GRAND RAPIDS, MICHIGAN - While saying he was "not unsympathetic" to the potential ruin of a Michigan-based staffing firm at the hands of government investigators, a Michigan federal magistrate judge has signed off on the U.S. Labor Department's demand for a confidential list of the company's clients, as the federal agency looks to continue and perhaps broaden a likely crippling investigation into the company.
Magistrate Judge Phillip Green issued the decision from the bench on Dec. 5 in Grand Rapids, in the Western District of Michigan.
An attorney representing the company, Forge Industrial Staffing, says the company intends to quickly appeal the decision to a U.S. district court judge, with potentially more authority to grant the relief they seek from what they have characterized as a "fishing expedition" on the part of federal regulators who are essentially searching for violations to prosecute.
The action against Forge also further deepens the frustrations of Forge and other employers throughout the country, who feel caught in a kind of Catch-22 situation, in which employers are all but forbidden from challenging identification presented by potential underage or otherwise illegal workers, but could still face sweeping regulatory investigations over the status of their workers, that could quickly spiral and destroy entire businesses.
The case involving Forge landed before Magistrate Judge Green when Forge challenged the subpoenas issued by the Labor Department under Acting Labor Secretary Julie A. Su.
The action against Forge began earlier this year, after the New York Times published an article in February discussing possible child labor violations in 20 different states. The story did not name Forge. However, the report included an interview with a woman who had worked briefly through Forge in two stints, notably including a three-day temporary stint with a Forge client, Hearthside Foods, in 2011.
At that time, Forge noted the woman had claimed a birthdate in 1992. However, 10 years later, in a longer stretch of employment through Forge, that same woman listed her birthdate in 1995, and used a different Social Security number, Forge has claimed in court documents.
The woman was quoted in the New York Times article, claiming Hearthside knew she was a minor when she worked for the company and no one cared.
The article prompted a strong response from the Biden administration and other government agencies. Forge noted that in the wake of the article, it was subjected to investigations from Michigan state labor officials, as well as from the U.S. Department of Homeland Security and the Labor Department.
The company says it has complied fully to this point with all investigations, and no government investigators have brought forward a single charge against them. The company says this is because of strong internal policies and processes to attempt to weed out ineligible or illegal workers.
Forge has particularly noted it has also supplied the Labor Department with a list of all of its workers and their contact information, and has invited federal investigators to interview any of its workers.
However, the US Labor Department has not only refused to relent in its investigation, but now seeks to expand the probe beyond potential child labor violations to a broader examination of Forge's operation, and potentially those of Forge's clients, under the federal Fair Labor Standards Act.
In court on Dec. 5, a lawyer for the Labor Department confirmed that the investigation is not limited to only potential child labor violations, but will include a look into potential "wage and hour" violations under FLSA, including checks for compliance with minimum wage and overtime pay rules, among potentially other possible FLAS violations.
In support of that effort, the Labor Department hit Forge with subpoenas demanding a list of every client company with which Forge has done business. Forge has indicated that list - which it says it seeks to keep confidential - could include more than 600 clients.
Forge said it believes the Labor Department will use the list to also pursue its clients, potentially exposing a long list of hundreds of businesses to investigations when the government has yet to identify any basis for such inquiries.
Further, Forge said forcing it to turn over such a list would expose Forge to potential financial ruin. The company said the investigation has already cost it more than $9 million in lost annual income, as clients have cancelled staffing contracts, leading to layoffs and other cuts.
Should the investigation continue and broaden, as the federal government wishes, Forge said it will likely be forced to close its doors.
In court Dec. 5, Forge attorney Brion Doyle, of the firm of Varnum LLP, again emphasized the risk to Forge from allowing the Labor Department to pursue its current strategy, which the company said appears to be driven by politics, appearing to take action against child labor, while putting potentially hundreds of thriving businesses under a ruinous regulatory microscope.
Doyle further urged the court to take note of the potential precedent being set in this case.
Doyle said allowing such subpoenas would be essentially authorizing the Labor Department to investigate any employer, anywhere, without cause or any reasonable suspicion, beginning with Forge's clients.
"We don't think there is a single case anywhere where (the Labor Department) showed up at a company's door, and said, 'Knock, knock, we're here for a general (FLSA) compliance check, now give us all your information,'" Doyle said.
The Labor Department "has to identify some basis for their investigation, other than 'We're here to investigate everything,'" Doyle added.
Judge Green chided Doyle for those statements, claiming he had "mischaracterized" the Labor Department's position in the case.
However, during the hearing, Judge Green repeatedly indicated he did not find Forge's request that the court force the Labor Department to identify the scope and purpose of its investigation, to be "unreasonable."
But the judge said he could not find any controlling court decisions from prior cases that could be used to back Forge's position that the courts should take into account the potential ruin of a business when evaluating the "reasonableness" and "relevancy" of investigators' information demands.
While courts can take into account the administrative burden a company may face in complying with certain kinds of sprawling subpoena information demands, Green said the case law doesn't extend such limits to include potentially the burden a company might endure by being driven out of business.
For him to find otherwise, he said, would require him to "write new case law," potentially contradicting decisions from the U.S. Sixth Circuit Court of Appeals and the U.S. Supreme Court, which he is not authorized to do as a magistrate judge.
"Unfortunately for Forge, it is not my prerogative to dictate to the (Labor) Secretary how to get this information," Green said.
The fight over the subpoenas stand as another controversy surrounding the tenure of Su at the top of the Labor Department. Notably, though she has been nominated to the post of Secretary of Labor by President Joe Biden, Su has yet to be confirmed by the U.S. Senate. In opposing Su's nomination, Republicans, with the support of West Virginia Sen. Joe Manchin, formerly a Democrat, have blasted Su as a left-wing anti-business activist.
Critics have also blasted Biden's decision to appoint her as Acting Secretary, saying it runs afoul of the law.