## Facts

- Displaced industrial workers in western Pennsylvania received retraining benefits under the federal Trade Adjustment Assistance (TAA) program administered by the Pennsylvania Department of Labor and Industry (PDOLI) under federal oversight.
- The Trade Act and regulations provide reimbursement for training-related travel expenses when approved training is outside a worker’s normal commuting area.
- PDOLI required TAA participants to sign waivers of travel-expense allowances as a condition of training approval and, in practice, limited reimbursement through a $5-per-day arrangement that often did not reflect actual costs.
- PDOLI also used a “one-half tuition” approach when deciding whether to approve training at a more distant facility: if projected travel costs exceeded one-half of the program’s tuition and fees and a cheaper comparable program was available closer to home, PDOLI would deny the distant training (and associated travel benefits).
- After suit was filed, the U.S. Department of Labor (DOL) issued guidance stating that state policies negotiating or capping travel allowances were inconsistent with federal law; PDOLI prospectively changed its practice to pay full travel costs but refused to provide retroactive reimbursement.
- The district court dismissed the action and denied relief, concluding (among other things) that plaintiffs had not shown the one-half tuition approach was an inflexible, blanket policy.
- Plaintiffs appealed.

## Issues

1. Whether PDOLI’s waiver requirement and travel-reimbursement limitations (including a negotiated $5-per-day arrangement) unlawfully imposed arbitrary limits on federally required TAA travel reimbursements.
2. Whether PDOLI’s “one-half tuition” approach constituted an impermissible blanket rule inconsistent with federal suitability and cost standards for approving training.
3. Whether DOL’s guidance and PDOLI’s subsequent prospective compliance mooted claims seeking declaratory relief and redetermination of past travel-expense determinations.
4. Whether the court could order relief requiring DOL to direct PDOLI to redetermine prior travel-expense claims under correct legal standards.

## Decision

- The Third Circuit reversed in part and remanded.
- The court held that PDOLI’s waiver policy and negotiated/capped travel allowance practices violated the Trade Act and regulations by placing arbitrary limits on training-related travel benefits.
- The court rejected mootness because plaintiffs sought retrospective relief through redetermination of past claims and PDOLI continued to deny retroactive reimbursement.
- The court concluded the one-half tuition standard functioned as a uniform cost-cutting mechanism rather than an individualized comparability and reasonableness analysis contemplated by federal requirements.
- The court directed entry of declaratory relief that Pennsylvania’s waiver policy violated the Trade Act and ordered DOL to require PDOLI to redetermine the workers’ travel-expense claims.

## Legal Principles

- When a federal benefits statute entitles eligible participants to reimbursement for training-related travel expenses, a state administering the program may not impose negotiated caps, mandatory waivers, or other arbitrary limitations that effectively reduce the federal entitlement.
- Cost-control discretion in approving training must be exercised through individualized determinations consistent with federal standards (including suitability, reasonable price, and availability of substantially similar lower-cost training), not through rigid formulas that operate as automatic denials.
- Subsequent agency guidance and prospective compliance do not moot claims where plaintiffs seek declaratory relief and retrospective correction of benefit determinations and the challenged practice continues to cause denial of past benefits.
- In a cooperative federal-state program where the federal agency oversees state administration by contract or statutory authority, a proper remedy may be an order directing the federal agency to require the state agency to redetermine claims under lawful standards, rather than a direct damages award against the state administrator.

## Conclusion

The Third Circuit held that Pennsylvania’s TAA travel-expense waiver and cap practices, and its formulaic use of a one-half tuition threshold, unlawfully imposed arbitrary limits on federal travel benefits; the court ordered declaratory relief and required DOL to compel PDOLI to redetermine past travel-expense claims.


Hampe v. Butler, 364 F.3d 90 (3d Cir. 2004)