Power & Pipes

FERC, CFTC, and State Energy Law Developments

President Donald Trump signed an executive order on July 10 to except the position of Administrative Law Judge (ALJ) from the federal government’s competitive service. This removes ALJs from the traditional “merit” selection process used for most federal government employees.

ALJs had been appointed through a competitive examination and competitive service selection process. However, pointing to the “expanding responsibility” that ALJs have for federal agency adjudications, and expanding on the US Supreme Court’s recent decision in Lucia v. Securities and Exchange Commission, the president concluded that all ALJs should be considered “Officers of the United States” subject to the Appointments Clause of the US Constitution and therefore be appointed by and serve at the discretion of the president or the head of the relevant agency. In Lucia, the Court had held that Securities and Exchange Commission ALJs are “Officers of the United States,” and are thus subject to the Appointments Clause.

As explained in the executive order, in addition to the constitutional issues with existing ALJ appointments, this change is also driven by the “need to provide agency heads with additional flexibility to assess prospective appointees” and to give agencies “greater ability and discretion to assess critical qualities in ALJ candidates, such as work ethic, judgment, and ability to meet the particular needs of the agency.”

To accomplish this change, the executive order amends Title 5 of the Code of Federal Regulations to add a schedule of excepted positions for ALJs (i.e., Schedule E). The change allows the president and agency heads to directly appoint ALJs without having to follow the competitive examination and competitive service selection procedures. The revised regulations do, however, direct agencies to continue using veteran preference in appointing ALJs “as far as administratively feasible.” The order does not specify whether ALJ positions will remain life-tenured. That said, excepted service appointments are generally at-will, while ALJs historically have held life tenure and been removable only for cause.

This change, which became effective immediately, will affect every executive agency and independent agency in the federal government that relies on ALJs, including the Federal Energy Regulatory Commission, which currently has 11 ALJs and a chief judge who is also an ALJ. This executive order does not, however, change the manner in which other quasi-judicial personnel are designated by agencies. For example, the Nuclear Regulatory Commission uses administrative judges (not ALJs) for its Atomic Safety and Licensing Board Panels. These positions have been and continue to be “excepted” from traditional federal government competitive service processes as well, stemming from the expectation in the Atomic Energy Act that these judges will be “persons of recognized caliber and stature in the nuclear field.”

How agencies implement this order in practice will—by design—depend on the discretion of the individual agency head. Should this change survive potential legal challenges, the new regulations could enable agency leadership to radically rework their existing body of ALJs that perform a critical role in adjudicating disputes under agency regulation.