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Lehigh Valley Manpower Program v. Donovan

decided: October 4, 1983.

LEHIGH VALLEY MANPOWER PROGRAM, PETITIONER
v.
RAYMOND J. DONOVAN, SECRETARY OF LABOR, U.S. DEPARTMENT OF LABOR, RESPONDENT



PETITION FOR REVIEW OF THE ORDER OF THE SECRETARY OF LABOR At No. 79-CETA-253.

Seitz, Chief Judge and Weis and Becker, Circuit Judges.

Author: Weis

Opinion OF THE COURT

WEIS, Circuit Judge.

On this appeal we conclude that the Secretary of Labor has authority to seek reimbursement for misapplication of CETA funds. However, since in this case he failed to observe time limits established by his own regulation for processing claims against municipal grantees, recovery is barred. Accordingly, the Secretary's order directing repayment will be set aside.

The Secretary of Labor asserted a claim against the Lehigh Valley Manpower Program for $27,662, the amount it paid as salary to its employee Robert Daday for the period March 1, 1978 to July 27, 1979. After a hearing, an ALJ found that by hiring Daday Lehigh had violated the Secretary's regulations against nepotism and therefore directed repayment. Lehigh appeals the Secretary's final decision.

Section 301 of the Comprehensive Employment and Training Act, 29 U.S.C. § 871(a) (repealed in 1982), provided local municipalities with federal funds to stimulate employment. To implement the program, Congress authorized the Secretary of Labor to promulgate appropriate regulations. One regulation prohibited CETA prime sponsors from hiring an individual for a federally funded position if a member of his immediate family served in an administrative capacity with the same sponsor.

Lehigh Valley Manpower Program operated an employment and training plan as a CETA prime sponsor. In November 1978, the Secretary became aware that the hiring of Robert Daday might be a violation of the nepotism regulation and notified Lehigh. After an exchange of correspondence and meetings between officials of the two organizations, the acting regional administrator of the Department of Labor's Employment and Training Administration sent a letter dated March 13, 1979 to Lehigh advising that Daday's employment should be terminated immediately and the cost of his wage and fringe benefits refunded to the Secretary of Labor. Lehigh responded on April 6, 1979, calling attention to earlier negotiations between the parties and threatening to file suit if a prior commitment was not honored.

On August 28, 1979, the Department of Labor Grant Officer sent Lehigh a registered letter asking for reimbursement because the Secretary "had determined that there was a nepotism violation." It also advised that a request for hearing had to be submitted within ten days. Lehigh did take the necessary steps and, at the hearing on June 17, 1981, the ALJ stated that Lehigh sought reversal of the "final determination issued August 28, 1979 by the grant officer."

After taking testimony, the ALJ found the Secretary entitled to reimbursement. The ALJ rejected Lehigh's contention that recovery was barred because the Secretary had not complied with the regulation requiring final determination within 120 days. The ALJ concluded that the provision was "advisory," that the limitation first appeared in a regulation on April 3, 1979, five months after the nepotism violation, and that Lehigh had suffered no prejudice.

The ALJ's order became the final decision of the Secretary on March 12, 1982, and Lehigh appealed to this court, contending that the Labor Department did not properly interpret the nepotism regulation and is estopped because of oral commitments made by a department official. However, we find it necessary to address only Lehigh's arguments that the Secretary lacked authority to direct reimbursement under the 1973 statute, and that in any event, recovery is impermissible because the 120-day limitation was not observed.

Lehigh's position on reimbursement is that the 1973 Act did not require a prime sponsor to use non-CETA funds to repay amounts misspent in the administration of CETA activities. Conceding that such an assessment was permitted by the 1978 amendments, 29 U.S.C. § 816(d)(1), Lehigh argued that the changes were not retroactive. As support for its position, Lehigh relied on New Jersey v. Hufstedler, 662 F.2d 208 (3d Cir. 1981). Because the Supreme Court had granted certiorari in that case, we held this appeal and another raising the same issue, Atlantic County v. Secretary of Labor, 715 F.2d 834 (3d Cir. 1983), until disposition of the New Jersey case.

After the Supreme Court reversed Hufstedler, Bell v. New Jersey, 461 U.S. 773, 103 S. Ct. 2187, 76 L. Ed. 2d 312, 51 U.S.L.W. 4647 (1983), we returned to our consideration of Atlantic County v. Secretary of Labor. We concluded that the Secretary of Labor had been given authority under the 1973 Act to recover misspent CETA funds from non-CETA sources. Atlantic County v. Secretary of Labor, 715 F.2d 834 (3d Cir. 1983). That decision forecloses any further dispute about the Secretary's power to compel repayment, and we need not reconsider the matter.

The 120-day limitation period, however, was not an issue in Atlantic County, but having been raised by Lehigh in the administrative ...


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