On Tuesday, August 19, the Fifth Circuit issued a highly anticipated decision upholding an injunction that prevents the National Labor Relations Board (“NLRB”) from prosecuting unfair labor practice cases against SpaceX, Aunt Bertha, and Energy Transfer LP while those employers litigate constitutional challenges to the NLRB’s structure. While the three-judge panel’s decision is likely limited to the Fifth Circuit (Texas, Louisiana, and Mississippi) and is almost certain to be appealed, the decision represents a major step forward in these employers’ efforts to challenge the NLRB’s authority.
The NLRB removal protections at issue involve the five-member Board and administrative law judges (“ALJs”), and the removal protections those individuals enjoy. The Fifth Circuit described the ALJs’ protections as two-layered: they can only be removed if the Merit Systems Protection Board (“MSPB”) finds good cause for removal and the MSPB Members themselves enjoy removal protections. The Fifth Circuit noted that it recently found a similar, two-layer protection structure unconstitutional in Jarkesy v. SEC.
The Fifth Circuit also found that the for-cause protections that NLRB Board Members enjoy are likely unconstitutional under Humphrey’s Executor v. United States. The Supreme Court’s Humphrey’s Executor decision upheld the structure of the Federal Trade Commission (“FTC”), but opponents of removal protections for agency officials have argued Humphrey’s Executor is a narrow exception to the President’s removal power that should not extend to the NLRB. This is primarily due to NLRB Board Members wielding “substantial executive power” and the NLRB’s key structural differences from the FTC. While it is unclear when the Supreme Court may weigh in on the constitutionality of NLRB removal protections, it is noteworthy that the Trump Administration raised a similar argument in the Supreme Court litigation regarding Member Wilcox’s removal.
As mentioned above, the Fifth Circuit’s decision is limited in geographic scope and is likely to face appeal, but it also may create a blueprint for employers in other states and Circuits to secure similar injunctions. Likewise, this decision may motivate the Supreme Court and/or other Circuit Courts to weigh in further on the issue. Employers and labor professionals should stay tuned for more Vorys on Labor updates on this and similar cases.
