Background
In November 2022, a La Grange employee filed an unfair labor practice charge with the NLRB, which resulted in the regional office issuing a complaint in March 2024. La Grange sought injunctive relief with the US District Court for the Southern District of Texas, challenging the constitutionality of the NLRB’s structure, which the court granted.
In December 2022, a former SpaceX employee filed an unfair labor practice charge against SpaceX with the NLRB, which resulted in an initial complaint by the NLRB’s regional office in March 2024. SpaceX challenged the constitutionality of the NLRB’s structure and sought injunctive relief in April 2024, which was granted by the US District Court for the Western District of Texas.
In April 2024, the NLRB issued a consolidated complaint against Findhelp, scheduling an administrative hearing for September 2024. Findhelp filed a lawsuit with the US District Court for the Northern District of Texas in August 2024, seeking an injunction for the same reasons as SpaceX and La Grange, which the court granted.
The NLRB appealed all three cases, which were consolidated in the US Court of Appeals for the Fifth Circuit.
NLRB Structure
The NLRB is divided into two distinct components: (1) an investigative and prosecutorial arm, led by a presidentially appointed General Counsel, and (2) an adjudicatory body—a five-member board (the Board), also appointed by the President—that reviews ALJ decisions. When an employee files an unfair labor practice charge against an employer, a regional NLRB officer investigates. If the officer finds sufficient evidence of the alleged unfair labor practice, the General Counsel files a formal complaint. The complaint is assigned to an ALJ, and the case is litigated through an administrative hearing, with the ALJ issuing a decision. Once the ALJ issues a decision and recommended order, either party may seek review by the Board. If no exceptions are filed, the ALJ’s ruling automatically becomes the decision of the Board. But if exceptions are filed, the Board may adopt the ALJ’s recommendation or issue its own decision. Either party may seek final review of NLRB’s decision in the US court of appeals for the circuit where the alleged unfair labor practice occurred (or the D.C. Circuit).
NLRB Members and ALJs are insulated from removal. Specifically, the President may only remove NLRB Members “for neglect of duty or malfeasance in office, but for no other cause.” 29 U.S.C. § 153(a). ALJs, on the other hand, may be removed only “for good cause established and determined by the Merit Systems Protection Board (MSPB) on the record after opportunity for hearing before the Board.” 5 U.S.C. § 7521(a).1
The structure of the NLRB is like that of the SEC, which utilizes ALJs in its enforcement actions. In June 2024, the US Supreme Court affirmed a ruling by the Fifth Circuit (Jarkesy) that the dual for-cause protections for ALJs violated the Constitution in cases where the SEC sought to impose civil penalties for securities fraud. Put another way, the Seventh Amendment to the Constitution guarantees the right to a jury trial in cases where the SEC seeks civil penalties for securities fraud.
The Fifth Circuit’s Ruling
The Fifth Circuit held that the employers (SpaceX, La Grange, and Findhelp) would likely succeed in their claims against the NLRB. Specifically, Article II of the Constitution vests “[t]he executive Power” in a single individual: “a President of the United States of America.” The court noted that this power was in “no other person or branch.” However, the Framers recognized that the President could not fulfill his duties “alone and unaided” and would need the assistance of subordinates. See Myers v. United States, 272 US 52, 117 (1926). But as the Fifth Circuit noted in its opinion, “those who exercise [power] on his behalf must remain subject to his oversight.”
The questions in the case were (1) “whether NLRB ALJs and Board Members are principal or inferior officers,” and (2) “whether the restrictions on their removal are sufficiently onerous, that the President has lost the ability to take care that the laws are faithfully executed.” Regarding ALJs, the court cited its previous decision regarding SEC ALJs. Jarkesy v. Sec. & Exch. Comm’n, 34 F.4th 446, 463 (5th Cir. 2022), aff’d and remanded, 603 US 109 (2024), and adhered to, No. 20-61007, 2024 WL 5496969 (5th Cir. Nov. 12, 2024). In Jarkesy, identical removal protections for ALJs were held to be unconstitutional. NLRB ALJs, like SEC ALJs, are inferior officers who can only be removed for good cause by the MSPB, whose members themselves are protected by for-cause removal. Accordingly, the court concluded, “Because NLRB ALJs are inferior officers insulated by two layers of for-cause protection, the removal restrictions are unconstitutional.”
With regard to NLRB Members, the court found they “wield substantial executive power.” More specifically, they “execute the NLRA [National Labor Relations Act] through administrative, policymaking, and prosecutorial authority” (internal quotes omitted). But the NLRB lacks key structural safeguards such as party-balancing requirements and budgetary accountability. Accordingly, the court held that the employers were likely to succeed on the merits of their challenge to the NLRB Members’ removal protections.
It is worth mentioning that not all courts taking up this issue have reached the same conclusion as the Fifth Circuit. For instance, there is a similar challenge to the constitutionality of the NLRB’s structure, which is currently on appeal in the US Court of Appeals for the Ninth Circuit. During oral arguments in that case, one of the panel judges suggested that the President’s removal of NLRB Member Gwynne Wilcox eviscerates the company’s claim that NLRB Members are unconstitutionally insulated from removal—a decision in the Ninth Circuit has not been reached, though. In December 2024, the US Court of Appeals for the Third Circuit refused to take up a similar challenge by Starbucks, indicating that it lacked jurisdiction to consider the issue altogether. In October 2024, the US Court of Appeals for the Sixth Circuit struck down a similar challenge by an employer on jurisdiction grounds. However, the takeaway for employers is that the Fifth Circuit has provided a game plan for challenging the constitutionality of NLRB proceedings, which would pause the proceedings or block them from advancing altogether. But it is important to note that the ruling does not eliminate the NLRB or its authority—it only affects how its officers are removed and whether proceedings can be paused.
1 The MSPB is an independent agency separate from the NLRB.
[View source.]
