Opinion for the Court filed by Circuit Judge EDWARDS.
HARRY T. 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, garment 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apparel, and those firms that manufacture bathing suits from any purchased fabric. 29 C.F.R. § 530.1(f) (1981) (rescinded by 46 Fed.Reg. 50,349 (1981)).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 appellants — knitted outerwear manufacturers and manufacturers' associations, labor organizations representing factory workers in the industry, and state labor law enforcement officials — brought suit, principally arguing 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 homeworkers are employed it is not possible effectively to enforce the minimum wage, overtime compensation and child labor provisions of the Fair Labor Standards Act of 1938 (hereinafter "the Act"), 29 U.S.C. §§ 201-219 (1976 & Supp. V 1981). They also claim that payment of subminimum 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 appellants' motion for summary judgment and granted summary judgment for the appellees.
Because we find that the Secretary's decision was arbitrary and capricious, we reverse the decision of the District Court and vacate the action of the Secretary rescinding restrictions on the employment of homeworkers. 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.
A. The History of Restrictions on Industrial Homework
To appreciate the significance of the Secretary's decision, one must first understand the historical context in which it arose. The concerns about industrial homework raised by the appellants echo those voiced by critics of substandard labor conditions throughout this century. See WAGE & HOUR DIV., U.S. DEP'T OF LABOR, IN THE MATTER OF THE RECOMMENDATION OF INDUSTRY COMMITTEE 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 industries in which it is pervasive.
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
Quoted in 1942 FINDINGS, supra, at 13, reprinted in I J.A. 79 (footnote omitted).
By the mid-1930's, there was increasing support for the prohibition of homework.
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,
Soon after the promulgation of these regulations, pressures to prohibit homework intensified. A number of states had taken such action,
One outgrowth of these hearings, and the related investigations of the Division, was a series of reports issued by the Division. Because the reports represent the most comprehensive analysis by the Department of Labor (hereinafter "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 then examined the underlying reasons 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 enforcement of minimum wages was the difficulty of ascertaining the identity of homeworkers:
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 ensure compliance with minimum wage, maximum hour, and overtime provisions of the Act. The Administrator found that:
Testimony by Division officials also indicated that the foregoing problems made investigation of wage and hour violations vastly more difficult when homeworkers were involved.
When violations were discovered, compensating homeworkers was onerous. Complex employer-employee relationships (often involving middlemen) made it "difficult to determine where to place the responsibility for violations" in the industry: "[c]ontractors usually have more than one jobber, necessitating several individual negotiations and frequently manufacturers disclaim liability for 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:
Id. at 30-31, 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, because of wide variations in the productivity of individual workers, establishing an average piece rate resulted in "only the roughest kind of approximation of actual individual hours worked." Id. at 32, I J.A. 98. This problem was exacerbated by variations in "size of yarn, or closeness or looseness of stitch," id. at 33, I J.A. 99 (quoting testimony of Anna L. Hoffer), as well as different combinations of styles, sizes and color. Id. at 32, I J.A. 98.
The Administrator soon acted on the information contained in the Division reports and prohibited homework in the seven industries studied, unless homeworkers came within certain narrow exceptions. The regulation applicable to the knitted outerwear
The authority of the Administrator to take such action was upheld in Gemsco, Inc. v. Walling, 324 U.S. 244, 65 S.Ct. 605, 89 L.Ed. 921 (1945),
Fair Labor Standards Amendments of 1949, Pub.L. No. 81-393, § 9, 63 Stat. 910, 916-17 (1949) (codified at 29 U.S.C. § 211(d) (1976)). With the Division's authority 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 safeguard 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 proposing 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 restrictions on the employment of homeworkers in the knitted outerwear industry and to retain such restrictions in the remaining six industries." 46 Fed.Reg. 50,348 (1981). This decision was based primarily on the finding that "substantial curtailment of employment opportunities and earning power will result from a continuation of the restrictions on industrial homework in the knitted outerwear
The Secretary indicated that in conjunction with the removal of the restrictions the Department would undertake "a concerted compliance effort in this industry." The Secretary suggested that such an effort could be effective:
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 restrictions on homework in the knitted outerwear industry. The 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(c) (1982).
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' argument concerning the alleged limitations of the Secretary's statutory 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 rescission was arbitrary and capricious, the court should review the rescission with "extreme deference." The court reasoned 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 causing 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. §§ 216, 217 (1976 & Supp. V 1981), lay "out a distinct and detailed statutory mechanism for judicial enforcement of [the Act] specifically by employees who are themselves denied the minimum wage, or by the Secretary on behalf of such employees." Appellees' brief, p. 34.
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 arguments by their failure to file a cross appeal. See Wisconsin Bankers Association v. Robertson, 294 F.2d 714 (D.C.Cir.), cert. denied, 368 U.S. 938, 82 S.Ct. 381, 7 L.Ed.2d 338 (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 Help Association v. Califano, 574 F.2d 518, 522 (D.C.Cir.1977). See generally Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (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 proceedings; 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 insubstantial and frivolous." Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946). While we think it clear that the appellants' assertion of a cause of action is neither wholly insubstantial nor frivolous and consequently we could reject the appellees' cause of action argument because of their failure to raise it below, cf. Mount Healthy City Board of Education v. Doyle, 429 U.S. 274, 279, 97 S.Ct. 568, 572, 50 L.Ed.2d 471 (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 for relief under § 1331 is not of the jurisdictional sort which the Court raises on its own motion"), we will address the appellees' argument to resolve any jurisdictional uncertainties. See Regents of the University of California v. Bakke, 438 U.S. 265, 380, 98 S.Ct. 2733, 2794, 57 L.Ed.2d 750 (1978) (White, J., concurring) ("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 Authority,
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 apparent force of the appellants' position, the appellees contend 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 unpersuasive. 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 seminal 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 provisions' must be given a `hospitable' interpretation." Abbott Laboratories v. Gardner, 387 U.S. 136, 140-41, 87 S.Ct. 1507, 1510-11, 18 L.Ed.2d 681 (1967) (quoting Shaughnessy v. Pedreiro, 349 U.S. 48, 51, 75 S.Ct. 591, 594, 99 L.Ed. 868 (1955)) (footnote omitted). We have indicated that under the APA there is "a strong presumption of reviewability 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). Accord Dunlop v. Bachowski, 421 U.S. 560, 567, 95 S.Ct. 1851, 1857, 44 L.Ed.2d 377 (1975) (absent express statutory prohibition of review, the Secretary bears a "heavy burden of overcoming the strong presumption that Congress did not mean to prohibit all judicial review of his decision"); Abbott Laboratories, 387 U.S. at 140, 87 S.Ct. at 1511 ("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, 82 S.Ct. 787, 794, 7 L.Ed.2d 809 (1962) (requiring "clear or convincing" evidence 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 provision for actions by underpaid employees, or the Secretary, to recover unpaid wages. The suggestion that provision of such an action evidences a clear and convincing intent to exclude all other judicial relief, and in particular the right of aggrieved parties to challenge allegedly arbitrary and capricious actions by the Secretary, 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 judicial redress of alleged administrative misconduct, is a distinct form of proceeding ...." Common Cause v. Department 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 ADMINISTRATIVE ACTION 357 (1965)) ("`The mere fact 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 intent 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
29 U.S.C. § 202(a) (1976). Similarly, the House Report argued that following passage of the Act
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 intended to protect workers and their families, whom the Act is intended to benefit, see 29 U.S.C. § 202 (1976), but it is also intended to protect the employers who comply with its terms."), aff'd 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.
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."
The legislative history also suggests that the protection sought for all covered employers and employees will be jeopardized unless those parties are entitled to judicial review of the Secretary's actions. First, there may be occasions when the interests of underpaid employees are such that they cannot be expected to bring actions which will, in effect, protect employers complying with the Act and their employees.
The foregoing discussion permits us to dispose quickly of the challenges to the appellants' standing to sue. The crux of the appellees' position is that the appellants do not fall within the "zone of interests" protected by the Act. See generally Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 153-54, 90 S.Ct. 827, 829-30, 25 L.Ed.2d 184 (1970). We have indicated that 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 under which suit is brought." Control Data Corp. v. Baldrige, 655 F.2d 283, 293-94 (D.C.Cir.) (footnote omitted), cert. denied, 454 U.S. 881, 102 S.Ct. 363, 70 L.Ed.2d 190 (1981).
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 standing a party must allege an injury that "`fairly can be traced to the challenged action' and `is likely to be redressed by a favorable decision.'" Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982) (quoting Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 38, 41, 96 S.Ct. 1917, 1925, 48 L.Ed.2d 450 (1976)).
Alternatively, the appellees' argument can be read to suggest that injurious competition
The appellants need not negate every conceivable impediment to effective relief no matter how speculative, Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 78, 98 S.Ct. 2620, 2633, 57 L.Ed.2d 595 (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, 100 S.Ct. 2232, 2240-41, 65 L.Ed.2d 184 (1980).
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.
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 not 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., 456 U.S. ___, 103 S.Ct. 2856, 2865, 77 L.Ed.2d 443 (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 Manufacturers Association. In that case, involving rescission by the National Highway Traffic Safety Administration (hereinafter "NHTSA") of a regulation requiring installation of passive restraints in motor vehicles produced after 1982, the Court rejected the suggestion that rescission was analogous to agency inaction, which is judged by an unusually narrow standard of review. The Court indicated that "revocation of an extant regulation is substantially different than a failure to act," 103 S.Ct. at 2866, reasoning that
While the Court recognized that an agency must be given latitude to adapt
We find the Court's reasoning particularly compelling as applied to the case at hand, since this case involves review of an agency's rescission of a longstanding policy.
The appellees' suggestion that the restrictions on homework 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 violations of the Act by employers of homeworkers in 1959, to obtain information "to aid development of a more effective 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 persisting decision that restriction of homework was a prerequisite to effective enforcement of the Act. This support for the restrictions is evidenced by comments received 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 compelling 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,
Consequently, the normal standard of review, as articulated by the Supreme Court in Motor Vehicle Manufacturers Association, is applicable to this case. This review is focused and restricted, and it does not permit us to substitute our judgment for that of the agency.
Motor Vehicle Manufacturers Association, 103 S.Ct. at 2867.
Moreover, "[i]t is well-established that an agency's action 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, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947), or accept "appellate counsel's post hoc rationalizations for agency action." 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, 95 S.Ct. at 442.
B. Failure to Consider Alternatives
The record before this court makes it clear that the Secretary failed to provide any explanation for his implicit rejection of alternatives to elimination of restrictions 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,
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 "[w]hether the certificate requirements should be revised to recognize additional circumstances justifying certification, such as child care and other family demands that may tend to preclude factory employment," and "[w]hether the certificate requirements should differentiate 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 existing restrictions, rather than complete rescission. In fact, the testimony challenging the restrictions predominantly related to the hardship that the restrictions imposed
Perhaps the clearest indication that these proposals warranted serious consideration is provided by the Secretary's explanation of the rationale for rescission. In summarizing 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 adverse effect on employment opportunities, particularly in rural areas.... Much of this employment, the testimony and comments indicated, is in areas where public transportation is not available and few or no other gainful employment opportunities exist." Id. at 50,349. Obviously one potential means of redressing these concerns is to permit homework only in situations where these impediments to factory employment are shown to exist. The Secretary's explanation provides no basis whatsoever for rejecting this approach and instead allowing all individuals, 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 consideration to the alternatives raised in his original notice and the comments. Indeed, the affidavit of a Division official explaining the decision,
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 alternative device and thought conceivable by the mind of man ... regardless of how uncommon or unknown that alternative may have been ....'" 103 S.Ct. at 2871 (quoting Vermont Yankee Nuclear Power Corp. v. NRDC, Inc., 435 U.S. 519, 551, 98 S.Ct. 1197, 1215, 55 L.Ed.2d 460 (1978)). However, the options ignored by the Secretary in this case certainly cannot be characterized 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 obvious 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 eliminate the requirement that licensees maintain programming logs and make those logs available to the public was arbitrary and capricious. We found that the Commission's failure "to give sufficient consideration" to the benefits of a more modest possibility — modification of log requirements to reflect more appropriately the informational 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.
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 requiring 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 smoking in airplanes because the Board had failed adequately to address
In the same manner, we hold that the Secretary should have considered and explained why the proposals mentioned 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 proposals. However, he was required to address common and known or otherwise reasonable options, and to explain any decision to reject such options. His complete failure to satisfy these quintessential aspects of reasoned decisionmaking is the primary basis
C. Other Unreasoned Aspects of the Decision
1. Enforcement Feasibility
Our decision to vacate is also grounded in the unreasoned 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 Secretary's analysis, we shall summarize and review the evidence 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"
The evidence in the record supporting the Secretary's decision is at best minimal.
Furthermore, as we have explained at length, substantial evidence is provided by years of enforcement experience prior to imposition of the restrictions, and the Division's investigation in the early 1940's, which suggest that the minimum wage law cannot be effectively enforced unless homework is restricted. This conclusion is also supported by testimony at the 1981 hearings, and analysis in the subsequent comments,
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 minimum."
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 requirements
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 enforcement 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 predictive judgments about areas that are within the agency's field of discretion and expertise. See FCC v. WNCN Listeners Guild, 450 U.S. 582, 594-95, 101 S.Ct. 1266, 1274, 67 L.Ed.2d 521 (1981); FCC v. National Citizens Committee for Broadcasting, 436 U.S. 775, 813-14, 98 S.Ct. 2096, 2121, 56 L.Ed.2d 697 (1978); FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S. 1, 29, 81 S.Ct. 435, 450, 5 L.Ed.2d 377 (1961); Building & Construction Trades' Department v. Donovan, 712 F.2d 611, 629 (D.C.Cir.1983). However, we reject the appellees' position 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." Motor Vehicle Manufacturers Association, 103 S.Ct. at 2870 (referring to rule that court may not impose additional procedural requirements upon an agency).
The Supreme Court has never indicated that when an agency is making a predictive judgment it need not engage in reasoned decisionmaking.
Our review of the record and the Secretary's explanation of his decision indicates that the Secretary has not given sufficient consideration to factors that may be highly relevant to the Department's ability
There is certainly a very real possibility that the number of homeworkers will substantially increase because of the rescission of restrictions. See Gemsco, Inc. v. Walling, 324 U.S. 244, 254 n. 17, 65 S.Ct. 605, 611 n. 17, 89 L.Ed. 921 (1945) ("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 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, 55 S.Ct. 837, 79 L.Ed. 1570 (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.
The Secretary also failed to give adequate consideration 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
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 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 testimony from individuals in rural Vermont, was not reasoned decisionmaking.
Finally, we do not think that the Secretary's explanation reflects sufficient consideration of the specific impediments to enforcement of the Act presented by homework. The Administrator's 1942 findings identified numerous obstacles to previous enforcement efforts when homeworkers 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
The Secretary's explanation of his decision does not address 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"
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 Secretary's claims would be an abdication of our responsibility to see that he has engaged in reasoned decisionmaking. This we refuse to do.
2. Curtailment of Employment
While the Secretary's decision was significantly motivated by his finding that substantial curtailment of employment opportunities would result from continued restrictions in the knitted outerwear industry, we find his abbreviated analysis of this issue completely inadequate. The Secretary's explanation of his view evidences no serious consideration of whether any employment benefits from rescinding restrictions will be offset by resulting employment losses and reductions in the earning power of factory workers.
Initially we note that our analysis of this specific deficiency 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 employment of homeworkers; (2) restrictions foreclosed additional 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,
Assuming that the Secretary reasoned that without restrictions more homeworkers would be employed in the knitted outerwear industry, he did not adequately consider 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 would reduce factory wages and employment,
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 concerns raised in the comments. The appellees do not question the appellants' claim that the Secretary's decision is premised on his desire to increase net employment opportunities, 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 because of their lack of substantiating evidence.
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 employers 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 consequences of rescission does not begin to address these concerns.
We recognize that a new administration may try to effectuate new philosophies that have been implicitly endorsed 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 implement 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 oppressive 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 survive 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 instructions 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.
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 "Secretaries' Comments").
1942 FINDINGS, supra, at 27, reprinted in I J.A. 93 (quoting testimony of Arthur J. White) (footnote omitted).
Id. at 32, I J.A. 98 (footnote omitted).
324 U.S. at 252-54, 65 S.Ct. at 611-12 (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, 65 S.Ct. at 612.
29 U.S.C. § 216(b), (c) (Supp. V 1981). The pertinent language of § 17 provides:
29 U.S.C. § 217 (1976).
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, 65 S.Ct. 895, 902 n. 18, 89 L.Ed. 1296 (1945). Our point is that this was not the sole congressional concern, and that it 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.
698 F.2d at 1248 (quoting Nichol, Causation as a Standing Requirement: The Unprincipled Use of Judicial Restraint, 69 KY.L.J. 185, 215 (1980-81)). We are also wary of requiring too strong a showing by the appellants in a case such as this where — as the appellees repeatedly point out — some uncertainties 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 favorable decision would contribute in any significant manner to remedying or preventing the plaintiff's injury.") (footnote omitted). This is certainly consistent with the desire underlying 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.
The suggestion that homeworker employers will move abroad is only supported by the testimony of one homeworker employer, arguing against domestic restrictions on his business. 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 homework 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 outerwear 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.
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).
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 appropriate, 46 Fed.Reg. 50,349 (1981), hardly counsels any alteration in the standard of review. Agencies remain free to react to new information as part of their standard regulatory procedure, but their expressed willingness to do so certainly cannot 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 uncertainties existed, he was obligated to identify these uncertainties and to explain why this justified rescission prior to "engaging in a search for further evidence." Motor Vehicle Mfrs. Ass'n, 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. Hodgson, 499 F.2d 467, 476 (D.C.Cir.1974)). The Secretary did not explain why such research would be more fruitful if homework 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 decision."). Finally, even were the appellees' argument accepted, it again would not remove all aspects of the Secretary's decision 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.
We also note that the Secretary's mention of the alternatives 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.
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 homeworkers were in violation of the minimum wage, overtime, or child labor provisions 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 minimum 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 industries as in the group of non-restricted industries." Id. at 3, II J.A. 477.
However, the value of these data is limited. The conclusions are based on investigations by Division officials "who collected data by examining employers' records and interviewing the employers and some of the homeworkers." Id. 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, reprinted 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 surprising that the findings in the 1959 report are qualified:
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 — regardless of whether the industry is restricted or unrestricted — and that the relevant consideration 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 possibility was considered by the Secretary, and we discuss the significance of this omission infra.
However, the suggestion that such determinations are entitled to deference and do not require complete factual support does not mean that agencies are free to engage in unreasoned 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. at 595, 101 S.Ct. at 1274, and that its position "reflects a reasonable accommodation" of the competing policy considerations. Id. at 596, 101 S.Ct. at 1275. Similarly, the factual determination that underlay the FCC's policy choice in National Citizens Comm. for Broadcasting "was grounded in a rational prediction, based on its knowledge of the broadcasting industry and supported by comments in the record." 436 U.S. at 808, 98 S.Ct. at 2119. Cf. FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S. at 29-30, 81 S.Ct. at 450 (holding that Commission's forecast about effect of certain conduct on future prices "necessarily involves deductions based on the expert knowledge of the agency," but also noting that a considerable showing was made that the forecast was well grounded and that "as 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 predictive judgments by agencies. As the Supreme Court has previously noted, "[u]nderlying the whole [Communications Act] is recognition of the rapidly fluctuating factors characteristic of the evolution of broadcasting and of the corresponding requirement that the administrative process possess sufficient flexibility to adjust itself to these factors." FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 60 S.Ct. 437, 439, 84 L.Ed. 656 (1940). See also United States v. Southwestern Cable Co., 392 U.S. 157, 173, 88 S.Ct. 1994, 2003, 20 L.Ed.2d 1001 (1968) (Congress acted in a field that was new and dynamic and gave Commission expansive powers); National Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630, 638 n. 37 (D.C.Cir.) ("The substantial discretion generally allowed the F.C.C. in determining both what and how it can properly regulate, is often attributed to the highly complex and rapidly expanding nature of communications technology."), cert. denied, 425 U.S. 992, 96 S.Ct. 2203, 48 L.Ed.2d 816 (1976).
The Court's decision in Motor Vehicle Mfrs. Ass'n also suggests that predictive judgments by agencies must be reasoned. In that case, the Court reviewed NHTSA's determination that it could not "reliably predict" that automatic seat belts would increase belt usage by five percent, 103 S.Ct. at 2871, to see if the agency's claim of uncertainty was supported by the record and reasonably explained. Id. The Court found that the agency's statement "take[s] no account of the critical difference between detachable automatic belts and current manual belts.... Whether [the possibility that the inertia factor which favors usage when automatic belts are installed will substantially increase seatbelt use] is in fact the case is a matter for the agency to decide, but it must bring its expertise to bear on the question." Id. at 2872. In our view, there is no reason for greater deference when an agency decides that data does permit a certain prediction than when it reaches the contrary conclusion. In either case, courts are capable of following the approach employed in Motor Vehicle Mfrs. Ass'n to ascertain whether the agency's decision is based on a consideration of relevant factors and is otherwise a product of reasoned decisionmaking.
The Secretary also suggested that enforcement was not possible in 1942 because the Department was newly established. 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 substandard 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 contains 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 enforcement capacity:
COMPTROLLER GENERAL OF THE UNITED STATES, CHANGES NEEDED TO DETER VIOLATIONS OF FAIR LABOR 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 Secretary'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." Volkswagenwerk Aktiengesellschaft, 390 U.S. at 272, 88 S.Ct. at 935 (quoting American Ship Bldg. Co. v. NLRB, 380 U.S. 300, 318, 85 S.Ct. 955, 967, 13 L.Ed.2d 855 (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 analysis in 1942.