Key Takeaways:
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The Fifth Circuit has ruled that the structure of the National Labor Relations Board likely violates the U.S. Constitution by insulating NLRB board members from presidential removal
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This decision undermines the agency’s authority, but does not immediately shut down NLRB enforcement
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Employers should expect more litigation, more uncertainty, and a possible Supreme Court showdown. The safest course is to stay compliant with existing law while preserving defenses and preparing for rapid shifts in policy
The Fifth Circuit’s Decision
The U.S. Court of Appeals for the Fifth Circuit has issued a decision that could reshape the landscape of federal labor law. In SpaceX, et al. v. NLRB, the court held that the National Labor Relations Board’s structure – specifically, the statutory limits on removing NLRB Board members – likely violates the Constitution. This ruling, though not the final word, injects major uncertainty into how the NLRB enforces the National Labor Relations Act (NLRA) and how employers should navigate NLRB proceedings in the near term.
Why the Structure Matters
The NLRB is the primary federal agency governing union organizing, collective bargaining, and unfair labor practice cases. For decades, its independence from political swings was defended in part by its structural protections. If those protections fall, the NLRB could be reshaped into a more directly political body, with members more vulnerable to removal by a sitting president.
The implications are profound:
- Unfair Labor Practice Cases. Employers facing NLRB complaints may now raise structural challenges as part of their defense.
- Union Campaigns. Organizing drives and election petitions overseen by the NLRB could face delays or challenges if the agency’s legitimacy is in doubt.
- Regulatory Stability. Employers have long had to navigate shifting policy depending on whether a Republican or Democratic administration held power. This ruling threatens to increase those swings, making long-term labor strategy even more difficult.
Immediate Practical Consequences
Employers should be cautious in interpreting this decision as a “get out of jail free” card. The NLRB continues to operate, and until the Supreme Court or Congress acts, the agency will likely press forward with its cases. But the ruling opens the door to the following near-term consequences:
- Litigation Leverage. Employers in active NLRB cases may file motions to stay proceedings or preserve constitutional objections. Even if not ultimately successful, these arguments could delay enforcement and create settlement leverage.
- Forum Shopping. Employers sued by the NLRB in Fifth Circuit jurisdictions may have an immediate advantage. Outside the Fifth Circuit, employers should expect the NLRB to contest such arguments vigorously.
- Uncertainty for Remedies. If later courts invalidate NLRB orders on structural grounds, remedies imposed now (such as reinstatements, backpay, or bargaining orders) may be vulnerable to being overturned.
Longer-Term Outlook
The Fifth Circuit’s ruling is not the last word. Several paths are possible:
- Supreme Court Review. Given the stakes, this issue is almost certain to reach the Supreme Court. The Court’s recent decisions on administrative structure (such as Seila Law v. CFPB and Collins v. Yellen) suggest a willingness to strike down for-cause removal protections. That precedent may align with the Fifth Circuit’s reasoning.
- Congressional Action. Congress could theoretically amend the NLRA to adjust the removal provisions or otherwise restructure the NLRB Board. However, legislative consensus on labor law is highly unlikely in the current polarized environment.
- Agency Uncertainty. Even if the Supreme Court upholds or narrows the Fifth Circuit’s reasoning, the litigation itself may embolden employers to challenge NLRB authority more frequently, slowing down the agency’s work.
Strategic Considerations for Employers
This is not a time for employers to celebrate and ignore the NLRB. Rather, it is a moment to prepare for volatility. Consider the following steps:
Preserve Constitutional Defenses. Employers in active cases should consult counsel on whether to raise structural objections to preserve rights for appeal.
Reassess Labor Strategy. Union organizing activity is likely to continue, and the NLRB will continue to oversee elections and prosecute cases. Employers should not assume NLRB enforcement is paralyzed, but should be aware that remedies may ultimately be contested.
Prepare for Political Flux. If NLRB Board members become more directly removable by the president, employers should expect faster and sharper swings in labor policy after elections. Compliance strategies will need to be nimble and regularly updated.
Monitor Parallel Cases. Employers should keep track of how other circuits handle this issue. If a split emerges, Supreme Court intervention will come quickly.
Conclusion
The Fifth Circuit’s decision is one of the most consequential developments in labor law in years. It casts doubt on the legitimacy of the agency that governs union-management relations and signals potential upheaval ahead. For employers, the challenge will be navigating a landscape where the rules of the game are uncertain—not only in substance, but in the very structure of the referee.
Staying proactive, preserving defenses, and monitoring developments closely will be essential in the months ahead.
