Last week, the U.S. Court of Appeals for the Fifth Circuit said the structure of the National Labor Relations Board (NLRB) is likely unconstitutional and enjoined the agency from conducting trials of unfair labor practice complaints against employers until the constitutional issue is fully decided.
The decision by the Fifth Circuit could encourage parties that are facing NLRB proceedings to pursue similar injunctions in federal court to escape agency hearings.
The constitutional issue centers on statutory protections that shield NLRB Board Members and Administrative Law Judges (ALJs) from removal without cause by the President. The Fifth Circuit considered whether those protections hamper the President’s executive authority under Article II the U.S. Constitution by preventing the accountability of those NLRB officials to the President and, therefore, the electorate.
Insulation from Dismissal Likely Unconstitutional
The Fifth Circuit was deciding a consolidated appeal that involves cases brought by three employers. Each faced an unfair labor practice complaint issued by the NLRB General Counsel. The employers sought preliminary injunctions in Texas federal district courts to freeze the NLRB proceedings on the basis that the statutory removal protections for NLRB officials are unconstitutional.[1] The district courts granted the injunctions, stopping the NLRB proceedings before ALJ-conducted trials could begin.
Upholding the injunctions, the Fifth Circuit made two key findings.
First, it unanimously held that the statutory protections on removal for Board Members and ALJs likely violate the U.S. Constitution’s separation of powers doctrine, given that those officials exercise substantial executive power but are insulated from at-will removal by the President. The court cited examples of the officials’ executive authority, including Board Members’ policymaking powers and ALJs’ ability to sanction witnesses. According to the Fifth Circuit, because Article II of the Constitution vests executive power “solely … in the President, those who exercise it on his behalf must remain subject to his oversight.”
The Fifth Circuit relied in part on a Supreme Court decision that was issued in May. That decision stayed lower court orders that prohibited President Donald Trump from firing then-Board Member Gwynne Wilcox. Although the decision was preliminary and did not ultimately decide the issue, the Supreme Court found it likely that the NLRB exercises “considerable executive power.”
The Board Member removal issue is being litigated in other federal courts, and the Supreme Court will probably make the final call. In the meantime, in light of Wilcox’s absence from the Board, the agency lacks a quorum to issue regulations or adjudicatory decisions. Last month, President Trump made two Board Member appointments — Scott Mayer and James Murphy — who will restore a quorum if they are confirmed by the Senate.[2]
NLRB Hearing Would Cause Irreparable Harm
Second, with respect to an issue of arguably greater immediate importance — whether the NLRB’s infirm constitutional structure requires halting administrative proceedings — the Fifth Circuit answered in the affirmative.
The court held that the employers’ merely being subject to a hearing before a constitutionally suspect agency constitutes irreparable harm.
The court explained that the harm is immediate and the “damage is done” once an unconstitutional hearing begins. It found additional showing of harm unnecessary, such as how the result of the hearing could differ if the NLRB was constitutionally structured.
Dissenting on this point, one Fifth Circuit judge argued there was no irreparable injury given the absence of causal harm between the constitutional violations and the NLRB proceedings.
Impact on NLRB Operations
The court’s decision makes it likely that employers who conduct business in the Fifth Circuit will be able to win preliminary injunctions to stop ALJ hearings by filing separation of powers suits against the NLRB.[3]
It remains to be seen whether employers would have success in freezing NLRB proceedings in geographic areas outside the Fifth Circuit.
The dissent argued that other judicial circuits require a heightened showing of irreparable harm to halt administrative proceedings, including the Second, Sixth, and Tenth Circuits, which casts doubt as to whether this decision will impact NLRB operations in such circuits.
Litigation of these issues may cause uncertainty in the ability of the NLRB to enforce federal labor law. Interested parties should consult experienced labor counsel.
[1] The statutory removal protections, the Fifth Circuit explained, include removal by the President of Board Members only “for neglect of duty or malfeasance in office,” and removal of ALJs only “for good cause” as found by the Merit Systems Protection Board.
[2] These nominations are pending in the Senate Health, Education, Labor and Pensions (HELP) Committee. It’s possible the HELP Committee will hold a hearing on the nominations next month, when the Senate returns from recess.
[3] The Fifth Circuit covers Texas, Louisiana and Mississippi.
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