The Fifth Circuit just handed SpaceX, and two other employers, a significant victory in their fight with the National Labor Relations Board (NLRB). The August 19 ruling with potentially seismic implications for the NLRB upheld preliminary injunctions that barred the NLRB from prosecuting unfair labor practice cases on the grounds that the Board’s very structure likely violates the United States Constitution.
What’s the issue?
At the heart of the dispute is whether the President’s limited ability to remove NLRB members and administrative law judges (ALJs) runs afoul of the Constitution’s separation of powers. Under the National Labor Relations Act, the President can only fire Board members for “neglect of duty or malfeasance in office,” and can only remove ALJs for “good cause” after a hearing before another agency (whose own leaders also enjoy removal protections).
SpaceX and others argued this double-layer of job security improperly ties the President’s hands. The Fifth Circuit majority agreed, concluding that NLRB members wield significant executive power — more than the Federal Trade Commission officials whose tenure protections were upheld in the 1935 Humphrey’s Executor decision — and thus fall outside that old precedent’s “narrow exception.”
Why it matters now:
- Proceedings on hold. For now, the NLRB cannot prosecute cases against SpaceX, social services platform Aunt Bertha, and pipeline company Energy Transfer LP.
- Irreparable harm recognized. The appellate court wrote that being forced to defend before an unconstitutionally structured agency is a harm in and of itself. Translation: Employers don’t need to show the proceeding would have turned out differently — the constitutional defect is enough.
- Circuit split created. One justice dissented, arguing the majority stretched precedent and made it easier for employers to sidestep the NLRB teeing up a likely Supreme Court showdown.
- ALJs also implicated. The panel drew on its earlier ruling against the Security Exchange Commission’s ALJ protections (Jarkesy v. SEC), signaling that NLRB judges may also be constitutionally suspect.
California implications:
While the Fifth Circuit’s ruling does not cover California employers since it sits in the Ninth Circuit’s jurisdiction, the ruling matters because, given the dissent, the United States Supreme Court is more likely to take this case. And, a SCOTUS that is generally not considered to be union friendly, could fundamentally reshape how (and perhaps whether) the NLRB operates in its current form throughout the country, including California. Until then, California employers remain subject to the Board’s authority, but should consult with counsel about raising constitutional challenges in pending cases.
The bottom line:
For California employers, this is not a “shut down the NLRB” moment — at least not yet. But it is a flashing neon sign that the Board’s power is being tested like never before. Employers facing unfair labor practice charges should make sure they are asserting all available arguments.
