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Aguayo v. Richardson

decided: January 18, 1973.


Friendly, Chief Judge, and Waterman and Hays, Circuit Judges.

Author: Friendly

FRIENDLY, Chief Judge:

This appeal is from an order of Judge Bauman in the District Court for the Southern District of New York, 352 F. Supp. 462, denying a preliminary injunction in an action by three sets of plaintiffs to enjoin the New York State Commissioner of Social Services and the State Department of Social Services (NYSDSS) from carrying out two experimental work project programs for employable members of families receiving assistance under the partially federally funded Aid to Families with Dependent Children (AFDC) program and to set aside the approval of the programs by the Secretary of Health, Education and Welfare under the demonstration project provision of the Social Security Act, 42 U.S.C. § 1315. The three sets of plaintiffs are: six women who might be required to take employment under the projects, suing individually, on behalf of their minor children and of other persons similarly situated; the City of New York and Jule Sugarman, Commissioner of its Department of Social Services, both of whom will have roles in administering the projects; and seven welfare rights organizations. There are two sets of defendants. One, the federal defendants, comprises the Secretary of Health, Education and Welfare (HEW), the Administrator of its Social and Rehabilitation Service; its Regional Commissioner; and the Department itself. The other set, the state defendants, includes New York's Commissioner of Social Services and the Department of Social Services.*fn1

I. The Nature of the Two Projects.

The two projects, known as Public Service Work Opportunities Project (PSWOP) and Incentives for Independence (IFI), were formulated by the State Department of Social Services and approved by HEW for one year.*fn2 The State envisions PSWOP as providing public service work opportunities for those AFDC recipients who are able to work but for whom regular employment, training or public service employment has not been available or appropriate. Approximately 25% of the State's AFDC cases, comprising those recipients living in fourteen welfare districts in New York City, two counties in the metropolitan area surrounding the City, three upstate urban areas and six counties in the rest of the state, are to be included in PSWOP.

The local departments of social services in PSWOP districts must see to it that employable recipients*fn3 of AFDC benefits register with the appropriate office of the New York State Employment Service. Semi-monthly interviews are to be scheduled for the recipients with employment counselors so that an employment plan, for a private sector job, training, public service employment (in IFI districts only), or a PSWOP job, can be developed. If the state employment service is unable to find other employment or a training program within thirty days, assignment of the recipient to a PSWOP job becomes mandatory. PSWOP employ can involve work for any state, city, town or village agency or school district located in the county. Broadly speaking, the work will be of the sort which, because of budgetary problems or otherwise, would not be undertaken except for PSWOP; workers in the program are not to displace those who would otherwise be employed.

No individual will be required to participate in PSWOP unless satisfactory child-care arrangements can be developed, and each case must be assessed to determine adequacy, although the state requires that "diligent efforts . . . be made by [the recipient] and the social services district to obtain child care services or the assistance of others to provide such care." Public Service Work Opportunities Project (for ADC and ADC-U Recipients) Policy and Procedures, at 3 [hereinafter PSWOP Policy and Procedures].

PSWOP workers will not receive earnings over and above their welfare benefits. The number of hours to be worked will be determined by dividing the amount of the participant's grant by the hourly wage to be received, but in no case will an individual be required to work more than eight hours a day or forty hours a week. The hourly rate will be the state minimum wage or the wage paid to employees for comparable work in the unit of government in which the project is conducted, whichever is higher. Participants will be reimbursed for lunch and transportation costs, and all work-related expenses incident to participation are to be paid "so that no recipient will incur any actual net reduction in income due to such participation." HEW Action Memorandum (re PSWOP), May 31, 1972, at 5.*fn4 Participants will also be covered by workmen's compensation. See N.Y.Soc.Serv.Law § 350k-3(d).

Failure to accept a justifiable referral or to participate properly after such a referral "without good cause" is a ground for termination of assistance, 18 N.Y.C.R.R. § 385.6. Upon request a fair hearing must be granted prior to termination, but if the recipient has not accepted the referral or has not continued to participate in the program and then receives an adverse determination at the hearing, a thirty-day suspension of benefits is mandated even though the recipient agrees to immediate compliance. See 18 N.Y.C.R.R. § 385.7.

The Incentives for Independence (IFI) demonstration project has four components: (1) a combination of two public service employment programs -- PSWOP and the Emergency Employment Act (EEA) Public Service Employment Program -- for adults unable to find regular employment; (2) an earnings exemption; (3) work motivation for school youth through participation in community work projects; and (4) a counseling service for the parents or caretakers of truant children. The project covers approximately 2.5% of the state's AFDC and Home Relief*fn5 recipients and will be conducted in three areas -- a welfare center in New York City (Bay Ridge), a suburban county (Rockland), and a rural county (Franklin) -- all of which are contained in or are coextensive with areas in which PSWOP will function.

As with PSWOP, all nonworking employable recipients will be required to participate in counseling, to report for job interviews and to accept work or training if offered, and no recipient will be considered employable unless a satisfactory child-care plan is available. Individuals in IFI districts can be assigned to PSWOP jobs if employment or training programs in the regular economy are unavailable, and their work obligations and benefits will be identical to those of other individuals in PSWOP programs, except that the sanction for noncompliance in IFI districts is a flat $66 per month reduction in assistance until the individual complies. A limited number of recipients in IFI districts, however, will be assigned to "public service employment" jobs, subsidized by EEA funds, which will pay the higher of the minimum wage or the prevailing wage for persons in similar public occupations. Unlike PSWOP workers, employees in public service employment will work full-time and be paid full wages. Participants will receive workmen's compensation, health insurance, unemployment insurance, and all other fringe benefits conferred on employees of the same employer; their work conditions and promotional opportunities will also be the same as those of regular employees.

A certain portion of the wages paid in these public service employment jobs will be ignored when determining the recipient's eligibility for a supplementary welfare assistance grant. This "income disregard," which differs from that normally mandated by the federal government for AFDC recipients in regular employment, see § 402(a) (7), (8) of the Social Security Act, 42 U.S.C. § 602(a) (7), (8), by lowering the income level at which supplementary assistance payments terminate,*fn6 will be applied in IFI districts to all AFDC and Home Relief recipients in public service employment or in regular employment.*fn7

Furthermore, the children of families receiving AFDC or Home Relief in IFI districts who are 15 years of age and attending school full-time (and are not otherwise ineligible)*fn8 are required to participate in "Work Motivation for Youth." This program will require the child to work for up to six hours semimonthly during the school year and up to sixty hours during the summer vacation. Participants will be paid $1.60 per hour for no more than 150 hours per year. Refusal to comply will result in a $6.25 semi-monthly reduction in the family grant, unless the parent certifies that he or she is trying to get the child to cooperate. Also, when a child fails regularly to attend school, the parent or caretaker in a family receiving assistance must accept counseling services or face a reduction in the grant.

II. The Processing of the Projects by the HEW, and the Proceedings in this action.

The New York legislature originally provided for a work relief program for AFDC recipients in April 1971. See N.Y.Soc.Serv.Law § 350-k (McKinney Supp.1972). In a letter written soon after enactment to George K. Wyman, then Commissioner of the State Department of Social Services, HEW stated that the work program was inconsistent with several federal requirements and could not receive federal funds. In August 1971, following discussions with President Nixon on welfare reform, Governor Rockefeller announced that New York would seek approval from HEW under § 1115 of the Social Security Act, 42 U.S.C. § 1315,*fn9 for an experimental work relief project, thus permitting a temporary waiver of certain federal requirements. New York submitted formal applications for the PSWOP and IFI projects on September 9 and 10, 1971, which were then revised and resubmitted on November 11, 1971.

On November 24, 1971, HEW approved both projects, contingent, however, on submission by New York of further information before December 31, 1971. The conditions called for revised and more detailed budgets, further information on personnel administration, and, with respect to IFI, requests for further waivers and rather extensive additional information on proposed implementation, including "a plan for general project activities (screening, referral, monitoring, etc.)." New York forwarded on December 28, 1971, letters not appearing in the record, which purported to meet HEW's conditions. On February 9 and 10, 1972, HEW responded, finding many of the budgetary specifications to be inadequate and requiring complete budgetary submissions as well as additional information on numerous operational aspects "prior to implementing the project." State officials, on February 22, 1972, provided HEW with two two-page letters responsive to some but -- particularly as to IFI -- not all of HEW's requests. The letters requested permission to begin implementation April 1, 1972.

Before any HEW responses, the District Court for the District of Columbia, enforcing an agreement between HEW and the National Welfare Rights Organization in settlement of an earlier suit brought under the Freedom of Information Act, on March 13, 1972, required HEW to withdraw its November 24, 1971, approval and to allow the Center on Social Welfare Policy and Law thirty days to examine the proposed projects and present an analysis to HEW.*fn10 On April 11, 1972, the Center sent HEW and NYSDSS an extensive letter prepared by Adele Blong, who has given the individual and organization plaintiffs superb representation, analyzing what it considered the defects of IFI and PSWOP and urging HEW not to authorize the programs. NYSDSS responded in two undated letters to HEW, one identifying the many objections raised by the Center and the other seeking to answer them.

Without having received further information from New York, the HEW staff prepared "Action Memoranda" which were presented to the Secretary on May 31, 1972, recommending approval of the projects but detailing certain necessary information still lacking from New York. On June 1, 1972, the Secretary approved the application for section 1115 demonstration projects, but again required further information prior to implementing each project. The further information requested included, inter alia, evidence of the availability of child care facilities, details of the fair hearing procedures to be used, and a statement that all work-related expenses would be reimbursed. On June 14 and 27, 1972, the State sent letters containing assurances of compliance and information concerning, respectively, PSWOP and IFI. Two weeks later, apparently without further official communication between HEW and NYSDSS, the state officials notified local welfare agencies to begin implementation of the projects on August 1, 1972.

The complaint herein was filed on August 2, 1972. Upon application by the plaintiffs, the district court, on August 4, issued an order temporarily suspending the HEW's approval of the projects to the extent that it permitted imposition of loss of benefits as a sanction and restraining the state defendants from imposing any sanction for nonparticipation; at the hearing Judge Bauman extended the stay pending resolution of the motion for a preliminary injunction.*fn11 On October 16 the court rendered an opinion. Judge Bauman held that the welfare organizations lacked standing and that the City of New York (and implicitly also Commissioner Sugarman) had standing to raise only what are hereafter referred to as the statutory claims. He found that all claims of constitutional violation were insubstantial, that federal jurisdiction nevertheless existed by virtue of § 10 of the Administrative Procedure Act, 5 U.S.C. § 702, but that the statutory claims had not been shown to be meritorious. Accordingly, he denied the motion for a temporary injunction. Another panel of this court denied a further stay, except for several days to allow appellants to petition the Supreme Court. On November 16, 1972, after a hearing in chambers, Mr. Justice Marshall ordered that the stay be continued pending argument before this court, and directed that the appeal be heard on an expedited basis. We continued the stay pending decision. Unhappily the variety and difficulty of the questions raised have prevented our rendering this as soon as we should have wished.

III. Standing.

As is usual in welfare cases, before coming to the merits we must weave our way through a maze of problems relating to standing and jurisdiction. The complaint raised both constitutional and statutory claims, which we state at this point only insofar as necessary to an understanding of the preliminary issues. It alleged, as against the state defendants, that because the two projects were imposed on only a portion of those eligible for AFDC benefits, these defendants violated the equal protection clause of the Fourteenth Amendment, and that the New York statutes with respect to hearings for suitability for the projects and the failure to develop specific standards and procedures applicable to the participants violated the due process clause.*fn12 The most important statutory claims were that the projects were so basically inconsistent with the Social Security Act as to lie beyond the power of approval of demonstration projects vested in the Secretary of HEW by 42 U.S.C. § 1315; that the record before the Secretary was inadequate to warrant such approval under the standards laid down in Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S. Ct. 814, 28 L. Ed. 2d 136 (1971); and that the approval was inadequate because of its failure to waive compliance with the work incentive (WIN) provisions of the Social Security Act, 42 U.S.C. § 602(a) (19). We shall consider the standing of each set of plaintiffs to raise each type of claim.

At first blush it would seem almost too clear for argument that relief recipients within the general class at which a work program is aimed would have standing to challenge it on both constitutional and statutory grounds. Compare Sierra Club v. Morton, 405 U.S. 727, 732, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972); Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 93 S. Ct. 364, 34 L. Ed. 2d 415 (1972).*fn13 The state defendants contest this on the basis that, except for Hyacinth Cadogan, none of the plaintiffs has been found to be employable and, on their own allegations, will not be found to be. We are not at all sure that this is an answer; the threat of compulsory enrollment would seem enough, except perhaps when there was ...

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