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May 7, 2013

The Cloudy Road Forward for NLRB

The National Labor Relations Board (“NLRB”) exists as a creature of federal labor law enacted in the 1930’s.  The National Labor Relations Act, which established the Board, provides mechanisms for appointment and confirmation of Board members as well as the more fundamental protections of employees against coercion and discrimination by employers and labor unions.

Political tensions have played a role in how the NLRB’s members are appointed and the policies the Agency has pursued.  Union density is in decline, now under 7% in the private sector. In an Administration with close ties to labor, expectations that the NLRB would help reinvigorate labor’s decline came and went with the Employee Free Choice Act legislation in the 2008-2009 period.

Efforts to enact regulations, a workplace posting requirement, and a variety of controversial case decisions have propelled the NLRB into the public eye. Court litigation examined the scope of the NLRB’s legal authority to pursue new directions which largely benefit employees and unions more than the business community.

The NLRB brought action to prosecute Boeing for relocating many factoring facilities from Washington State to South Carolina. The prosecution was attacked as inappropriate, leading to investigations and hearings on Capitol Hill.  A December 2012 House of Representatives Oversight Committee report attacked the NLRB’s efforts to prosecute Boeing as well as various regulatory initiatives viewed as stimulating union organizing activity.

NLRB rulings in other cases brought new rules and challenges for non-union employers across the country, many of whom likely forgot they fell under NLRB jurisdiction at all.  Decisions declaring long-standing practices to be unlawful have shocked and baffled the management community.

The NLRB successfully attacked arbitration agreements with class action waivers despite U.S. Supreme Court approval of class action waivers in its AT&T ruling (DR Horton), at-will employment clauses with standard provisions that at-will status cannot change (Red Cross of Arizona), confidentiality rules despite EEOC requirements of confidentiality in workplace investigations (Hyundai and Banner cases), social media regulation (Hispanics United), termination for defaming the Employer product (Jimmy John’s), and requiring employees to work together “harmoniously” (2 Sisters).

A case from Washington State, involving disputed labor negotiations with unionized beverage distributor Noel Canning, escalated the attention on the NLRB’s actions. The NLRB prosecuted Noel Canning and the case eventually moved to the Board panel in Washington, D.C., which consisted of three Board members. The Chairman of the Board, Mark Pierce, was confirmed by the U.S. Senate. The other two Board members, Sharon Block and Richard Griffin, were not confirmed. Instead, they were recess appointments to the Board by the President.  The Board panel ruled that Noel Canning acted unlawfully as alleged.

Noel Canning appealed the Board’s ruling to the District of Columbia Circuit Court of Appeals, a court which reviews more NLRB rulings than any other federal Constitutional appellate court. Noel Canning argued that the Board panel lacked jurisdiction to rule because of defects in the recess appointments of Board members Block and Griffin. The court ruled in late January 2013 that the two members of the NLRB panel who received recess appointments were not validly appointed under the standards of the U.S. Constitution. With a three-member Board panel required under a 2011 U.S. Supreme Court ruling, the Board lacked a valid quorum to rule.

The Noel Canning Court read narrowly the Constitutional authority of the President to make recess appointments. The court limited the recess appointment authority to what the Court called “the Recess,” defined as the period between sessions of Congress.  Further, the Court limited valid recess appointments to those appointments made by the President during “the Recess” to vacancies coming about during “the Recess.” With Congressional sessions being almost year-long in recent years, the only true instances of “the Recess” as defined by the Noel Canning Court were brief, invalidating the Block and Griffin appointments. Moreover, earlier recess appointees could likewise be argued void.

The recess appointment analysis from the Noel Canning ruling could invalidate hundreds of other NLRB rulings, as when the U.S. Supreme Court invalidated over 600 earlier NLRB rulings in the New Process Steel case in 2011.

The NLRB immediately announced disagreement with the Court’s ruling in Noel Canning and confirmed business would continue as usual. Meanwhile, employers, unions, and employees across the country have wondered whether the NLRB has authority to act on cases, proposed regulations, workplace posting requirements, or appointments within the Agency.

In an oral argument handled by this author in the D.C. Circuit, just after the Noel Canning ruling, counsel for the NLRB confirmed that the NLRB had not yet taken a formal position on the Noel Canning ruling, awaiting development of a position with the US Department of Justice.

By mid-February, many NLRB cases involving employers across the country saw Noel Canning issues raised because recess appointee Board members were involved. Appeals in the D.C. Circuit saw proceedings suspended, awaiting action and developments in the Noel Canning case.

On March 12, 2013, the NLRB confirmed that the Agency would seek review of the Noel Canning ruling at the U.S. Supreme Court. The NLRB fled its petition with the Supreme Court on April 25. In its 2011 New Process Steel ruling, the U.S. Supreme Court described the Board’s quorum as a dog’s tail which continued “to wag after the dog died.” The NLRB may well have a concern about a similar response from the Supreme Court on the current issue.

Employers, unions, and employees across the country continue to do business with the NLRB on case filings, investigations, prosecutions, elections, and other daily labor issues. Meanwhile, the Noel Canning litigation will affect the perception of the NLRB, its authority to act in this Administration, and its credibility as a government agency for months to come.

Unions seeking to organize may doubt whether the NLRB can enforce the law. Unions have not been enamored with the NLRB for many years, harkening back to what they viewed as a hostile Board during Republican administrations. One prominent union attorney responded to the Noel Canning ruling with the comment, “Don’t mourn, organize.”  In that light, many unions are increasing activity despite questions over NLRB’s authority.

Meanwhile, new legislation was introduced in Congress to stop the NLRB action until current recess appointment issues are resolved. The decline of union density continues. Right to Work laws expand. In combination with Noel Canning litigation, new trends may emerge which reshape labor laws in the private sector workplace and retool it as the presence of private-sector unions continues to diminish. The President now seeks Senate confirmation of the two disputed recess appointees to the Board. In addition, he has nominated two Republicans and the one Democrat (Chairman Mark Pearce, previously confirmed by the Senate), to serve on the NLRB, making five pending nominations. If all candidates are confirmed, it will be the first time since 2003 that the NLRB has had five confirmed members. If no candidates are confirmed before August, the NLRB may lose its three-member quorum needed to decide cases, under the New Process Steel ruling, before we know the outcome of recess appointees issued under the Noel Canning case.

Management facing labor issues must stay tuned to developments. The Agency continues to act in a way which challenges traditional views and practice in union and non-union workplaces.  If faced with NLRB cases, management should assess whether Noel Canning arguments exist. The current cloud over NLRB and its authority may continue into 2014, as the Noel Canning litigation continues.

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