Constitutional Limitations on Federal Government Participation in Binding Arbitration, 95-16

• Decision Date: 07 September 1995
• Docket Number: 95-16
• Citation: 19 Op. O.L.C. 208
• Court: Opinions of the Office of Legal Counsel of the Department of Justice
• Parties: Constitutional Limitations on Federal Government Participation in Binding Arbitration

19 Op. O.L.C. 208

Constitutional Limitations on Federal Government Participation in Binding Arbitration

No. 95-16

United States Department of Justice

September 7, 1995

WALTER DELLINGER, Assistant Attorney General Office of Legal Counsel

Constitutional Limitations on Federal Government Participation in Binding Arbitration

The Appointments Clause does not prohibit the federal government from submitting to binding arbitration.

Nor does any other constitutional provision or doctrine impose a general prohibition against the federal government entering into binding arbitration, although the Constitution does impose substantial limits on the authority of the federal government to enter into binding arbitration in specific cases.

MEMORANDUM OPINION FOR THE ASSOCIATE ATTORNEY GENERAL

You have asked for our opinion as to whether the Constitution in any way limits the authority of the federal government to submit to binding arbitration.^[1]Specifically, you have asked us to explain and expand on advice we issued on September 19, 1994 in which we confirmed our earlier oral advice that "the Office of Legal Counsel no longer takes the view that the Appointments Clause, U.S. Const, art. II, §2, cl. 2 bars the United States from entering into binding arbitration." Memorandum for David Cohen, Director Commercial Litigation Branch, Civil Division, from Dawn Johnsen, Deputy Assistant Attorney General, Office of Legal Counsel, Re: Binding Arbitration (Sept. 19 1994).^[2] Below, we reiterate this conclusion and, pursuant to your request, set forth the reasoning by which we reached it. In addition, we consider, again pursuant to your request, the various other constitutional provisions that may be implicated when the federal government enters into binding arbitration. We conclude that none absolutely bars the federal government from taking such action. We should point out, however, that Exec. No. 12778 remains in effect. See Civil Justice Reform, 56 Fed. Reg. 55 195 (1991). [ 209] That order forbids litigation counsel for federal agencies from seeking or agreeing to enter into binding arbitration. Id. § 1(c)(3). Therefore, while a constitutionally valid statute may compel litigation counsel to enter into binding arbitration, litigation counsel may not voluntarily agree to binding arbitration.^[3]

I. Background

Neither term in the phrase "binding arbitration" bears a settled meaning. First, "arbitration" may be a very different exercise in different contexts and cases because there are no universally applicable rules of practice, procedure, or evidence governing the conducting of arbitration. In addition, there is no standard as to whether arbitration is to be conducted by a single arbitrator or by a panel of arbitrators or as to the method for selecting the individuals who serve in that capacity.^[4] Moreover, arbitration may be voluntary - in that both parties have agreed to resolve their dispute by this method - or compulsory - in that some other requirement such as a statute compels the parties to resolve their dispute by this method. Second, it is not at all clear what exactly is meant by referring to an arbitration as "binding." We take this to mean that judicial review of the arbitral decision is narrowly limited, as opposed to non-binding arbitration in which each party remains free to disregard any arbitral ruling. The limitation on judicial review could take numerous forms. It may mean that there is to be no review of an arbitral decision. Alternatively, it may mean that an arbitral decision is reviewable only under a very limited standard, such as fraud by the arbitrator(s) or arbitrary and capricious decision making. Because of this indeterminacy, it is [ 210] not possible to draw many specific conclusions. We are able, however, to offer generalizations and guidance pertaining to participation by the federal government in the various forms that binding arbitration may take.

II. The Appointments Clause

A. Whether Arbitrators Are Officers of the United States

To understand why me assertion that the Appointments Clause prohibits the government from entering into binding arbitration is not well-founded, it is necessary first to examine the requirements of the Appointments Clause itself. The Appointments Clause provides that

[the President, ] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

U.S. Const, art. II, §2, cl. 2. The Appointments Clause sets forth the exclusive mechanisms by which an officer of the United States may be appointed. See Buckley v. Valeo, 424 U.S. 1, 124-37 (1976) (per curiam). The first issue to be resolved is, who is an "officer" within the meaning of the Constitution and therefore must be appointed by one of the methods set out in the Appointments Clause?

Not everyone who performs duties for the federal government is an officer within the meaning of me Appointments Clause. The requirements of the Appointments Clause apply only where an individual is appointed to an "office" within die federal government. From the early days of the Republic, die concepts of "office" and "officer" have been understood to embrace the ideas of "tenure, duration, emolument, and duties." United States v. Hartwell, 73 U.S. (6 Wall.) 385, 393 (1867). Because Hartwell has long been taken as me leading statement of the constitutional meaning of "officer, "^[5] mat statement is worth repeating in full: [ 211] An office is a public station, or employment, conferred by the appointment of government. The term embraces the ideas of tenure, duration, emolument, and duties.

The employment of the defendant was in the public service of the United States. He was appointed pursuant to law, and his compensation was fixed by law. Vacating the office of his superior would not have affected the tenure of his place. His duties were continuing and permanent, not occasional or temporary. They were to be such as his superior in office should prescribe.

A government office is different from a government contract. The latter from its nature is necessarily limited in its duration and specific in its objects. The terms agreed upon define the rights and obligations of both parties, and neither may depart from them without the assent of the other.

Id. at 393.

Harwell and the cases following it specify a number of criteria for identifying those who must be appointed as constitutional officers, and in some cases it is not entirely clear which criteria the court considered essential to its decision. Nevertheless, we believe that from the earliest reported decisions onward, the constitutional requirement has involved at least three necessary components. The Appointments Clause is implicated only if there is created or an individual is appointed to (1) a position of employment (2) within the federal government (3) that is vested with significant authority pursuant to the laws of the United States.

1. A Position of Employment: The Distinction between Appointees and Independent Contractors.

An officer's duties are permanent, continuing, and based upon responsibilities created through a chain of command rather than by contract. Underlying an officer is an "office, " to which the officer must be appointed. As Chief Justice Marshall, sitting as circuit justice, wrote: "Although an office is 'an employment, ' it does not follow that every employment is an office. A man may certainly be employed under a contract, express or implied, to do an act, or perform a service, without becoming an officer." Maurice, 26 F. Cas. at 1214. Chief Justice Marshall speaks here of being "employed under a contract"; in modem terminology the type of non-officer status he is describing is usually referred to as that of independent contractor. In Hartwell, this distinction shows up in the opinion's attention to the characteristics of the defendant's employment being "continuing and permanent, not occasional or temporary, " as well as to the suggestion that with respect to an officer, a superior can fix and then change the specific set of duties, rather than having those duties fixed by a contract. 73 U.S. at 393. [ 212]

The Court also addressed the distinction between employees and persons whose relationship to the government takes some other form in Germaine. There, the Court considered whether a surgeon appointed by the Commissioner of Pensions " 'to examine applicants for pension, where [the Commissioner] shall deem an examination . . . necessary, ' " Germaine, 99 U.S. at 508 (quoting Rev. Stat. § 4777), was an officer within the meaning of the Appointments Clause. The surgeon in question was ' 'only to act when called on by the Commissioner of Pensions in some special case"; furthermore, his only compensation from the government was a fee for each examination that he did in fact perform. Id. at 512. The Court stated that the Appointments Clause applies to "all persons who can be said to hold an office under the government, " id. at 510, and, applying Hartwell, concluded that "the [surgeon's] duties are not continuing and permanent and they are occasional and intermittent." Id. at 512. The surgeon, therefore, was not an officer of the United States. Id.^[6]

2. Appointment to a Position within the Federal Government.

In addition, Hartwell and the other major decisions defining "Officers of the United States" all reflect the historical understanding that...