleged injury that was directly traczable to

the action of the defendant federal official, for it com-

plained of injurious competition that would have been

illegal without that action.“)

Alternatively, the appellees’ argument can be read to

suggest that injurious competition will continue if restric-

tions are reimposed because homework employers will

either hire homeworkers illegally or will move their opera-

tion abroad and compete by using lower-priced foreign

labor.* This claim is substantially different than those on

which the Supreme Court relied in the cases cited by the

appellees—Warth and Simon. In Warth, the Court found

that low and moderate income individuals seeking housing

did not have standing to challenge exclusionary zoning

practices, in part because redress of their injury “de-

pended on the efforts and willingness of third parties to

build low- and moderate-cost housing.” 422 U.S. at 505.

Similarly, the relief sought by the plaintiffs in Simon

(denial of favorable tax treatment to hospitals that did

not serve indigents) would only encourage third parties to

provide the hospital treatment desired by the appellants;

whether third parties would provide this treatment was

* Appellees’ brief, p. 39 n.20. The appellees make these

allegations about the likely actions of homework employers

as evidence of their claim that these employers will not hire

factory workers. The appellees’ failure to argue explicitly

that the competition resulting from such actions will approach

that resulting from rescission of restrictions, gives cause to

wonder whether even the appellees think this is a serious

possibility. It is also noteworthy that the Secretary did not

— * this possibility in justifying rescission of the restric-

ons.

28

“speculative at best.” 426 U.S. at 43 (footnote omitted).

In contrast, the relief sought by appellants would make

the injurious conduct of third parties complained of in

this case illegal; only by taking extraordinary measures—

i. e., violating the law or starting new businesses over-

seas—could third parties prevent redress of the appel-

lants’ injuries.

The appellants need not negate every conceivable im-

pediment to effective relief no matter how speculative,

Duke Power Co. v. Carolina Environmental Study Group,

Inc., 438 U.S. 59, 78 (1978), nor are they required “to

prove that granting the requested relief is certain to

alleviate” their injury. Community Nutrition Institute v.

Block, 698 F.2d 1239, 1248 (D.C. Cir. 1983). See also

Bryant v. Yellen, 447 U.S. 352, 367-68 (1980).27 The

20 See American Society of Travel Agents, Inc. v. Blumen-

thal, 566 F.2d 145, 151 (D.C. Cir. 1977) (“Here, the AJC and

other such groups will clearly remain free to pursue their

travel businesses, however the tax status is finally resolved.

By contrast, in [Association of Data Processing Organizations,

Inc. v. Camp, 397 U.S. 150 (1970) J, if the Comptroller of the

Currency’s ruling had been overturned on judicial review, the

offering of data processing services by national banks would

have been illegal, and petitioners undoubtedly would have

faced no further competition from that source, absent statu-

tory revision.”), cert. denied, 435 U.S. 947 (1978).

27In Community Nutrition Institute we also explained that

litigation often “present[s] complex interrelationships be-

tween private and government activity that make difficult

absolute proof that the harm will be removed.” Thus, a

court should be careful not to require too much from a

plaintiff attempting to show redressability, lest it abdicate

its responsibility of granting relief to those injured by

illegal governments! action.

698 F. 2d at 1248 (quoting Nichol, Causation as a Standing

Requirement: The Unprincipled Use of Judicial Restraint,

69 Ky. L. J. 186, 215 (1980-81) ). We are also wary of requir-

ing too strong a showing by the appellants in a case such as

29

speculation offered by the appellees is not supported by

sound reasoning or the record.“ Also, as Congress passed

this where—as the appellees repeatedly point out—some un-

certainties are inevitable.

Furthermore, even if reimposition of restrictions would only

significantly—rather than completely—redress the appellants’

injuries, this would be sufficient to permit judicial review.

Nichol, supra, at 222 (“standing should be granted if a favor-

able decision would contribute in any significant manner to

remedying or preventing the plaintiff's injury.“) (footnote

omitted). This is certainly consistent with the desire under-

lying the redressability requirement “to limit the judicial role

to measures that will produce tangible, meaningful results in

the real world.” Common Cause, 702 F.2d at 254.

28 As we discuss in greater detail infra, restrictions on home-

work in 1942 were followed by a reduction in homeworkers

from approximately 30% to 1.6% of all knitted outerwear

employees, and the appellees appear to acknowledge some

causal relationship between the restrictions and the reduction.

The suggestion that homeworker employers will move

abroad is only supported by the testimony of one homeworker

employer, arguing against domestic restrictions on his busi-

ness. Of course this does not even suggest that production of

knitted outerwear comparable in quantity to that resulting

from removal of homework restrictions will shift overseas,

or that such overseas employers will be able to compete as

effectively in United States’ markets as they would if operating

within the United States as homework employers. Moreover,

other evidence cited by the appellees—testimony by a home-

work employer that if restrictions are resumed he would

cease business altogether—directly supports the conclusion

that restrictions would reduce the unfair competition of which

the appellants complain. The risk of employers moving abroad

also seems minimal when one considers that the appellants

are only seeking reimposition of the status quo (as it existed

prior to 1981). The record does not indicate that knitted outer-

wear businesses moved overseas in large numbers during the

forty years that homework was restricted and one would not

expect—absent persuasive evidence in the record—that a

reimposition of these restrictions after only a two-year hiatus

would suddenly lead to a substantial exodus of domestic

businesses.

30

the Act partly to provide redress to employers from un-

fair competition, the suggestion that effective enforcement

of the Act will not have this effect directly contravenes

the congressional judgment underlying the Act.

In short, Congress intended to afford protection to both

the employers and employees who are represented in this

lawsuit. There is no reason in the present case for the

appellants to be denied judicial review to assure that this

intent is reasonably being effectuated.”

III. DISCUSSION

A. Scope of Review

Both parties agree that the rescission was informal,

notice-and-comment rulemaking conducted pursuant to

section 4 of the APA, 5 U.S.C. § 553 (1982), and as such

is to be found unlawful if it is “arbitrary, capricious, an

abuse of discretion, or otherwise net in accordance with

the law.” 5 U.S.C. § 706(2) (A) (1982). See, e.g., Motor

Vehicle Manufacturers Association v. State Farm Mutual

Automobile Insurance Co., 103 S. Ct. 2856, 2865 (1983) ;

Office of Communications of United Church of Christ v.

FCC, 707 F.2d 1413, 1422 (D.C. Cir. 1983). However,

the parties vigorously dispute the rigor with which this

test should be applied when a court reviews an agency’s

rescission of longstanding policy.

This case is a classic example of an agency attempt to

modify a longstanding policy by rescinding regulations

embodying that policy. In our view, whatever questions

may have existed with respect to the proper standard of

judicial review of such actions were put to rest last term

when the Supreme Court decided Motor Vehicle Manu-

facturers Association. In that case, involving rescission

29 Because we decide that the manufacturers, manufacturers’

associations and labor organizations have standing, we need

not decide the standing of other appellants in this action.

Watt v. Energy Action Int'l Found., 454 U.S. 151, 160 (1981).

31

by the National Highway Traffic Safety Administration

(hereinafter “NHTSA”) of a regulation requiring in-

stallation of passive restraints in motor vehicles produced

after 1982, the Court rejected the suggestion that rescis-

sion was analogous to agency inaction, which is judged by -

an unusually narrow standard of review. The Court in-

dicated that “revocation of an extant regulation is sub-

stantially different than a failure to act,” 103 S. Ct. at

2866, reasoning that

[rJevocation constitutes a reversal of the agency’s

former views as to the proper course. A “settled

course of behavior embodies the agency’s informed

judgment that, by pursuing that course, it will carry

out the policies committed to it by Congress. There

is, then, at least a presumption that those policies

will be carried out best if the settled rule is ad-

hered to.” Atchison, T. & S.F.R. Co. v. Wichita Bd.

of Trade, 412 U.S. 800, 807-808, 93 S.Ct. 2367,

2374-2375, 37 L.Ed.2d 350 (1973).

Id.

While the Court recognized that an agency must be

given latitude to adapt its rules to accommodate chang-

ing circumstances, it noted that these changes “do not

always or necessarily point in the direction of deregula-

tion.” Id. “In the abstract, there is no more reason to

presume” that such changes require “rescission of prior

action, instead of a revision in or even the extension of

current regulation.” Id. Hence, the Court concluded that

if there is “a presumption from which regulation should

start, that presumption—contrary to petitioner’s views—

is not against safety regulations, but against changes in

current policy that are not justified by the rulemaking

record.” Id. In other words, the standard of judicial

review is not altered by the fact that the agency has

rescinded a regulation, rather than moved in some other

direction. Id.

We find the Court’s reasoning particularly compelling

as applied to the case at hand, since this case involves

32

review of an agency’s rescission of a longstanding pol-

icy. The Division’s decision in 1942 to restrict home-

work was an outgrowth of many years of unsuccessful

attempts by state and Federal officials to regulate home-

work. These officials, and commissions reviewing their

efforts, concluded that even the most vigorous enforce-

ment efforts could not prevent violations of labor stand-

ards when homeworkers are used. The Division’s com-

prehensive review of this experience led it to conclude

that restricting homework was the only effective way to

enforce the minimum wage in the knitted outerwear in-

dustry, and this position was adhered to by the Division

for almost forty years. This settled course of behavior

truly embodied the Division’s informed judgment that re-

stricting homework would best carry out the policy dic-

tated by Congress.

The appellees’ suggestion that the restrictions on home-

work were not seriously reexamined for forty years and

that this should narrow our review of the rescission of

the restrictions is untenable. As we have explained, the

relative efficacy of regulation and restriction received

substantial attention for many years prior to adoption of

the homework restrictions, and was exhaustively studied

by the Division in 1942. The Division also studied viola-

tions of the Act by employers of homeworkers in 1959, to

obtain information “to aid development of a more effec-

tive enforcement program.” 1959 REPORT, supra, at 1,

reprinted in II J.A. 475.

The Division’s adherence to the restrictions between

1942 and 1980 is a reflection of the widespread and per-

sisting decision that restriction of homework was a pre-

requisite to effective enforcement of the Act. This sup-

0 The regulation at issue here was in effect for almost forty

years. In contrast, the regulation involved in Motor Vehicle

Mfrs. Ass’n had been promulgated four years prior to its

rescission and had not actually taken effect (since the require-

ment only applied to future car models).

33

port for the restrictions is evidenced by comments re-

ceived from five Secretaries of Labor, serving a number

of administrations between 1960 and 1981, and from the

Administrator of the Division from 1958 to 1969, voicing

strong opposition to the proposed rescission and arguing

that the need for restriction of homework is just as com-

pelling today as it was in 1942.“

This consistent support for the restrictions is a sharp

contrast to the situation reviewed by the Supreme Court

in Motor Vehicle Manufacturers Association. There, the

Court reviewed the rescission of a regulation which, over

the course of its “complex and convoluted history,” had

been “imposed, amended, rescinded, reimposed, and now

rescinded again.” 103 S. Ct. at 2862. We cannot dis-

cern any rational basis for being less circumspect in re-

viewing the rescission of a regulation that has been uni-

formly supported since its adoption forty years ago, than

the Supreme Court was in reviewing rescission of a

highly controversial regulation.

Consequently, the normal standard of review, as articu-

lated by the Supreme Court in Motor Vehicle Manufac-

turers Association, is applicable to this case. This review

%1 See Secretaries’ Comments, supra note 1, reprinted in

I J. A. 172-77; Comments of Clarence Lundquist (June 18,

1981), reprinted in I J. A. 252-53. The persisting views of

the Department were evicent in a 1967 publication on labor

laws:

Homework defied regulation, and therefore poor working

conditions and poor heaith standards have continued to

flourish wherever homework itself was continued. No

corps of inspectors has ever been or could be sufficiently

large to inspect all the homes often enough to prevent

widespread violation of child labor, minimum wage, or

maximum hour standards, or to enforce safety and health

provisions.

U.S. Dep’t oF LABOR, GROWTH OF LABOR LAW IN THE UNITED

STATES 266 (1967), quoted in ILGWU Comments, supra, at 38,

reprinted in II J. A. 336 (footnote omitted).

84

is focused and restricted, and it does not permit us to

substitute our judgment for that of the agency.” 103

S. Ct. at 2866. “Nevertheless, the agency must examine

the relevant data and articulate a satisfactory explana-

tion for its action including a ‘rational connection be-

tween the facts found and the choice made. Id. at

2866-67 (quoting Burlington Truck Lines, Inc. v. United

States, 371 U.S. 156, 168 (1962)). We must consider

whether the decision was based on a consideration of the

relevant factors and whether there has been a clear error

of judgment.” Bowman Transportation Inc. v. Arkansas-

Best Freight System, Inc., 419 U.S. 281, 285 (1974)

(quoting Citizens to Preserve Overton Park, Inc. v. Volpe, |

401 U.S. 402, 416 (1971)). An agency’s decision will

normally be found arbitrary and capricious

if the agency has relied on factors which Congress

has not intended it to consider, entirely failed to con-

sider an important aspect of the problem, offered an

explanation for its decision that runs counter to the

evidence beforé the agency, or is so implausible that

* Our recent decision in Building & Construction Trades’

Dep't v. Donovan, 712 F.2d 611 (D.C. Cir. 1983), surely can-

not be read (as the appellees appear to claim) to suggest a

contrary rule. There, we were considering a party’s claim

that longstanding regulations promulgated pursuant to certain

statutory language constituted a binding statutory construc-

tion by the agency. We held that while longstanding practice

can be persuasive evidence when the interpretation of statu-

tory language is involved, it carries much less weight when

the statute affords agency discretion and the agency is merely

choosing one of several reasonable ways to exercise its dis-

* eretion. Unlike Building & Construction Trades’ Dep’t, the

instant case does not involve a claim that the applicable statute

- precludes rescission of longstanding policy; instead, the issue

is whether the rescission was “arbitrary and capricious.” In

any event, we need not even ponder the meaning of Building

& Construction Trades’ Dep’t. As we have explained, our

analysis of the issue in this case is strictly dictated by the

Court’s approach in Motor Vehicle Mfrs. Ass’n.

35

it could not be ascribed to a difference in view or

the product of agency expertise.

Motor Vehicle Manufacturers Association, 103 S. Ct. at

2867.

Moreover, [i] t is well-established that an agency’s ac-

tion must be upheld, if at all, on the basis articulated by

the agency itself.” Id. at 2870. Hence, this court may

not supply a basis for the agency’s action, SEC v.

Chenery Corp., 332 U.S. 194, 196 (1947), or accept “ap-

pellate counsel’s post hoc rationalizations for agency ac-

tion.” Motor Vehicle Manufacturers Association, 103 S.

Ct. at 2870. However, we will “uphold a decision of less

than ideal clarity if the agency’s path may reasonably be

discerned.” Bowman Transportation Inc., 419 U.S. at

286."

*The appellees argue that a more deferential standard of

review is required by the “experimental” nature of the rescis-

sion, and the fact that the rescission is based in part on a pre-

dictive judgment about the Secretary’s enforcement capacity

and the likely responses of employers and employees to alter-

native enforcement strategies. The latter argument, at most,

counsels deference to the predictions made by the Secretary—

it does not affect our review of aspects of reasoned decision-

making that are unrelated to these predictions. Hence, we

consider this argument infra in the more limited context in

which it is relevant.

The “experimental” argument we can dispose of forthwith.

First, the Secretary’s expression of a willingness to modify

the rescission if new information suggests that this is appro-

priate, 46 Fed. Reg. 50,349 (1981), hardly counsels any alter-

ation in the standard of review. Agencies remain free to react

to new information as part of their standard regulatory pro-

cedure, but their expressed willingness to do so certainly can-

not insulate their decisions from meaningful judicial review.

Unlike the experimental program in the case relied on by the

appellees, United Telegraph Workers v. FCC, 436 F.2d 920

(D.C. Cir. 1970), the Secretary’s action in this case did not

have a fixed termination date.

Second, if the Secretary believed that significant uncer-

tainties existed, he was obligated to identify these uncertain-

36

In short, our review of the Secretary’s decision is not

merely perfunctory. We are to engage in a “searching

and careful” inquiry,“ the keystone of which is to ensure

that the Secretary engaged in reasoned decisionmaking.

American Public Gas Association v. FPC, 567 F.2d 1016,

1029-30 (D.C. Cir. 1977), cert. denied, 435 U.S. 907

(1978). See also Motor Vehicle Manufacturers Associa-

tion, 103 S. Ct. at 2871 (indicating that agency’s ex-

planation “is not sufficient to enable us to conclude that

the rescission was the product of reasoned decisionmak-

ing); Specialty Equipment Market Association v. Ruck-

elshaus, No. 81-1047, slip op. at 15 (D.C. Cir. Oct. 14,

1983) (when reviewing agency’s determinations under

“arbitrary and capricious” standard, “we must make a

substantial and searchirg inquiry to ensure that the

agency’s decisions are the product of reasoned thought

and based upon a consideration of relevant factors’).

ties and to explain why this justified rescission prior to “en-

gaging in a search for further evidence.” Motor Vehicle Mfrs.

Assen, 103 S. Ct. at 2871. See Small Refiner Lead Phase-down

Task Force v. United States EPA, 705 F.2d 506, 520 (D.C.

Cir. 1983) (“(When the facts are uncertain, the Administrator

‘should so state and go on to identify the considerations he

found persuasive.’”) (quoting Industrial Union Dep’t v. Hodg-

son, 499 F.2d 467, 476 (D.C. Cir. 1974)). The Secretary did

not explain why such research would be more fruitful if home-

work restrictions in the knitted outerwear industry are lifted.

Just as we do not have the expertise required to substitute

our judgment for the Secretary’s, we do not have the expertise

to fill significant omissions in the Secretary’s reasoning. See

Motor Vehicle Mfrs. Ass’n, 103 S. Ct. at 2874 (“[I]t is the

agency’s responsibility, not this Court’s, to explain its deci-

sion.”). Finally, even were the appellees’ argument accepted,

it again would not remove all aspects of the Secretary’s deci-

sion from the ordinary scope of review. For example, the

desire to experiment would not excuse the Secretary’s failure

even to consider the alternatives discussed infra.

* Small Refiner Lead Phase-dowr Task Force, 705 F.2d at

520 (quoting Citizens to Preserve Overton Park, Inc. v. Volpe,

401 U.S. 402, 416 (1971)).

37

B. Failure to Consider Alternatives

The record before this court makes it clear that the

Secretary failed to provide any explanation for his im-

plicit rejection of alternatives to elimination of restric-

tions on homework. ‘Therefore, in light of Motor Vehicle

Manufacturers Association, we are constrained to hold

that the Secretary’s failure to consider such alternatives,

and to explain why such alternatives were not chosen,“

was arbitrary and capricious, in violation of section 10(e)

of the APA, 5 U.S.C. § 706 (a) (1982).

There is little dispute about the availability of less far-

reaching choices than complete rescission of homework

restrictions in the knitted outerwear industry. Indeed,

two possible choices were identified in the Department’s

notice of the Vermont and Washington, D.C. hearings.

In that notice the Secretary requested information on

„whether the certificate requirements should be revised

to recognize additional circumstances justifying certifi-

cation, such as child care and other family demands

that may tend to preclude factory employment,” and

whether the certificate requirements should differenti-

ate between urban and rural areas.” 45 Fed. Reg. 80,556

(1980).

During the hearings, and in the comments received

later, there was substantial testimony which could have

led the Secretary to opt for such modifications of the ex-

isting restrictions, rather than complete rescission. In

Following the Supreme Court’s lead in Motor Vehicle

Mfrs. Ass’n, we hold that an agency’s failure to “cogently

explain why it has exercised its discretion in a given manner,”

108 S. Ct. at 2869, renders its decision arbitrary and capri-

cious. Alternatively, our decision also rests on §4(b) of the

APA, 5 U.S.C. 3 558 (e) (1982), which requires that the

agency provide an adequate statement of basis and purpose.

See Action on Smoking and Health v. CAB, 699 F.2d 1209,

1215-16 (D.C. Cir.), opinion supplemented by 713 F.2d 795

(D.C. Cir. 1983).

fact, the testimony challenging the restrictions predomi-

nantly related to the hardship that the restrictions im-

posed in rural Vermont. There was ample testimony in-

dicating that the situation in Vermont was substantially

different than that existing in more urban states and

necessitated different treatment.” Specific proposals were

advanced that would have permitted accommodation of

these differences by means short of complete rescission of

restrictions. The most detailed was a proposal submitted

by the Attorney General of Vermont suggesting that the

Secretary adopt a program whereby rural states meeting

certain criteria could be authorized to certify homework-

ers.” A comment from a Vermont Senator reiterated the

possibility of expanding certification to permit homework

by certain individuals whose circumstances precluded fac-

tory work.“

Perhaps the clearest indication that these proposals

warranted serious consideration is provided by the Secre-

tary’s explanation of the rationale for rescission. In sum-

marizing the evidence supporting rescission he said that

commentators “cited the lack of adequate transportation,

the need to remain at home to care for children and other

family matters, as well as the lack of factory employment

in most rural areas.” 46 Fed. Reg. 50,348 (1981). He

also indicated that “evidence was presented which showed

that a continuation of the restrictions would have an ad-

verse effect on employment opportunities, particularly in

% See Office of Administrative Law Judges, U.S. Dep’t of

Labor, A Public Hearing to Commence Labor Department Re-

view of Homeworker Rules” 310 (Jan. 14, 1981) (herein-

after “Vermont hearings II“), reprinted in I J. A. 47 (state-

ment of Marlene Walsh) ; Comments of Susan Auld (June 8,

1981), reprinted in I J.A. 237; Comments of John J. Easton,

Jr. (Feb. 18, 1981), reprinted in I J.A. 185.

* Comments of John J. Easton, Jr. (Feb. 18, 1981), re-

printed in I J.A. 37-46.

2 Comments of Patrick J. Leahy (June 4, 1981), reprinted

in I J.A. 229.

rural areas.... Much of this employment, the testimony

and comments indicated, is in areas where public trans-

portation is not available and few or no other gainful

employment opportunities exist.” Id. at 50,349. Obvi-

ously one potential means of redressing these concerns is

to permit homework only in situations where these im-

pediments to factory employment are shown to exist. The

Secretary’s explanation provides no basis whatsoever for

rejecting this approach and instead allowing all individ-

uals, in rural and urban areas, to engage in homework

regardless of their circumstances.”

The Secretary’s explanation of his decision does not

provide the slightest indication that he gave any con-

sideration to the alternatives raised in his original notice

and the comments. Indeed, the affidavit of a Division

official explaining the decision,“ and the arguments of

the appellees’ counsel in this appeal,“ make no claim that

these alternatives received consideration.

* While we believe that the fact that narrower options

might have achieved the employment benefits sought by the

Secretary is a sufficient basis for compelling consideration of

these options, such consideration was also dictated by other

concerns. At a minimum, the record would lead a rational

decisionmaker to recognize some uncertainties about the Sec-

retary’s capacity to enforce the minimum wage if homework

is not restricted, and this is particularly true in urban areas.

See text at notes 45-70 infra. Given these uncertainties, the

Secretary should have considered whether the restrictions

should only have been lifted in situations where enforcement

was most likely to be efficacious (i.e., possibly in rural areas),

or in those limited situations in which any risks created by

these uncertainties were offset by a corresponding employ-

ment benefit.

Affidavit of Arthur H. Korn, Chief, Branch of Special

Minimum Wages, Wage & Hour Division, Dep’t of Labor

(Jan. 25, 1982) (hereinafter “Korn Affidavit”), reprinted in

II J.A. 555-67.

1 The appellees’ only argument is that the Secretary did

consider some different alternatives. e., he considered lift-

40

It is absolutely clear from decisions by the Supreme

Court and this court that such an “artificial narrowing

of options,” Pillai v. CAB, 485 F.2d 1018, 1027 (D.C.

Cir. 1981), is antithetical to reasoned decisionmaking ©

and cannot be upheld. Only last term the Supreme Court

reaffirmed this principle in Motor Vehicle Manufacturers

Association. There, NHTSA justified its rescission of a

requirement that motor vehicles be equipped with either

airbags or automatic seatbelts, by arguing that manu-

facturers were going to opt for automatic seatbelts and

consumers would circumvent this option by detaching the

seatbelts. The Supreme Court found this decision unrea-

soned and vacated the rescission. As we find in the in-

stant case, the Court found that the agency’s explanation

could not justify its drastic decision to rescind rather

than modify the standard to disallow the automatic seat-

belts option. 103 S. Ct. at 2869 (“Even if this conclusion

were acceptable in its entirety, standing alone it would

not justify any more than an amendment of Standard

208 to disallow compliance by means of the one technol-

ogy which will not provide effective passenger protec-

tion.”) (citation omitted). The Court explained that

alt the very least this alternative way of achieving

ing the rescission in all seven industries and doing so in a

“non-experimental” fashion. Appellees’ brief, pp. 62-63 n.38.

However, the agency’s consideration of some alternatives does

not free it from considering other obvious alternatives. A

contrary holding would provide agencies an easy means to

circumvent this aspect of reasoned decisionmaking, since they

could, according to the Government, avoid considering ob-

vious and potentially viable alternatives simply by showing

that they considered any alternatives at all.

We also note that the Secretary’s mention of the alterna-

tives discussed here in the notice of hearing does not in any

way change the arbitrary and capricious nature of his failure

to ever discuss them again. There is no question that the

Secretary was aware of these options; the issue is whether he

gave them sufficient consideration and adequately explained

his decision.

41

the objectives of the Act should have been addressed and

adequate reasons given for its abandonment.” Id.

The Court in Motor Vehicle Manufacturers Association

indicated that it did not “broadly require an agency to

consider all policy alternatives in reaching [a] decision.

It is true that a rulemaking ‘cannot be found wanting

simply because the agency failed to include every alterna-

tive device and thought conceivable by the mind of man

. . regardless of how uncommon or unknown that aiter-

native may have been... .” 103 S. Ct. at 2871 (quoting

Vermont Yankee Nuclear Power Corp. v. NRDC, Inc.,

435 U.S. 519, 551 (1978)). However, the options ignored

by the Secretary in this case certainly eannot be charac-

terized as “uncommon or unknown.” These options were

specifically mentioned in the notice of hearings and the

comments received by the Secretary, and would be an ob-

vious response to the concerns expressed by the Secretary.

Our decision in Office of Communication of United

Church of Christ v. FCC, 707 F.2d 1413 (D.C. Cir.

1983), is also analogous to the case at hand. In that

case, we considered whether the FCC’s decision to elimi-

nate the requirement that licensees maintain program-

ming logs and make those logs available to the public

was arbitrary and capricious. We found that the Com-

mission’s failure “to give sufficient consideration” to the

benefits of a more modest possibility—modification of log

ts to reflect more appropriately the informa-

tional needs of the Commission’s new regulatory scheme

—required remanding the Commission’s decision on log

requirements so that the Commission could undertake

such an inquiry.”

42 See also State Farm Mut. Auto. Ins. Co. v. Department of

Transp., 680 F.2d 206, 230 (D.C. Cir. 1982) (“More impor-

tant, NHTSA has failed to consider or analyze obvious alter-

natives to rescission, and has thus artificially foreclosed at-

tempts to further the purpose of the Safety Act.”), vacated

42

In Action on Smoking and Health v. CAB, 699 F.2d

1209 (D.C. Cir.), opinion supplemented by 713 F.2d 795

(D.C. Cir. 1983), we emphasized that in addition to re-

quiring rational consideration of alternatives, the APA

demands an adequate explanation when these alternatives

are rejected. Hence, we vacated a decision by the Civil

Aeronautics Board to rescind certain restrictions on smok-

ing in airplanes because the Board had failed adequately

to address alternatives proposed in the comments. We

relied on the requirement of section 4(b) that an agency

engaging in notice and comment rulemaking “shall in-

corporate in the rules adopted a concise general state-

ment of their basis and purpose.” 5 U.S.C. § 553(c)

(1982). We indicated that while an agency “need not

respond to every comment,” id. at 1216, it must respond

in a reasoned manner to “ ‘explain how the agency re-

solved any significant problems raised by the comments,

and to show how that resolution led the agency to the

ultimate rule.’” Id. (quoting Rodway v. USDA, 514 F.2d

809, 817 (D.C. Cir. 1975) (footnote omitted)). The

Board’s claim that it had in fact considered the alterna-

tives, and its attempt to rely on generalized and conclu-

sory policy considerations as grounds for rejecting them,

were inadequate: “[{tjhe Board must explain why a par-

ticular proposal is inconsistent with the balance between

regulation and competition sought by the Board.” Id.

In the same manner, we hold that the Secretary should

have considered and explained why the proposals men-

tioned in his notice of hearing were inconsistent with the

balance he sought between maximizing employment and

effective enforcement of the minimum wage. We do not

suggest that he had to opt for any particular one of these

sub nom. Motor Vehicle Mfrs. Asa’n v. State Farm Mut. Auto.

Ins. Co., 103 S. Ct. 2856 (1983); National Citizens Comm.

for Broadcasting v. FCC, 567 F.2d 1095, 1115 (D.C. Cir.

1977), cert. denied, 486 U.S. 926 (1978) ; Pillai v. CAB, 485

F.2d 1018, 1027 (D.C. Cir. 1973).

43

proposals. However, he was required to address common

end known or otherwise reasonable options, and to ex-

plain any decision to reject such options. His complete

failure to satisfy these quintessential aspects of reasoned

decisionmaking is the primary basis for our decision to

vacate his rescission of the restrictions in the knitted

outerwear industry.

C. Other Unreasoned Aspects of the Decision

1. Enforcement Feasibility

Our decision to vacate is also grounded in the unrea-

soned nature of the Secretary’s decision that an effective

enforcement program would be feasible if restrictions on

homework in the knitted outerwear industry were lifted.

Before explaining the particular deficiencies in the Sec-

retary’s analysis, we shall summarize and review the evi-

dence that was before the Secretary when he made this

decision. We engage in this inquiry not in an effort to

“upset the agency’s view of the facts“ but instead to

highlight “the limitations of this record in supporting

the agency’s decision.” Motor Vehicle Manufacturers As-

sociation, 103 S. Ct. at 2871.

The evidence in the record supporting the Secretary’s

decision is at best minimal.“ It comes primarily from

48 While the foregoing discussion provides the clearest basis

for our holding that the Secretary’s decision was arbitrary

and capricious, the discussion in sections Cl & C2, infra, pro-

vides independent (rather than cumulative) reasons for our

holding.

* Our inquiry could hardly be construed otherwise, since

the agency’s view of almost all of the facts discussed here is

never indicated other than in the most general terms.

This evidence is described in the appellees’ brief, pp. 49-

50. The Government does not mention the study by the II-

linois Department of Labor, although this study was cited

by the lower court. In view of the fact that 109 investigations

in that study revealed 41 establishments in violation of one or

44

Vermont home knitters and their representatives who

indicated that knitters were paid more than the mini-

mum wage. These knitters often did not have records of

the hours they worked **—in fact, some testified that fac-

tors such as distractions at home made estimating the

number of hours virtually impossible — and made no

claims about the wages paid to homeworkers outside the

rural setting of Vermont. The appellees also claimed that

there were data showing that the homework restrictions

did not reduce the incidence of violations of the Act. The

explanations of these data by both the appellants and the

ap; ilees reveal that these data provide no meaningful

support for this conclusion.**

more labor laws, 349 violations of the Industrial Home Work

Law, and 315 violations of the Illinois Minimum Wage Law,

LABOR LAW ENFORCEMENT Drv., ILLINOIS DEP’T OF LABOR,

THE ILLINOIS INDUSTRIAL HOMEWORK LAW/FEDERAL HOME-

WORK REGULATIONS 16 (1980), reprinted in I J.A. 126, its

results hardly compel its cursory recommendation that the

Federal homework restrictions “are discriminatory” and

should be removed. Id. at 21, I J.A. 132. The Secretary’s de-

cision does not reflect acceptance of this recommendation,

since he rejected the lifting of restrictions in six of the seven

restricted industries.

Vermont hearings II, supra note 36, at 228-29, reprinted

in I J.A. 27-28 (statement of Luelle Breen); id. at 264-65,

I J.A. 40-41 (statement of Emma Pudvah).

* Id. at 257, reprinted in I J.A. 37 (statement of Virginia

Gray) ; id. at 278-74, I J.A. 42-48 (statement of Peggy York).

The appellees point to data showing that the percentage

of complaints investigated that proved to be valid was vir-

tually the same for homeworkers in restricted (68%) and

non-restricted industries (61%), Wace & Hour Dr., U.S.

DeEpP’T OF LABOR, SUMMARY OF WAGE AND Hour DIvIsIoNn IN-

VESTIGATIONS OF EMPLOYERS UTILIZING HOMEWORKERS BY RE-

STRICTED AND NONRESTRICTED INDUSTRIES (FY 1975-FY

1980), reprinted in II J. A. 553, and for factory workers,

Korn Affidavit, supra note 40, at 6, reprinted in II J.A. 560.

In essence, these data only reveal that employees generally do

45

Furthermore, as we have explained at length, substan-

tial evidence is provided by years of enforcement experi-

not file complaints unless they are well founded. It does not

indicate the rate at which actual violations occur. The ap-

pellees themselves concluded, in response to the appellants’

suggestion that the figures demonstrate significant minimum

wage violations, that [they do not by any stretch of the

data ‘indicate a violation rate of over 60 [percent] for home-

workers in both restricted and non-restricted industries,’ as

plaintiffs charge. (Pl. Br. 38) Indeed, they do not identify

any actual violation rate for either group of homeworkers.”

Appellees’ brief, p. 54. This is significant because the “total

misconstr[uction]” of the data that the appellees decry, id.,

also appears to underlie the Secretary’s understanding of the

data. In describing the “process by which the Department of

Labor reviewed the existing regulations,” Arthur H. Korn,

the Chief of the Division’s Branch of Special Minimum

Wages, explained that “[t]hese statistics indicated that the

rate of minimum wage or overtime violations in homework

was not significantly different in the restricted and non-

restricted industries” and that “violations found in all inves-

tigations (factory and homework) ... averaged approxi-

mately 68 percent, the same as the average rate of violation

found in the restricted homework industries Korn

Affidavit, supra note 40, at 1, 6, reprinted in II J.A. 555, 560.

The Department’s 1959 study provides somewhat stronger

support for the Secretary’s position. It found that “one out of

six of the establishments employing howeworkers were in vio-

lation of the minimum wage, overtime, or child labor provi-

sions of the [Act],” 1959 REPORT, supra, at 3, reprinted in II

J. A. 477, that “three out of 10 homeworkers did not have the

handbooks required by regulations,” id., that seven percent of

all homeworkers “were found to be paid at less than the mini-

mum wage during the profile workweek,” id. at 8, II J.A. 482,

and that “the incidence of violations of the minimum wage

provisions was about the same in the group of restricted in-

on ＋ as in the group of non- restricted industries.“ Id. at

3, A. 477.

However, the value of these data is limited. The conclu-

sions are based on investigations by Division officials who

collected data by examining employers’ records and inter-

viewing the employers and some of the homeworkers.” Id.

46

ence prior to imposition of the restrictions, and the Divi-

sion’s investigation in the early 1940’s, which suggest

that the minimum wage law cannot be effectively en-

forced unless homework is restricted. This conclusion is

also supported by testimony at the 1981 hearings, and

analysis in the subsequent comments, suggesting that the

enforcement problems created by homework continue to-

day. Comments received from five former Secretaries of

Labor argued that lifting the restrictions would “turn

America back to the dark ages of industrial inhuman-

ity.” Secretaries’ Comments, supra note 1, reprinted in

I J. A. 172, 174, 176. Opposition was also voiced by the

former Administrator of the Division from 1958 to 1969.

at 2, II J.A. 476. As the 1942 findings indicated, establishing

violations when homeworkers are involved is an extremely

onerous task. For example, it is complicated by the difficulty

of identifying homeworkers, 1942 FINDINGS, supra, at 26, re-

printed in I J.A. 92, and the fact that employers violating the

Act may distort records so that homeworkers appear to receive

the minimum wage. Id. at 21, I J.A. 87. Hence, it is not sur-

prising that the findings in the 1959 report are qualified:

The survey findings probably understate the degree of

violation of the Fair Labor Standards Act by employers

of homeworkers becaurse of the difficulty of determining

the number of hours worked by homeworkers and

whether or not children participated in the work. The

violations shown are those which investigators could es-

tablish without an unreasonable expenditure of time.

1959 REPORT, supra, at 2, reprinted in II J.A. 476.

The appellants also challenge the significance of the finding

that the incidence of violations involving homeworkers is the

same in restricted and non-restricted industries. They argue

that one would expect wage violations to be common when

homeworkers are used—regardiess of whether the industry

is restricted or unrestricted—and that the relevant considera-

tion is whether restrictions reduce the aggregate number of

violations by causing homeworkers to be used less often in

restricted industries. There was no indication that this pos-

sibility was considered by the Secretary, and we discuss the

significance of this omission infra.

47

Comments of Clarence Lundquist (June 18, 1981), re-

printed in I J. A. 252. Law enforcement officials in Cali-

fornia, Connecticut and New York, all of whom must

deal with large urban centers, argued that homework de-

fies effective enforcement of the minimum wage unless

restricted.“ The record further reveals the concerns of a

Regional Administrator of the Department’s Employment

Standards Administration:

Additionally, homeworking is a perfect vehicle for

utilizing and taking advantage of undocumented

workers, it has been disclosed through investigations.

Our many investigations covering manufacturing in-

dustries has [sic] also uncovered realistic examples

0 Office of Administrative Law Judges, U.S. Dep’t of Labor,

A Public Hearing to Commence Labor Department Review of

“Homeworker Rules” 145 (Jan. 13, 1981) (hereinafter Ver-

mont hearings I“), reprinted in I J. A. 18 (statement of Donald

DeFillippi, Assistant Director of the Division of Regulation

of Wages, Connecticut Department of Labor) (“Where home-

work is being performed, there is absolutely no way to pre-

vent the circumvention or evasion of and to safeguard the

minimum wage.”); Comments of William L. O’Toole (May

27, 1981), reprinted in I J.A. 198 (“Piecegoods contracting

is a very highly competitive industry requiring little capital.

The manufacturers, or ‘jobbers’, who give out the work are

for the most part only interested in getting the cheapest price

from their contractors and are quite ready to close their eyes

to the conditions under which the work is done. The contrac-

tors are hard-pressed, sometimes making out little better than

their employees. They are forced to cut their costs in every

way possible, or they will simply not get the work. It would

be surprising if widespread, systematic violation of the wage

and hour laws did not result from these circumstances. Only

systematic enforcement will correct these abuses. Removal of

Part 530 will make systematic enforcement impossible.’’) ;

Comments of Donald Vial (May 15, 1981), reprinted in I

J.A. 158 (“Enforcement experience in California has demon-

strated beyond any doubt that maintenance of minimum

standards for Industrial Homework is practically impossible

because workers will not step forward to complain because

they fear losing their only means of survival.“).

} 48

of the abuses of the industrial homework regula-

tions, both state and federal.”

The record includes specific evidence indicating that

homeworkers are typically paid subminimum wages. The

Administrator of the Division of Labor Standards for the

Rhode Island Department of Labor testified that “[w]hen

we have interviewed home workers we have found that

they are paid 10 to 70 percent of the prevailing mini-

mum.” * Similarly, a California enforcement official tes-

tified that he had yet to find a homeworker in Los An-

geles County, Santa Clara County, or San Diego County

who had been paid more than $2.25 an hour.“

These conclusions are buttressed by a 1980 action

brought by the Department against a manufacturer who

allegedly was illegally employing homeworkers in the

knitted outerwear industry in Vermont. The complaint

alleged willful and repeated violations of the minimum

wage, overtime, compensation, and recordkeeping require-

% State of New York Department of Labor Public Hearing

on Industrial Homework 6 (April 2, 1981) (hereinafter “New

York hearings”), reprinted in II J.A. 370 (statement of

Frank Mercurio). See also Vermont hearings I, supra note

49, at 42 (statement of Arthur Korn) (“Our experience in

enforcing the ininimum wage law and that of states who have

had experience in that area have found that maintaining the

minimum wage for homeworkers is still a problem, a con-

tinuing problem.”).

51 Office of Administrative Law Judges, U.S. Dep’t of Labor,

A Public Hearing to Commence Labor Department Review of

“Homeworker Rules” 118 (Feb. 18, 1981) (hereinafter ““Wash-

ington, D.C. hearings I”), reprinted in I J.A. 66 (statement of

Roberta F. Orticerio).

82 Office of Administrative Law Judges, U.S. Dep’t of Labor,

A Public Hearing to Commence Labor Department Review of

“Homeworker” Rules 412 (Feb. 17, 1981) (hereinafter

„Washington, D.C. hearings II”), reprinted in I J. A. 54 (state-

ment of Joe Razo).

49

ments of the Act.“ An accompanying affidavit from a

compliance officer in the Division indicates that the Divi-

sion’s investigation revealed taat “a total of $40,673.05

in back wages is due 58 homeworkers.”™“ This number

is substantial in light of a Vermont official’s testimony

that there are only 200 to 400 homeworkers in Vermont.“

The appellees’ defense of the Secretary’s determination

that enforcement would be feasible is predicated on their

belief that determinations of this type—which involve

assessment of the Department’s enforcement capacity and

predictive judgments about the utility of certain enforce-

ment techniques-—“are unquestionably committed to the

discretion of the agency charged with protecting those

interests, not to courts or litigants.” Appellees’ brief, p.

42. We agree with the appellees that this court must be

particularly deferential when reviewing an agency’s pre-

dictive judgments about areas that are within the agen-

cy’s field of discretion and expertise. See FCC v. WNCN

Listeners Guild, 450 U.S. 582, 594-95 (1981); FCC v.

National Citizens Committee for Broadcasting, 436 U.S.

775, 813-14 (1978); FPC v. Transcontinental Gas Pipe

Line Corp., 365 U.S. 1, 29 (1961) ; Building & Construc-

tion Trades’ Department v. Donovan, 712 F.2d 611, 629

(D.C. Cir. 1983). However, we reject the appellees’ posi-

tion insofar as they would treat the predictive nature of

the judgment “as though it were a talisman under which

any agency decision is by definition unimpeachable.”

88 Plaintiff’s Complaint at 2-3, Marshall v. C.B. Sports, Inc.,

Civ. No. 79-299 (D. Vt. filed Feb. 7, 1980), reprinted in II J.A.

599-600.

% Affidavit of Michael J. Leclair, Compliance Officer, Wage

& Hour Division, U.S. Dep’t of Labor (Dec. 23, 1980), re-

printed in II J.A. 601.

85 Washington, D.C. hearings I, supra note 51, at 68, re-

printed in I J. A. 61 (statement of Joel Cherington).

50

Motor Vehicle Manufacturers Association, 103 S. Ct. at

2870 (referring to rule that court may not impose addi-

tional procedural requirements upon an agency).

The Supreme Court has never indicated that when an

agency is making a predictive judgment it need not en-

gage in reasoned decisionmaking.” Because new agency

% The appellees rely on Supreme Court cases reviewing the

ence, and necessity” standard. 47 U.S.C. §§ 309(a), 310(b)

(1976). In these cases, the Court has held that “complete

for the Commission’s judgment

|

|

However, the suggestion that such determinations are en-

titled to deference and do not require complete factual sup-

port does not mean that agencies are free to engage in un-

reasoned decisionmaking. Specifically, there is no indication

in these cases that agencies can ignore important factors in

making predictions, or can reach judgments that are irrational

given the relevant evidence in the record. To the contrary, in

WNCN Listeners Guild, the Court found that the FCC “has

provided a rational explanation for its conclusion,” 450 U.S.

accom

Similarly, the factual determination that underlay the FCC’s

Pipe Line Corp., 365 U.S. at 29-80 (holding that Commis-

sion’s forecast about effect of certain conduct on future prices

“necessarily involves deductions based on the expert know!l-

edge of the agency,” but also noting that a considerable show-

ing was made that the forecast was well grounded and that “as

§1

policies often will involve some element of prediction

about the future effects of those policies, the arbitrary

a matter of common sense,” the correctness of the forecast

was difficult to deny).

We also have some question about whether the deference

shown to FCC decisions is necessarily appropriate for all pre-

dictive judgments by agencies. As the Supreme Court has

previously noted, [u] nderlying the whole [Communications

Act] is recognition of the rapidly fluctuating factors charac-

teristic of the evolution of broadcasting and of the correspond-

ing requirement that the administrative process possess suffi-

cient flexibility to adjust itself to these factors.” FCC v. Potts-

ville Broadcasting Co., 309 U.S. 134, 188 (1940). See also

United States v. Southwestern Cable Co., 392 U.S. 157, 173

nature of communications technology.”), cert. de-

nied, 425 U.S. 992 (1976).

The Court’s decision in Motor Vehicle Mfrs. Ass'n also sug-

gests that predictive judgments by agencies must be reasoned.

In that case, the Court reviewed NHTSA’s determination that

it cou.’ i not “reliably predict” that automatic seat belts would

percent, 103 S. Ct. at 2871, to see

agency’s claim of uncertainty was supported by the

d. The Court found that the

We

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and capricious standard of judicial review would be ef-

fectively nullified if a court seriously entertained the

position espoused by the appellees. The presence of an

element of prediction is particularly likely when such pol-

icies involve dramatic departures from longstanding pol-

icy, and yet it is evident that such policies are not im-

mune from judicial review. The implication that such

decisions are completely insulated from meaningful judi-

cial review ignores the Supreme Court’s admonition that

expertise, the strength of modern government, can be-

come a monster which rules with no practical limits on

its discretion.’” Motor Vehicle Manufacturers Associa-

tion, 103 8. Ct. at 2869 (quoting New York v. United

States, 342 U.S. 882, 884 (1951) (Douglas, J., dissent-

ing) ).% While we respect an agency’s superior position

to make judgments involving elements of prediction, we

will review the record and the agency’s decision to assure

that “it identified all relevant issues, gave them thought-

ful consideration duly attentive to comments received,

and formulated a judgment which rationally accommo-

dates the facts capable of ascertainment and the policies

slated for effectuation.” Telocator Network of America

v. FCC, 691 F.2d 525, 544 (D.C. Cir. 1982).

5 See generally Greater Boston Television Corp. v. FCC,

444 F.2d 841, 850 (D.C. Cir. 1970) (“Expert discretion is

„ We note also that the appellees’ request for extreme de-

ference” is particularly dubious in a case such as this, where

his decision indicates that the Secretary has not

given sufficient consideration to factors that may be

highly relevant to the Department’s ability to enforce the

Act without homework restrictions. Initially, there is no

indication that the Secretary gave any serious considera-

tion to the possibility that lifting restrictions would sub-

stantially increase the number of homeworkers.” This

failure is important because the Secretary’s judgment

that the Division’s staff could enforce the Act was ex-

plicitly based on his view “that homeworkers will com-

prise only a small percentage of the approximately 63,000

production employees in this industry ....” 46 Fed.

Reg. 50,349 (1981).” .

There is certainly a very real possibility that the num-

ber of homeworkers will substantially increase because of

the rescission of restrictions. See Gemsco, Inc. v. Wall-

ing, 324 U.S. 244, 254 n.17 (4945) (“Under the National

Industrial Recovery Administration, 118 of the 556 codes

included homework provisions; and 86 percent of the 118

prohibited homework. Homework in consequence was

the agency’s prediction relates to the efficacy of a policy that

has been tried unsuccessfully in the past, and when the record

contains statements by a number of state enforcement officials

and former leaders of the agency suggesting that the policy

will not be effective.

% We are unwilling to conclude that the Secretary’s general

and wholly unverified conclusion that “it appears” that the

number of homeworkers will be small, 46 Fed. Reg. 50,349

(1981), reflects sufficient consideration of the possibility that

the number will increase. See Action on Smoking and Health,

699 F.2d at 1217 (“We are told that the decision was made

e

dence of that consideration is given. To accept the Board's

action would render judicial review of informal rules mean-

ingless.”’).

Additionally, thie consideration is relevant to whether

restrictions have reduced the aggregate number of violations

of the Act when homeworkers are used, by decreasing the

number of homeworkers. See note 48 supra.

54

greatly reduced, but its volume turned sharply upward

when the National Industrial Recovery Act was declared

unconstitutional in Schechter Poultry Corp. v. United

States, 295 U.S. 495 (1935).”). As the appellees point

out, approximately thirty percent of knitwear employees

were homeworkers in 1942, but today only 1.6% of them

are. Appellees’ brief, p. 10. While the causal relationship

between restriction and this decline is speculative, even

the appellees appear to acknowledge that it is logical to

assume the existence of such a relationship.“ Indeed, this

assumption appears implicit in the very basis for the

Secretary’s decision: rescission is necessary to avoid

“substantial curtailment of employment opportunities.”

46 Fed. Reg. 50,349 (1981). Obviously, this curtailment

is only avoided if rescission results in a greater number

of employees in homework than is the case under the re-

strictions.* Additionally, even if the percentage of

knitted outerwear employees that are homeworkers rises

to only forty percent of the 1942 level, the number of

* Appellees’ brief, p. 56 (“It. was, of course, logical to

assume that homework was a more widespread phenomenon in

1942, since at that time homework had not been outlawed for

40 years, as is the case today.“).

* The appellees recognize the potential contradiction in the

Secretary’s position and argue that the Secretary could ra-

tionally have found that rescission would increase the number

of homeworkers—and hence employment—but would not in-

crease it so dramatically that enforcement of the Act would be

impossible. However, the Secretary’s explanation of his de-

cision does not provide any indication that he was aware that

his predictions yielded potentially incongruous results, or that

he made a reasoned decision that the number of homeworkers

would fall within the middle ground suggested by the appellees.

Moreover, we cite the Secretary’s employment finding only as

additional evidence of the possibility that the number of home-

workers would increase following restrictions, which, when

evaluated in conjunction with other reasons to suspect that

this might happen, leads us to conclude that the Secretary

should have considered this possibility.

homeworkers would be the same as in 1942 because of

increases in the industry's total employment.*

The Secretary also failed to give adequate considera-

tion to the differences between enforcing the Act when

homeworkers are used in rural areas and when they are

used in urban areas. As we have noted, much of the

evidence on which the Secretary’s determination was based

came from the testimony and comments of individuals

from rural Vermont.“ Some of this testimony, and much

of the testimony from enforcement officials in more urban

states, emphasized the substantial differences between

rural and urban areas, and indicated that the conditions

requiring restrictions in urban areas were not duplicated

in rural areas.“ In particular, it was suggested that the

The industry employs 63,000 production workers today,

46 Fed. Reg. 50,849 (1981), compared to “22,500 wage earners

on manufacturing processes and an additional 2,100 salaried

employees” in 1989. 1942 FINDINGS, supra, at 6, reprinted in

I J.A. 72 (footnote omitted).

“The Commissioner of the Vermont Department of Em-

ployment Security testified that “[b]y some definitions, Ver-

mont is considered to be the most rural state in the nation.

Only eight of its 246 communities have populations over

10,000, and Burlington, its largest city, has fewer than 50,000

people.” Washington, D.C. hearings I, supra note 51, at 55,

reprinted in I J.A. 60 (statement of Sandra Dragon).

Washington, D.C. hearings I, supra note 51, at 65-66

(statement of Joel Cherington) (By permitting homework

where workers are not within a mile of public transportation

“the Department would be able to distinguish between home-

work in heavy congested urban areas, such as New York and

Los Angeles, and homework conducted in rural states such as

Vermont. If the principal problem addressed by Regulation

580 is the exploitation of immigrant workers in our major

cities, as I believe it is, my suggestion would enable that prob-

lem to be addressed without disrupting Vermont and other

state’s economy [sic].”) ; Washington, D.C. hearings II, supra

note 52, at 410, reprinted in I J. K 62 (statement of Joe Razo)

(“I wish some of the ladies who say they are earning more

than the minimum wage on the piece rate basis would come

to California. We need experienced operators, but you will

56

greater numbers of undocumented workers in urban areas,

sometimes having low incomes and obviously in no posi-

tion to complain if employers mistreat them, created a

serious enforcement problem. There was also testimony

that immigrants are particularly susceptible to submini-

mum wages because of language barriers and cultural

differences.“ It is also possible that in rural areas en-

forcement officials are less likely to experience problems

such as “(t]he constant change in address of low-income

families and the high turnover in home work employees”

which were reported as impediments to enforcement by

the Administrator in his 1942 findings. 1942 FINDINGS,

supra, at 26, reprinted in I J.A. 92.

We do not mean to suggest that these possibilities are

grounded in fact, or that the Secretary was obligated in

his ultimate decision to differentiate between rural and

urban areas. However, there are obvious and substantial

quickly find that your price will be undercut by the recently

arrived immigrant from Korea, from Hong Kong, from Cam-

bodia, from Tailand [sic], and more recently, the Vietnamese.

employment possibility for many of our eitizens.“); Com-

ments of William L. O'Toole (May 27, 1981), reprinted in

I J.A. 197, 198 (“Removal of Part 530 would create a strong

positive incentive for the hiring, and exploitation, of illegal

FF than the honest citizens and

legitimate immigrants who would not fear to complain about

subminimum wages. ... A problem that arises when the rules

— - NN.

the sweeping elimination of regulations which have their

principal impact in urban areas.”).

* See Comments of William L. O’Toole (May 27, 1981),

reprinted in I J.A. 197.

57

differences between rural and urban areas, and there was

substantial evidence in the record indicating that some of

these differences were highly relevant to enforcement of

the Act when homeworkers are employed. Consequently,

the Secretary’s failure even to consider these differences,

particularly in light of his significant reliance on testi-

mony from individuals in rural Vermont, was not reasoned

decisionmaking.

Finally, we do not think that the Secretary’s explana-

tion reflects sufficient consideration of the specific impedi-

ments to enforcement of the Act presented by homework.

The Administrator’s 1942 findings identified numerous

obstacles to previous enforcement efforts when home-

workers are used and explained that these are intrinsic

features of homeworker employment. These included the

difficulty of identifying and locating workers that are

employed as homeworkers, a problem that would seem

most likely when employers have been violating the Act

and may wish to impede enforcement. The 1942 findings

also indicated that it was difficult to ascertain the number

of hours worked by individual homeworkers, even when

employers are acting in good faith. Other problems were

identified in the findings, and the appellees do not point to

any specific evidence in the record suggesting that these

impediments are less likely to exist today.

The Secretary’s explanation of his decision does not ad-

dress these concerns. Instead, the Secretary argues that

because of increased acceptance of the minimum wage,

and the developing expertise of his enforcement officials, a

“concerted compliance program” * by the Department will

* On appeal, the appellees included in their brief a number

of documents delineating the nature of this compliance effort.

This inclusion is somewhat surprising because the Secretary’s

announcement of the rescission contains no indication that

the basis for this action included consideration of particular

—but unspecified—enforcement plans. Moreover, the Su-

preme Court has indicated that in applying the “arbitrary

and capricious” standard, “the focal point for judicial re-

58

insure effective enforcement of the Act.“ The Secretary’s

statements are unsupported by the record ® and, in effect,

view should be the administrative record already in existence,

not some new record made initially in the reviewing court.”

Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam). Nev-

ertheless, we need not decide whether this evidence could not

be used to support the Secretary’s decision, because even if

it is considered it does not change the result in this case. There

is no indication that the strategies revealed in the document

—generally, use of time studies and piece rates, education of

homeworkers, and intensified investigative efforts—are ma-

terially different than those strategies attempted without suc-

cess by the states and the Federal Government prior to the

imposition of restrictions. Nor is there any indication of why

such strategies can overcome the specific impediments to en-

forcement that traditionally have been viewed as insuperable.

as The Secretary’s explanation of his decision does not in-

clude the suggestion he made in the notice of proposed rule-

making that homeworkers would be more likely to report

violations if restrictions were lifted. 46 Fed. Reg. 25,109

(1981). Because the Secretary did not mention this possibil-

ity as a basis for his decision, the appellees’ attempt to resur-

rect it is unavailing. Indeed, it should also be noted that the

record includes an explanation of why such an increase in

reporting is not likely to occur. Comments of William L.

O’Toole (May 27, 1981), reprinted in I J.A. 197.

* We have already noted that the Secretary’s suggestion

that the number of homeworkers will be small is not the prod-

uct of reasoned decisionmaking. The Secretary also suggested

that there is greater acceptance of the minimum wage today

than there was in 1942. 46 Fed. Reg. 50,349 (1981). We do

not find this proposition as self-evident as the appellees sug-

gest, and the appellees cite no supporting evidence in the rec-

ord other than the testimony of the Vermont home knitters

regarding their own experiences. Appellees’ brief, pp. 52-53.

However, there was also evidence in the record, including ref-

erences to the Department’s own investigation of CB Sports,

Inc., suggesting that payment of subminimum wages to em-

ployees is pervasive. Hence, even assuming arguendo that

there is general acceptance of the minimum wage, there is

little question that violations continue, and the relevant issue

59

ask us to accept the Secretary’s conclusory assurances

and to assume that the impediments to enforcement of the

Act which were considered “inherent in the home work

is whether enforcement efforts can prevent 1. if homework

is unrestricted.

The Secretary also suggested that enforcement was not

possible in 1942 because the Department was newly estab-

lished. However, regulation of homework was certainly not

a new phenomenon in 1942; the Department had years of

prior state and Federal experience to draw on. The record

also indicates that even the most intensive enforcement efforts

by state and Federal bodies had not effectively controlled sub-

standard labor practices in homework. Again, the appellees

do not point to anything in the record suggesting that the

Department’s “new” concerted compliance effort really con-

tains anything “new” at all. Moreover, a recent study by the

General Accounting Office, quoted by the International Ladies’

Garment Workers’ Union in its comment on the proposed

rescission, calls into question the Department’s present en-

forcement capacity:

The Department of] Labor’s investigations of establish-

ments demonstrate that non-compliance with FLSA rec-

ordkeeping, minimum wage, and overtime provisions is a

serious and continuing problem. Labor is able to inves-

tigate annually only a small percentage of firms covered

by the act. For example, in 1979 Labor investigated less

than 2 percent of the 4.1 million establishments with

paid employees subject to FLSA provisions. The num-

ber of covered establishments was last determined by

Labor in 1977. Although Labor attempts to act on all

FLSA complaints received, the complaint backlog has re-

mained fairly constant—between 21,000 and 25,000—

during the 3 fiscal years ended [sic] 1979.

COMPTROLLER GENERAL OF THE UNITED STATES, CHANGES

NEEDED TO DETER VIOLATIONS OF Fam L. Bon STANDARDS ACT,

A REPORT TO THE CONGRESS 4 (May 28, 1981), quoted in

ILGWU Comments, supra, at 62, reprinted in II J.A. 360

(footnote omitted).

In evaluating these considerations, we respect the Secre-

tary’s expertise in ascertaining the enforcement capacity of

his staff. However, as we have indicated, our deference to his

expertise “cannot be allowed to slip into a judicial inertia.”

60

practice” in 1942, 1942 FINDINGS, supra, at 26, reprinted

in I J.A. 92, have disappeared with the passage of time.

We do not believe that the Secretary was free to ignore

the specific impediments identified in the 1942 findings,

and we also may not ignore them. Acceptance of the Sec-

retary’s claims would be an abdication of our responsibility

to see that he has engaged in reasoned decisionmaking.

This we refuse to do.” Because of the Secretary’s failure

to consider adequately factors identified in this subsec-

tion, his judgment that removing restrictions would not

prevent effective enforcement of the Act was arbitrary

and capricious and cannot be upheld.

2. Curtailment of Employment

While the Secretary’s decision was significantly moti-

vated by his finding that substantial curtailment of em-

ployment opportunities would result from continued re-

strictions in the knitted outerwear industry, we find his

abbreviated analysis of this issue completely inadequate.

The Secretary’s explanation of his view evidences no seri-

ous consideration of whether any employment benefits

from rescinding restrictions will be offset by resulting em-

Volkswagenwerk Aktiengessellschaft, 390 U.S. at 272 (quoting

American Ship Bldg. Co. v. NLRB, 380 U.S. 300, 318 (1965).

In light of the minimal evidence in the record supporting his

position, we think it clear that the Secretary’s generalized

claims about enforcement capacity and changing attitudes

cannot justify his failure to address the specific impediments

to enforcement revealed by the Department’s exhaustive an-

alysis in 1942.

7 See Office of Communication of United Church of Christ

v. FCC, 707 F.2d 1413, 1442 (D.C. Cir. 1983) (refusing to ac-

cept the FCC’s “conclusory assurances” that its ability to reg-

ulate would not be diminished by changes that included elimi-

nation of the requirement that radio licensees maintain pro-

gramming logs; vacating because “the Commission has failed

to give adequate consideration to the vital information role

that the logging requirements presently serve in the overall

scheme of the Communications Act“).

61

ployment losses and reductions in the earning power of

factory workers.

Initially we note that our analysis of this specific de-

ficiency in the Secretary’s analysis is confounded by the

Secretary’s failure to articulate satisfactorily even the

most rudimentary aspects of his findings. Specifically, it

is not at all clear whether the Secretary’s finding that the

restrictions curtailed employment opportunities means

that: (1) restrictions jeopardized existing illegal employ-

ment of homeworkers; (2) restrictions foreclosed addi-

tional opportunities in homework; or (3) restrictions did

not affect actual employment, but were removed to legalize

the status of existing homeworkers. While the lower court

believed that the Secretary’s finding was predicated on the

second rationale,” the connection between the facts cited

by the Secretary (i.e., that many people currently work

as homeworkers) and such a finding is mystifying. Be-

cause of other deficiencies in the Secretary’s reasoning

regarding the employment benefits of rescission, discussed

infra, it is unnecessary for us to decide whether the

ambiguity as to his actual finding requires reversal. We

highlight them because they illustrate the difficulties this

court would face if it attempted to fill in the numerous

gaps in the Secretary’s reasoning. In effect, to cure the

deficiencies in the Secretary’s analysis we would be re-

quired to substitute our reasoning for the patently super-

ficial explanation provided by the Secretary.

Assuming that the Secretary reasoned that without re-

strictions more homeworkers would be employed in the

knitted outerwear industry, he did not adequately con-

sider the possibility that this employment increase would

be offset by economic injury to factory workers. The

record included testimony and comments suggesting that

such injury would result because homework competition

Tl International Ladies’ Garment Workers’ Union v. Dono-

van, Civ. No. 81-2606, mem. op. at 11 (D.D.C. July 23, 1982),

reprinted in II J.A. 618.

62

would reduce factory wages and employment,” and some

manufacturers would be unable to compete and would be

driven out of business. Hence, the employment “benefit”

of the rescission might simply be a shift in employment

from factories to homes, with no net increase in employ-

ment opportunities.

The Secretary’s only response was that “these comments

did not present adequate substantiating evidence.” 46

Fed. Reg. 50,349 (1981). While this response is accurate,

it does not constitute sufficient consideration of the con-

cerns raised in the comments. The appellees do not ques-

tion the appellants’ claim that the Secretary’s decision is

premised on his desire to increase net employment oppor-

tunities, or their claim that this required the Secretary to

consider both the employment benefits and detriments of

the Secretary’s decision. In the circumstances of this case,

this responsibility required the Secretary to do more than

simply dismiss the concerns raised in the comments be-

cause of their lack of substantiating evidence.“ As the

E.., Comments of National Hand Embroidery & Novelty

Mfrs. Ass’n (May 20, 1981), reprinted in I J.A. 166-67 (lifting

restrictions will cause average wage in industry to fall to

Federal minimum so that employers can compete with home-

work employers) ; Comments of AFL-CIO Executive Council

(May 7, 1981), reprinted in I J. A. 204 (removal of restrictions

will encourage employers to divert work from factories to un-

protected homeworkers).

* FE. g., Comments of Wisconsin State AFL-CIO (June 23,

1981), reprinted in I J.A. 259 (revocation of prohibition on

homework in garment industry “would result in legitimate

businesses being forced to close”); Comments of Ass’n of

Knitted Fabrics Mfrs., Inc. (May 7, 1981), reprinted in I J.A.

153 (removal of restrictions would result in unemployment

and may drive small manufacturers out of business).

™ Cf. National Lime Ass’n v. EPA, 627 F.2d 416, 443 (D.C.

Cir. 1980) (where EPA had statutory duty to promulgate

achievable standards and this required analysis of relevant

variables, industry’s failure to provide data or assist in anal-

ysis in any meaningful way did not lift “the burden from the

Agency of pursuing what appears to be a relevant variable

f

appellees repeatedly point out, this is a case where only a

limited amount of hard data exists and the Secretary had

to make a decision largely in the absence of such data.

This factor, however, cuts in both directions. As the Sec-

retary did not feel constrained by the absence of such

data in predicting that rescission would provide substan-

tial employment benefits, we cannot fathom his failure

seriously to consider offsetting detriments solely on the

ground that this possibility was not substantiated by

hard data.

The possibility of employment detriments resulting from

unrestricted homework is a serious concern and deserves

the Secretary’s careful consideration. As we have said,

the record contains substantial evidence suggesting that

homeworkers will be paid subminimum wages, and one of

the reasons the Act was passed was to protect all em-

ployers and employees from the economic consequences of

subminimum wages. Moreover, even if homeworkers are

hired and paid lawful wages, this in no way suggests that

employees in the industry as a whole will be benefitted.”

The Secretary’s explanation of the employment conse-

quences of rescission does not begin to address these con-

cerns.” In the absence of such analysis, we believe it is

or at the least discussing in its document why it was not con-

sidered important“).

See, e.g., New York hearings, supra note 50, at 100, 101,

reprinted in II J. A. 376, 877 (statement of Frank Mercurio).

76 As we have explained, the responsibility for consideration

and discussion of such concerns is the agency’s, and not this

court’s. Hence, it would not be proper for us to follow the

lead of the District Court and speculate that “it is also possible

that a net gain in jobs, either due to cost savings or to sales

by employers of homeworkers that were formerly lost to

foreign competition, could be realized.” International Ladies’

Garment Workers’ Union v. Donovan, Civ. No. 81-2606, mem.

op. at 11 (D. D.C. July 23, 1982), reprinted in II J.A. 613. The

District Court’s speculation is also hard to reconcile with its

earlier speculation that the number of homeworkers has de-

64

clear that the Secretary’s decision was arbitrary and

capricious.

CONCLUSION

We recognize that a new administration may try to

effectuate new philosophies that have been implicitly en-

dorsed by the democratic process. Nonetheless, it is

axiomatic that the leaders of every administration are

required to adhere to the dictates of statutes that are also

products of democratic decisionmaking. Unless officials of

the Executive Branch can convince Congress to change

the statutes they find objectionable, their duty is to im-

plement the statutory mandates in a rational manner.

See Motor Vehicle Manufacturers Association, 103 S. Ct.

at 2875 n.“ (Rehnquist, J., concurring) (“Of course, a new

administration may not choose not to enforce laws of

which it does not approve... .”).

The Fair Labor Standards Act was passed to protect

employees and employers from the consequences of op-

pressive wages. The Secretary’s failure to engage in

reasoned decisionmaking before rescinding a longstanding

tool for enforcing the Act has imperiled the attainment of

this objective in an industry employing 63,000 workers.

This abdication of his statutory responsibility cannot sur-

vive judicial] scrutiny.

For the foregoing reasons, we reverse the decision of

the District Court and vacate the Secretary’s rescission of

homework restrictions in the knitted outerwear industry.

The case is remanded to the District Court with instruc-

tions to return the matter to the Secretary for further

proceedings as may be warranted. The restriction against

industrial homework shall be reinstated and remain in

effect unless properly modified pursuant to “reasoned

decisionmaking” consistent with the opinion of this court.

So ordered.

ö ro i

United States Court Of Appeals

FOR THE DISTRICT OF COLUMBIA CIACUIT

No. 62-2133 September Term, 19 83

Civil Action No. 81-02606

International Ladies’ Garment

Worke Union, ee 8

* iUnited States Court of Appeals!

far the D tick Ch C-tematla Creat

FILED °°" 29 1988

GEORGE A. FISHER

CLERK

„

Rayaond J. Donovan, et al.

Aprrn! from the United States Distriet Court for the District of Columbia.

Before: WRICHT and EDWARDS, Circuit Judges, and McCOWAN, Senior Circuic

Judge.

JUDGMENT

This cause came on to be heard on the record on appeal from the United States

District Court for the District of Columbia, and was argued by counsel.

On consideration thereof It is ordered and adjudged by this Court that the

judgment of the District Court appealed from in this cause is hereby

reversed and appellee Secretary's rescission of certain homework restrictions in

the knitted outervear industry is vacated. This case is remandea to the Districc

Court with instructions to return the matter to the Secretary for further pro-

ceedings as aay be warranted. All of the foregoing is in accordance vith the

opinion of this Court filed herein this date. °

Per Curien

Yor The Court

—9 re te Oe

Georg@ A. Fisher

Clerk

Date: Wovember 29, 1983

Opinion for the Court filed by Circuit Judge Edwards.

(7 268—6 88 77 0 Thee

— —

—ͤ— ß —

United States Cuurt of Anpzals

FOR THE OISTALCT OF COLUMOIA CIRCUIT

No. 62-2133 September Term, 19,

International Ladies’ Garment Civil Action No. 3

Workers, Union, et al. Stotes

Appellants ye vores A

v.

e FEB 1

Raymond J. Donovan, et al.

GtORGE A

CLE

BEFORE: Robinson. Chief Judee: riecht. Teen. Wilbew Wald, Milera Sar

Ginsburg, Bork, Scalia and Starr, Circuit Judges and McCowan,

Senior Circuit Judge

ORDER

The Suggestion for rehearing es bane wi Appellee-intervenurs, file

January 13, 1934, has been circulated to the full Court and no member

has requested che taking of a vote thereon. On considerctivn of the

foregoing, ic is

” ORDERZO by the Court en bane chat the uforvsaid suggestion is

dented.

For The Court:

GEORGE A. FISHER, CLERK

ehh

Robert A. Bonner

Chief Deputy Clerk

By:

he

2

—

—

—

=

—

7

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

INTERNATIONAL LADIES'

GARMENT WORKERS' UNION,

t al.,

Plaintiffs

CIVIL ACTION

NO. 81-2606

.

RAYMOND J. DONOVAN,

Secretary of Labor,

et al.,

Defendants.

i — U— —— Z— — 2 — 2 —

MEMORANDUM

This case is brought pursuant to 5

U.S.C. §703 to review a regulation of the

Secretary of Labor which removed the

knitted outerwear industry from the list

of industries in which industrial

homework is prohibited by 29 C.F.R. §530

(1981). 46 Fed. Reg. 40,349 (October 9,

1981). The regulation allows’ the

employment in the home of an undetermined

number of workers for whom such work was

previously prohibited, provided the

homeworker keeps extensive records. The

new regulation overturns a 1942

prohibition against such homework, which

the then Secretary had determined to be

necessary "in order to carry out the

purposes of the minimum wage order for

the Knitted Outerwear Industry." Wage

and Hour Division, In the Matter of

Recommendation of Industry Committee No.

32 for a Minimum Wage Rate in the Knitted

Outerwear Industry and Industrial

Homework in the Knitted Outerwear

Industry at 36 (Mar. 30, 1942)

(hereinafter "1942 Findings").

I.

Plaintiffs are a labor union

representing factory workers in the

knitted outerwear industry, employers in

the same industry, and state officials

charged with the enforcement of state

statutes similar to the FLSA. They claim

that the action of the Secretary is

unlawful for a variety of procedural and

substantive reasons, based upon their

belief that as A result of the

Secretary's action enforcement of the

Fair Labor Standards Act in the industry

will be significantly impaired. The

Court granted motions for leave to

intervene by intervenor-applicants who

wish to perform work at home and to

employ homeworkers within the relevant

industry, and who join the government

defendants in supporting the Secretary's

action. All defendants contest

plaintiffs' contention that allowing

homework will impede enforcement of the

Act, as well as plaintiffs’ other

70

contentions. The government defendants

also assert that plaintiffs lack standing

to bring this challenge.

The knitted outerwear industry

consists of those firms that knit from

yarn, and, in the same establishment,

further manufacture, dye or finish

knitted garments for use as external

apparel, and those firms that manufacture

bathing suits from any purchased fabric.

29 C. F. R. §530.1(f) (1981), removed by 46

Fed. Reg. 40,349 (Oct. 9, 1981). There

are approximately 63,000 persons employed

in the industry throughout the United

States. In 1942, with a few exceptions,

not relevant here, all homework in this

industry as well as six others was

prohibited based on findings that minimum

wage violations were widespread in

industries in which homework

r oe Mae Se ie Eh. as

N

:

:

71

predominated, and that a prohibition of

homework was accordingly necessary in

order to prevent the circumvention or

evasion of the minimum wage in those

industries. This prohibition was upheld

by the Supreme Court in Gemsco, Ine. v.

Walling, 324 U.S. 244 (1945).

The Fair Labor Standards Act was

amended in 1949, by, inter alia, adding a

new section 11(d):

The Administrator is

authorized to make such

regulations and orders

regulating, restricting,

or prohibiting homework as

are necessary or

appropriate to prevent the

circumvention or evasion

of and to safeguard the

minimum wage prescribed in

this chapter, and all

existing regulations or

orders of the

Administrator relating to

industrial homework are

continued in full force

and effect.

29 U.S.C. §211(d).

72

In 1980, partially in response to a

controversy created when the prohibition

of homework was enforced against a

Vermont firm employing homeworkers, the

Secretary published a notice of hearings

in the Federal Register, addressed to the

issue of whether "Regulations in 29 CFR

Part 530 are still appropriate to

safeguard the minimum wage prescribed in

the Act and whether there is a need to

change the Regulations to more accurately

reflect the current status of industrial

homework." 45 Fed. Reg. 80,555 (Dec. 5,

1980). After conducting hearings in

Burlington, Vermont and Washington, D.C.

the Agency proposed the elimination of

the homework prohibition in all seven

industries. 46 Fed. Reg. 25,108 (May 5,

1981). After receiving over 10,000

comments, the Agency removed the

73

prohibition in the knitted outerwear

industry but left it intact in the

remaining industries, based largely on

the fact that the evidence indicated that

substantial numbers of persons were

prevented from working by the rule in the

knitted outerwear industry, while no such

demonstration was made with respect to

the other six industries. The Preamble

to the 1981 regulation stated that a

concerted compliance effort would be

undertaken in the knitted outerwear

industry, and that the Department would

consider reimposing the restriction

should widespread violations of the Act

occur, and might also consider removal of

the restriction in the remaining

industries should the evidence support

such an action.

74

II.

The Secretary first maintains that

plaintiffs lack standing to challenge his

action here. This claim is based

principally on his claim that plaintiffs

have not show that they have or will

suffer "injury in fact" from the decision

to legalize homework in this industry.

Plaintiffs argue on the contrary that

without the restriction on homework they

are likely to be subject to unfair

competition from other employers paying

below minimum wage to homeworkers whose

wages the Department will de unable

adequately to police. This could in turn

result in unemployment of some of the

union plaintiffs members who work in

factories. Employer plaintiffs could

lose markets or profits to the

competition from firms employing

75

homeworkers at below minimum wage.

Defendant claims that those injuries will

not occur because in fact the Department

will be able adequately to enforce the

FLSA. However, this goes to the merits.

The Court must assume, for purposes of

deciding a motion to dismiss, that the

allegations of the complaint are true and

that plaintiffs will prevail on the

merits of their claims that enforcement

will be less effective to prevent below

minimum wages than prohibition of

homework has been. See, e.g. Gladstone

Relators v. Village of Bellwood, 441 U.S.

91 (1979); United States v. SCRAP, 412

U.S. 669 (1973).

Of course, if the injuries alleged

were a matter of pure speculation,

Plaintiffs could not create standing by

means of a purely conclusory allegation.

76

However, the injuries alleged here are

hardly speculative. The loss of jobs and

profits to firms employing workers at

subminimum wages was just the sort of

injury against which Congress intended to

guard by passing a national minimum wage

law. Indeed, 82 of the Act, 29 U.S.C.

§202, states that the existence of

substandard labor conditions "constitutes

an unfair method of competition in

commerce." See also Lerwill v. Inflight

Services, Ine., 379 F. Supp. 690, 696

(N. D. Cal. 1974), aff'd, 582 F. 2d 507

(9th Cir. 1978). Far from being

speculative, then, the injuries alleged

here are injuries which Congress sought

to prevent by passing the Act.

This also makes clear that

plaintiffs satisfy the "Zone of

interests" test of Association of Data

77

Processing Service Organization v. Camp,

397 U.S. 150 (1970). The fact’ that

defendants may ultimately establish that

the contention that increased violations

will result from the removal of the

homework restrictions is not proven does

not affect plaintiffs' right to make that

claim. If their claim is valid, there is

a distinct likelihood that they will

suffer the injuries they have alleged.

Defendants claim that plaintiffs

might also suffer loss of jobs or profits

due to other causes, such as the

recession or foreign competition, is

irrelevant. Plaintiffs do not have to

show that defendants' conduct is the only

source of injury to them, only that it is

a source of injury. To give only one

example, plaintiffs in Duke Power Co. v.

Carolina Environmental Study Group, 438

78

U.S. 59 (1978) were not required to show

that nuclear power plants were the sole

source of the thermal poilution of which

they complained, and indeed could not

have made such a showing.

Defendants rely heavily on Warth v. |

Seldin, 422 U.S. 490 (1975). However, in

that case, no plaintiff made allegations

that, were the challenged zoning

ordinances removed, he would be able to

build or live in low-income housing.

Here, plaintiffs have clearly alleged

that they will suffer competitive harm of

a type which the Act seeks to prevent.

Thus, the industry and union plaintiffs

have standing to bring this challenge.

This makes it unnecessary to decide

whether the state officials, who

essentially allege impaired ability to

enforce their own state laws, have

79

standing. Watt v. Energy Action

Educational Foundation, 102 8. Ct. 205,

212 (1981).

111.

Turning now to the merits,

plaintiffs first claim that §11(d),

quoted above, removed any authority which

the Secretary possessed to repeal the

homework restrictions in the seven

industries restricted at the time of its

passage. The language of the statute

does not support this construction,

however, and plaintiffs have pointed to

nothing in the legislative history which

would indicate such an intent. Such

evidence would have to be fairly strong

and convincing before a court could

conclude that Congress intended to freeze

a regulation governing a method of

enforcing the law, a matter normally

within the province of the Executive

Branch. Here, the evidence is not merely

weak, it is nonexistent. Plaintiffs’

only real argument is that the "continued

in full force and effect" language must

have been intended to prevent repeal of

the regulations at issue here, since

otherwise it would be superfluous. They

point to §16(c) of the same amendments,

which provided generally for orders,

regulations and interpretations under the

prior act to remain in effect except as

modified in the future or repealed.

However, the legislative history of

51100) makes clear that it was intended

to resolve any doubts about the authority

of the Secretary to regulate homework, as

there was substantial doubt about the

Secretary's authority to prohibit

homework generally, as opposed to doing

81

so in specifie industries. See Gemsco,

Inc. v. Walling, supra, at 269. Section

11(d) makes ciear that the restrictions

on homework originally enacted as part of

a wage-order regime continued to effect

despite the fact that the wage orders

themselves terminated. It also of course

makes it clear that the Secretary has

authority to restrict homework in other

industries. The section is thus not

superfluous if read to allow the repeal

of prior homework regulations, and

plaintiffs' argument must accordingly be

rejected.

Plaintiffs' chief claim is that the

removal of the homework restriction is

arbitrary and capricious because’ the

conclusion that the minimum wage can be

enforced in the knitted outerwear

industry is not supported by the record

82

and because the Agency failed to provide

an adequate statement of the basis and

purpose of the action, as required by 5

U.S.C. §553(¢). These two arguments are

inextricably linked, because the primary

purpose of the "concise general

statement" of the rule's basis and

purpose is to facilitate review by

enabling the reviewing court "to see what

major issues of policy were ventilated by

the informal proceedings and why the

agency reacted to them as it did."

Automotive Parts & Accessories Ass'n. v.

Boyd, 407 F. 2d 330, 338 (D.C. Cir.

1968). Here the Agency took very

literally the requirement that the

statement of basis and purpose be

"concise." While a more complete

discussion might have been preferable,

the Preamble is sufficient to enable the

83

Court to make the necessary examination

of the Agency's decision-making,

particularly in view of the fact that

much of the factual basis for the

Agency's action necessarily involves

judgment and prognostication, so that

detailed factual findings are not

feasible.

The parties are in agreement that

the relevant standard of review is

whether the Department's action here is

"arbitrary, capricious, an abuse of

discretion or otherwise not in accordance

with law." 5 U.S.C. §706(2)(A). The

parties are in apparent disagreement,

however, on the actual amount of scrutiny

and degree of deference owed to the

agency under this standard on these

facts. Plaintiffs point to the fact that

regulation at issue here represents a

84

change from longstanding agency policy as

justifying more exacting scrutiny, citing

National Resources Defense Council v.

SEC, 606 F. 2d 1031, 1049-50 n. 23 (D.C.

Cir. 1979). On the other hand,

defendants claim that the action here

challenged is equivalent to inaction by

the agency, to which there is normally

extreme deference. Id. at 1052-53.

Here, these two factors are roughly in

equipoise and leave the standard of

review much as it would be in the absence

of either factor.

The D.C. Circuit seems to have

reached a similar conclusion in the

recent case of State Farm Mutual

Automobile Ins. Co. Vv. Dep't of

Transportation, No. 81-2220 (D.C. Cir.

June 1, 1981), in which the standard of

review for the recission of the passive

85

restraint regulation was held to be

subject to the same standard of review as

was the regulation's original

promulgation. It is well settled that

under the arbitrary and capricious

standard of review courts are not

permitted to weigh the evidence de novo

or to substitute their judgment for that

of the Agency, but rather must determine

whether the decision was based on

consideration of the relevant factors and

was not the product of a clear error of

judgment. Citizens to Preserve Overton

Park v. Volpe, 401 U.S. 402, 416 (1971);

Weyerhaeuser Co. v. Costle, 590 F. 2d

1011, 1024-28 (1978). In this context,

where informal rulemaking of a broad

policymaking nature is being reviewed,

this entails an examination of whether

the Secretary has explained the facts and

policy concerns relied upon, whether the

factual findings have some basis in the

record, and whether they could lead a

reasonable person to make the judgment

the Secretary has made. Id. at 1027.

This requires a reivew which is

searching, careful and, in the end,

deferential. Natural Resources Defense

Council v. SEC, 606 F. 2d 1031 (D.C. Cir.

1979). The actual degree of scrutiny

will frequently vary from case to case,

depending upon the type of question

presented, the intent of Congress, the

expertise of the Secretary and the

ability of the court to deal effectively

with the particular type of question.

Id. at 1050.

However, two additional factors not

present in State Farm counsel here for

particular deference to the Department.

87

First, the standard at issue in State

Farm had been repeatedly and exhaustively

examined for a number of years, and the

decision to rescind the standard marked a

sharp reversal of prior policy. While

the reversal of prior policy challenged

here is perhaps as sharp, the policy at

issue here has not been the subject of

repeated and thorough re-examination by

either the Secretary or Congress; rather,

it has remained unchallenged and

unexamined since its original

promulgation. While the fact’ that

previous Secretaries have not seen fit to

repeal the prohibition on homework is

entitled to some weight, it is not the

sort of continual scrutiny to which the

passive restraint regulation was

subjected.

More importantly for this case, the

fact that the regulation here involves a

decision as to how the Department can

best enforce the minimum wage counsels

extreme deference. Plaintiffs attack

vigorously the Secretary's conclusion

that "an effective enforcement program is

feasible." 46 Fed. Reg. at 40,349.

However, this sort of determination is

within the special competence of the

Executive Branch; a Court should set

aside such a finding only if there is

virtually no evidence or reason to

support it.

The Agency's determination that

conditions have changed sufficiently in

the forty years since the homework

prohibition was first promulgated to now

permit an adequate enforcement effort is

based on several factors. First, the

89

Department found that when the rule was

first promulgated the minimum wage was

fairly new, and that acceptance of the

minimum wage is now greater than it was

then. While plaintiffs attack this

finding, it is supported by common sense,

by the Secretary's expertise, and by the

testimony of workers in the knitted

outerwear’ industry. Plaintiffs attack

this testimony because the witnesses kept

no records of the number of hours they

worked. But this attack bears on the

probative value of the testimony, an

issue which can best be resolved by those

who observed the witnesses, i.e., the

Secretary and not this Court.

In addition, the Secretary noted

that at the time the rule danning

homework was promulgated homeworkers

constituted over 20 percent of the

90

workforce. The Secretary found that

homeworkers were likely to constitute a

small percentage of the workforce if

homework were legalized now. Plaintiffs

maintain that this finding is not

supported by a survey or study. However,

the Agency could reasonably conclude that

such a survey was not indicated, since

such employment is now illegal and any

projection about the future is

necessarily speculative. In any event,

the finding that homeworkers are likely

to constitute a smaller percentage of the

workforce now than in 1942 is consistent

with the findings of the then

Administrator that factory production was

more efficient than home production and

that the prohibition of homework would

therefore likely lead to improved

production methods. See 1942 Findings at

NPSL Sie inn Pa EME ees So Be

|

|

|

91

36. If this is true, it is unlikely that

many would wish to return to a less

efficient method of production. Finally,

both the Secretary's own 1959 Study and a

study drafted by the Illinois Department

of Labor and submitted to the Secretary

support a finding that the incidence of

violations in the knitted outerwear

industry is unlikely to be so high as to

preclude an effective enforcement

program.

The evidence on the other’ side

consisted primarily of conclusory

statements that enforcement of the

minimum wage laws was impossible where

homework existed, together with a

repetition of the 1942 Findings. The

agency could properly reject such claims

as unsubstantiated or counterbalanced by

contrary evidence and inferences. The

Agency could also properly conclude that

the comments of many of those commenting

were entitled to relatively less weight

because they were made by persons who

would be competing with homeworkers or

employers of homeworkers, and who might

desire to prevent such competition even

at wages in excess of the minimum.

Finally, the government relied in

making its determination that an

effective enforcement program was

feasible on data which indicate that

violations occur as frequently in

industries in which homework is

prohibited as in other industries. See

Plaintiffs’ Appendix E. In all

industries save the seven in 29 C.F.R.

$530, homework is permitted, yet (the

Secretary might conclude) an effective

enforcement program is feasible. There

was no showing that the problem of

homework in this industry was

particularly intractable or that any

other distinction aside from historical

accident now necessitated treating the

knitted outerwear industry differently

from the hundreds of other industries in

which homework is permitted.

Defendant's decision to remove the

homework restriction, and in particular

its decision to do so in this industry

while retaining it in the other six, was

also based on a finding that allowing

homework in this industry would prevent a

"substantial curtailment of earning

power." 46 Fed. Reg. at 50,349. This

was based on substantial testimony that

the prohibition of homework precluded

many persons in rural areas otherwise

able to work from any work opportunity at

94

all because there were no _ factories

accessible t-to them. This stands in

marked contrast to the situation in 1942,

when the Administrator found that most of

the homeworkers lived in urban areas in

close proximity to the factory. 1942

Findings at 19, 36. Plaintiffs claim

that this gain in jobs may well be offset

by a loss in factory jobs. But it is

Also possible that a net gain in jobs,

either due to cost savings or to sales by

employers of homeworkers that were

formerly lost to foreign competition,

could be realized. In any event, the

Secretary could properly conclude that in

the context of real persons for whom the

restriction was a definite hardship, the

option of working at home should be

afforded as long as it would not

significantly impair enforcement of the

Act.

Plaintiffs assume that the statute

requires the Secretary to prohibit

homework unless he finds that allowing it

will not result in minimum wage

violations. The statute is not so

worded, however. It authorizes’ the

Secretary to regulate, restrict or

prohibit homework to the extent necessary

or appropriate to prevent circumvention

or evasion of the minimum wage. But the

statute requires consideration of the

effect of such a regulation on earning

power. See 29 U.S.C. §202. Obviously,

the outlawing of all homework would

reduce by some amount violations of the

minimum wage, but at the cost of

preventing some persons from working who

might rk otherwise. The Secretary

could bly conclude that the total

-

prohibition of a type of work simply

because some who work that way will not

be paid minimum wage is a draconian

remedy and not to be employed lightly.

Thus, one of the cases on which

plaintiffs chief ly rely, Defenders of

Wildlife v. Endangered Species Scientific

Auth., 659 F. 2d 168 (D.C. Cir. 1981), is

readily distinguishable. There the Court

of Appeals . reversed an agency

determination that the requirements of a

treaty that no export of animals be made

unless a finding of no detriment to the

survival of the species (in this case

bobcats) was made. In that case, the

Court held that no finding of no

detriment could be made where there was

no information on the total number of

bobcats nor on the total number killed.

Apart from the fact that the factual

basis for the government's finding here

is more substantial, there is a great

difference between the requirements of

the treaty at issue in Defenders of

Wildlife and this statute. The treaty at

issue here required the prohibition of

exports unless a finding of no detriment

could be made, thus implying that in

doubtful cases the prohibition should

stand. Plaintiffs' theory in this case

would have more merit if the statute here

required the Secretary to prohibit

homework unless he found that there would

be no significant violations of the

minimum wage. The statute does not set

up such a presumption of illegality;

rather, it provides an additional tool

for the Department to use in its

enforcement of the Act.

In six in

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