The Secret Courts That Federal Agencies Do Not Want You to Know About

Most Americans have no idea that federal regulatory agencies run their own internal court system. These agencies use administrative law judges, known as ALJs, to decide disputes between the government and citizens or businesses. These tribunals operate separately from real Article III courts, and they often lean heavily toward the regulators who employ them. What makes this system even more concerning is a nearly unknown practice: agencies quietly loaning their judges to one another.

A new report from the Pacific Legal Foundation examines this judge-sharing and argues that it raises serious constitutional problems, transparency failures, and accountability concerns.

A Separate Court System Few Citizens Ever See

ALJs conduct hearings, take testimony, rule on evidence, and issue binding decisions. They act in a role similar to federal judges. However, they are hired by agencies, not appointed through the constitutional process, and they work inside the same institutions that prosecute the cases they review. Critics argue this creates a built-in conflict of interest that tends to favor the regulator.

But the report highlights an even larger structural problem. ALJs are not only housed within agencies. They are also traded between them with very little oversight.

A Ninety-Year Tradition of Judge-Swapping

The new research reviewed 960 ALJs across 42 different agencies. The findings show that judge-sharing has occurred for almost a century. It began long before the Administrative Procedure Act of 1946, which was supposed to be the framework for how the administrative state conducts hearings.

Some examples from the historical record include the following:

• The Federal Trade Commission adjudicated major cases beginning in 1914.

• The Civil Service Commission, the ancestor of today’s OPM and MSPB, used hearing examiners as early as the 1870s.

• The National Labor Relations Board borrowed judges in the 1960s.

• The Department of Labor used contract examiners decades before the APA required clear rules.

This long tradition shows that ALJ borrowing is deeply ingrained in federal bureaucracy and did not originate through any deliberate legislative process.

Modern Judge-Sharing Still Happens Behind Closed Doors

The report documents modern examples that are poorly understood by the public. In a 2014 case called Berlin v. Department of Labor, the Merit Systems Protection Board borrowed a Coast Guard ALJ to conduct a hearing for the Labor Department. MSPB continues to borrow judges today.

Other agencies do the same:

• The Surface Transportation Board uses conference rooms at the Federal Energy Regulatory Commission for its hearings and relies almost entirely on borrowed FERC ALJs.

• NOAA, the IRS, the Consumer Product Safety Commission, and the Consumer Financial Protection Bureau have all run entire hearing programs without employing internal judges.

This borrowing occurs in complete secrecy. Agencies almost never disclose the arrangement or explain why they cannot staff their own tribunals.

Why Agencies Borrow Judges

According to the report, the system runs on two motivations.

1. A shortage of judges

Some agencies do not have enough ALJs to handle spikes in caseloads. This is common at the NLRB and other high-volume agencies.

2. A shortage of funding

Other agencies never secured congressional appropriations for an internal hearing office. Instead of hiring their own ALJs, they rely entirely on borrowed judges. CFPB did this from 2011 to 2016.

Both reasons may be practical, but neither fits the legal framework Congress designed.

Why Judge-Sharing Violates the Constitution

The report raises several constitutional concerns.

1. Judge-sharing undermines presidential removal power

An ALJ who works for Agency A may be loaned to Agency B. During this period, Agency A cannot supervise or discipline the judge. Agency B cannot remove the judge because it did not appoint the judge. The President has no clear authority to intervene. This creates a gray zone with almost no oversight.

2. Borrowed judges violate the Appointments Clause

Under the APA, an ALJ must be appointed by the agency where the judge serves. The Supreme Court’s 2018 decision in Lucia v. SEC reaffirmed this requirement. When OPM loans an ALJ to another agency, it effectively creates a second appointment that Congress never authorized.

3. Agencies hide how they pay for borrowed judges

The report found no public record explaining how agencies fund borrowed judges. The Nuclear Regulatory Commission is the only agency that offers minimal detail. Even then, it does not explain where the money comes from. This secrecy contradicts the Article I Appropriations Clause, which requires all federal spending to be approved by Congress.

Statutory Problems That Congress Never Anticipated

Under the 1978 amendment to the APA, only agencies that are temporarily short-staffed may borrow ALJs. Several agencies violated this rule by borrowing judges despite having zero internal judges on staff.

These agencies include:

• IRS

• NOAA

• CPSC

• CFPB

• Surface Transportation Board

In all these cases, the borrowing agency lacked the legal authority to conduct formal adjudication in the first place. The APA only permits formal hearings when the agency’s enabling statute authorizes them. Some of these agencies lacked even that foundational requirement.

A System With No Transparency and No Limits

Large agencies such as HHS, DOL, and SSA regularly lend judges. Smaller agencies such as the Surface Transportation Board and SBA are heavy borrowers. The pattern is widespread and routine. Many borrowed judges remain at the receiving agency for long periods, creating the appearance of a permanent workforce that never received a lawful appointment.

Independent agencies, which are already harder to supervise, employ the largest share of transitory judges relative to their size.

A Call for Oversight and Reform

The report concludes that judge-sharing is legally dubious, constitutionally problematic, and hidden from public scrutiny. It also undermines the political accountability that the Constitution assigns to the President and Congress.

According to the authors, Congress and the executive branch should investigate the ALJ loan system, enforce clear rules for appointments and funding, and restore constitutional limits on agency adjudication. The administrative state depends heavily on its internal courts, but those courts must follow the law just like any other part of the government.