On December 27, 2024, the U.S. Court of Appeals for the Third Circuit found that the National Labor Relations Board (NLRB) lacks the authority to order an employer to pay damages beyond what it unlawfully withheld from wrongfully terminated employees. In doing so, the court vacated a portion of the NLRB’s order in NLRB v. Starbucks Corp. that required Starbucks to compensate unlawfully terminated employees for “direct or foreseeable pecuniary harms incurred as a result of the unlawful adverse actions against them, including reasonable search-for-work and interim employment expenses, if any, regardless of whether the expenses exceeded their interim earnings.”
The order resulted from the NLRB’s finding that Starbucks committed unfair labor practices by unlawfully firing two baristas in response to their engaging in protected organizing activities, in violation of Sections 8(a)(1) and 8(a)(3) of the National Labor Relations Act (NLRA). Starbucks challenged the order, arguing the Board exceeded its statutory authority under the NLRA.
The NLRB’s traditional remedies for unfair labor practices have included equitable relief in the form of reinstatement, and back pay for unlawfully terminated employees. In 2022, the NLRB held in Thryv, Inc., 372 NLRB No. 22 (2022), that “in all cases in which [its] standard remedy would include an order for make-whole relief,” it will also “expressly order that the respondent compensate affected employees for all direct or foreseeable pecuniary harms suffered as a result of the respondent’s unfair labor practice.” This was a major expansion of the scope of remedies awarded by the NLRB, and in subsequent cases, the Board relied on Thryv to award new types of damages for such things as credit card debt incurred following a discharge, job search expenses, and 401(k) withdrawals necessitated by the loss of income.
Rejecting the Board’s reasoning in the Thryv decision, in NLRB v. Starbucks Corp., the Third Circuit held that the NLRB does not have the authority to award relief for losses incurred as a result of, but not directly from, the withholding of wages or benefits. The court recognized the NLRB’s long-established power to award backpay, as “[b]ackpay is based on what an employer has wrongfully withheld from an employee, so it has been ‘characterized…as an integral part of an equitable remedy, a form of restitution.” But, the court held, extending the Board’s remedial authority to providing relief for direct or foreseeable pecuniary harms “resembles an order to pay damages,” which is an improper extension of the NLRB’s authority. The court thus vacated the remedies portion of the NLRB’s order and remanded the case to the agency for further proceedings.
For employers in the Third Circuit (Delaware, New Jersey, and Pennsylvania), the court’s Starbucks decision is a very favorable development, because, as a practical matter, they no longer face the prospect of the Thryv consequential damages remedy. The Starbucks decision is not precedential outside the Third Circuit, so employers in other states are still subject to Thryv remedies. But other Courts of Appeals may find the Third Circuit’s decision persuasive if and when appeals of Thryv remedial orders are brought before them. It is also possible that the next NLRB General Counsel, who will be appointed by the incoming Trump Administration, may abandon the pursuit of Thryv remedies altogether. We will be closely monitoring any such shifts in NLRB enforcement positions resulting from the transition to the new administration and we will keep you informed.
