Decision Favoring Private Sector Entities Administering Federal & Private Programs

Decision Favoring Private Sector Entities Administering Federal & Private Programs



The Skinny:

  • Private companies and non-profits running programs for the federal and state governments may use their own employees to conduct impartial hearings to review decisions terminating a participant’s benefits.
  • An employee reviewing a termination of benefits can be impartial even though she works for the same company or non-profit that issued the termination.
  • An at-will employee who serves as a hearing officer can be considered impartial under the law, even though she may be fired for any reason or no reason.
  • To ameliorate the risk of legal challenge, private companies and non-profits should take care to isolate the decision to terminate benefits from the process of reviewing such a decision.


Companies and non-profits sometimes step into the outsized (some would say oversized) shoes of the Feds and the States to locally administer government programs and disperse public funds.  Examples include the Section 8 Housing Choice Voucher program and the Department of Education’s TRIO programs, a group of outreach and student services supporting individuals from disadvantaged backgrounds.  One of the animating impulses behind such public-private partnerships is leveraging the perceived efficiencies of the private sector to deliver programs and services without the mind-melting delays and teeth-grinding red tape sometimes associated with direct governmental administration.


It’s a fine idea.  But Uncle Sam and his several States (would they be considered Uncle Sam’s nephews and nieces) aren’t willing to part with our tax dollars without holding onto a few strings.  This is particularly true where program participants are considered at-risk or otherwise heavily dependent on the privately run, but publicly funded, programs and services. 


When a non-governmental actor decides to terminate a participant’s benefits or services, they are often obliged to give the participant a chance to challenge or appeal that decision.  This regularly takes the form of a fair hearing or administrative appeal before an impartial hearing officer.  These hearing officers are quasi-judicial figures conducting mini trials reviewing the initial decision to terminate.  What’s more, these officers are frequently employed by the same private sector entity that initially decided to terminate benefits. 


If your gut tells you that this is a bit like Bart Simpson swiping fresh-baked cookies and Marge allowing the pointy haired, perpetual pre-teen terror to decide whether he’s strangled by Homer as punishment, well, you’re not wrong.  On the one hand, an employee decides to terminate, while on the other, a second employee of the same entity is tasked with impartially reviewing the first employee’s termination decision.  Effectively, the entity is reviewing its own termination decision, just like demon-spawn, Master Bartholomew Simpson.  Although the deciding and reviewing employees are different people, they both depend on the same employer for their paychecks.  Most importantly, each is likely an at-will employee, meaning that they can be fired at any time, for any reason (for, oh, I don’t know, reversing a decision to terminate).


As bizarre as it seems to let Bart review his own alleged misconduct, a similar system is used both by governments and the private sector in reviewing the termination of public benefits and services.  Hearing officers entrusted with impartially reviewing terminations are frequently, indeed almost always, employees of the entity which made the decision under review.


Catania, Mahon & Rider recently successfully defended a private non-profit company (the “NGO”) responsible for terminating a participant (the “Participant”) from the Section 8 program.   The NGO’s administrative staff believed that the Participant failed to follow the procedures for recertifying her benefits eligibility.  The NGO’s staff terminated the Participant who then appealed to a hearing officer employed by the NGO, as allowed under the Section 8 program regulations.  Following that hearing, the hearing officer affirmed the termination decision.


The Participant challenged that affirmance by appealing to the New York State trial court.  The Participant made the “Bart Simpson” argument, in essence claiming that an at-will employee, such as the NGO’s hearing officer, cannot as a matter of law be impartial.  She claimed that this is because both the hearing officer and the staff member who made the decision under review are employed by the same legal entity.  The Participant also asserted that at-will employees like the NGO’s hearing officer are easily subjected to being improperly pressured into affirming a termination at the risk of losing their jobs.


The trial court rejected these arguments.  Instead, it determined that at-will employees may serve as impartial hearing officers.  Any other ruling would have jeopardized future termination decisions affirmed by the employees of corporations or non-profits administering government services or benefits. 


Critical to this decision was factually documenting the NGO’s hands-off approach to hearings and that it does not incentivize particular outcomes.  This was done by preparing and filing with the court detailed affidavits from the NGO’s Chief Executive Officer and its Section 8 Director, as well as the hearing officer. 


Additionally, the court adopted and cited the rationale of a U.S. Court of Appeals case, Van Harken v City of Chicago, 103 F.3d 1346, 1997 WL 2811 (7th Cir. 1997) which we discussed at length in our memorandum of law supporting the NGO.  Van Harken involved a hearing officer system created by the City of Chicago for handling parking ticket appeals.  Chicago hired private attorneys to hear these appeals.  The Van Harken plaintiffs argued that such hearing officers could not be impartial and objective because they “are hired by, and can be fired at will by, the City[]”.  Id., supra, 103 F.3d at 1352.  Brooklyn’s own, Chief Judge Richard Posner, writing for the Seventh Circuit, disagreed stating that


            we do not think that the adjudicative reliability of the hearing

                       officers is fatally compromised by the manner of their appointment

                       and by their lack of secure tenure.  The officers are not paid by the

                       number of hearings that they resolve against the respondent; they 

                       are not paid any portion of the fines they impose * * * * *; they have

                       no quota of fines that they must impose on pain of losing their jobs

                       or having their pay reduced; and they have no other financial stake

                       in the outcome of the cases that they adjudicate * * * * *.  If their 

                       very indirect, very tenuous stake (a fear that if a hearing officer

                       lets off too many alleged parking violators, the [City] may get

                       angry and fire him) were enough to disqualify them on

                       constitutional grounds, elected judges, who face significant

                       pressure from the electorate to be “tough” on crime, would 

                       be disqualified from presiding at criminal trials, especially in

                       capital cases.  They are not. 


Van Harken, supra, 103 F.3d at 1352-53.


We believe that the trial court’s reliance on Van Harken will make it difficult for future participants to successfully challenge the impartiality of hearing officers employed by private sector entities.  This will be particularly true where such entities, like the NGO, ensure the complete bifurcation of their processes for rendering initial termination decisions and for conducting fair hearings challenging those decisions.


Companies and non-profits running government programs can rest safe knowing that their employees may serve as impartial hearing officers, despite the fact Marge isn’t ever going to let Bart decide whether he gets throttled by Homer (no matter that The Simpsons may run for another 100 years). 


This article is intended to be used for informational purposes only.  Legal advice is neither implied by the author nor should be inferred by the reader.  If you have specific legal questions, you should consult with your attorney.


Jeffrey Sculley, who may be reached at, is an attorney and counselor at law focusing his practice on representing non-profits, NGOs and private clients in all types of administrative, regulatory and compliance matters, before governmental agencies and administrative hearing officers and law judges; providing backroom human resource and employment support to businesses and not-for-profits; appealing adverse trial-court and administrative decisions; counseling clients on logo and brand development and trademark protection; and representing commercial and residential landlords.

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