On November 10, the U.S. Supreme Court heard argument in Department of Labor v. Sun Valley Orchards. The question: can the Department of Labor (DOL) impose fines and back wages through its own in-house judges, or must it prove its case in federal court? The answer could reshape how immigration-related penalties are enforced against employers nationwide. A decision is expected by June 2027.
How we got here
The case began when a New Jersey farm was ordered to pay more than $550,000 in penalties and back wages for violating its H-2A job order, including problems with housing, transportation and guaranteed hours. DOL’s in-house judge and its Administrative Review Board upheld the award.
In 2025, the Third Circuit ruled that process unconstitutional. Because the claims resembled a breach-of-contract suit, the court said, the employer was entitled to a federal judge. That ruling already applies in Pennsylvania, New Jersey and Delaware.
Why it matters beyond agriculture
The government’s own brief warns the ruling could reach H-1B and I-9 penalties.
H-1B. The Labor Condition Application is a set of promises to DOL, much like the H-2A job order. If the Third Circuit is upheld, DOL may have to go to federal court to collect H-1B back wages and penalties. That raises its costs and strengthens employers’ hand in settlement talks. Investigations, debarment and LCA revocation would likely continue unchanged.
I-9. These fines are handled by ICE and a Justice Department tribunal (OCAHO), not DOL, so the effect is indirect. I-9 duties come from statute rather than a promise, making them harder to challenge. Paperwork-only penalties are the most exposed. Separate challenges to OCAHO are also underway, and a broad ruling in Sun Valley would strengthen them. In practice, few I-9 cases reach OCAHO; most settle at the Notice of Intent to Fine stage, where this case could add bargaining power.
Why H-1B employers face Wage and Hour investigations
Every H-1B petition starts with a Labor Condition Application (LCA), a signed set of promises to DOL. Employers commit to:
- Pay at least the higher of the actual or prevailing wage, including when the worker has no assignment (“benching”)
- Offer H-1B workers the same benefits as U.S. workers
- Post notice of the LCA and keep a public access file
- Keep the job duties and worksite consistent with the LCA
DOL’s Wage and Hour Division can open an investigation based on a complaint from a worker or competitor, a referral from another agency or, under its 2025 Project Firewall initiative, certification by the Secretary of Labor. Violations can bring back wages, civil penalties and debarment.
What employers should do now
- Tell counsel when an H-1B employee is terminated or departs. Timely withdrawal of an H-1B minimizes any risk of a fine or backpay award.
- Keep complying. Audits, site visits and Notices of Inspection will continue whatever the outcome.
- Preserve your rights. If you face a pending H-1B wage claim or I-9 fine raising a constitutional objection may delay the imposition of the fine.
- Review settlement timing. In some pending matters, it may make sense to wait for the decision before agreeing to a penalty.
- Watch for workarounds. If DOL loses, the government has suggested it could impose penalties first and let employers seek full review in court afterward. Congress could also step in.
Questions about a pending investigation? Contact Meltzer Hellrung.
