Fifth Circuit rules that removal protections for NLRB ALJs and Board Members are unconstitutional
The Decision: Summarized
The U.S. Court of Appeals for the Fifth Circuit ("Fifth Circuit") has ruled that the National Labor Relations Board ("NLRB") is unconstitutionally structured and cannot hear unfair labor practice charges. The decision focused on "removal protections" for the NLRB's administrative law judges ("ALJs") and Board Members and whether the president may remove them with sufficient ease to enact his or her labor agenda. This decision, surely headed to the U.S. Supreme Court, could upend labor law or result in a fundamental change to how the NLRB operates.
Three employers, including Elon Musk's SpaceX, each faced separate unfair labor practice charges. Before proceedings could commence, the employers filed separate complaints in three different federal district courts in Texas arguing that the NLRB should be enjoined from prosecuting them because the for-cause removal protections for ALJs and Board Members are unconstitutional, violating the president's rights under Article II of the Constitution. All three district courts agreed that the NLRB's ALJs are unconstitutionally shielded from removal and barred the NLRB from moving forward with the cases. Only one district court, the Southern District of Texas, addressed the same question with respect to the NLRB's Board Members and found that, they too, were unlawfully protected from removal.
Implications
Generally speaking, federal district courts are prohibited from issuing injunctions involving or arising out of a labor dispute. Although here the complaints were filed in the shadow of impending labor charges, the Fifth Circuit determined that the employers' structural claims against the NLRB fell outside this definition of a labor dispute as they did not concern wages, hours, working conditions, or union representation. In so finding, the Fifth Circuit has opened the doors for employers across the country to file similar lawsuits when facing an NLRB charge. This is now the second instance in which the Fifth Circuit has determined that the ALJs of an administrative agency are unconstitutionally protected from removal – the other being the Securities and Exchange Commission in Jarkesy v. Securities and Exchange Commission. With such precedent set, other administrative agencies may soon face structural challenges as well.
When deciding as to whether there was harm sufficient to warrant an injunction, the Fifth Circuit found that irreparable injury occurs when a party is subjected to a proceeding before an agency whose officials are unconstitutionally insulated from removal. This finding departed from decisions by the Tenth, Sixth, and Second Circuits in response to similar challenges which have determined that a plaintiff must show that the unconstitutional removal protections interfered with the underlying agency proceedings. In the Sixth Circuit case, which also involved challenges to the removal of the NLRB's ALJs and Board Members, the Court determined that the plaintiff's "bare claim that the NLRB proceeding would be 'illegitimate'" was not enough to establish irreparable harm. Thus, while employers may be prompted to bring similar challenges elsewhere, success is not guaranteed. The issue of whether the "harm" in these cases was legally sufficient is sure to be an issue analyzed by the Supreme Court.
Moving Forward
It is important to note that the NLRA is still the law, is still constitutional, and the protections it grants employees remain in effect. While the Fifth Circuit's decision will undoubtedly impact the NLRA's enforcement, at least in the short term, employers should continue to ensure compliance with the statute. Amending the NLRA through legislative action or severing the removal provisions through judicial means may permit a quick solution. However, if the NLRB's structural issues are not addressed soon, its inability to proceed with unfair labor practices in the Fifth Circuit will continue and may expand to other jurisdictions.
Employers currently engaged in proceedings before the NLRB may want to contemplate the following: (1) when responding to any NLRB complaints, setting forth affirmative defenses that take the Fifth Circuit's decision into account; (2) requesting a stay of the proceedings until the NLRB's structural issues are resolved; (3) coordinating with counsel to determine whether a suit for injunctive relief based on structural claims is the best course of action; and (4) assessing how the Fifth Circuit's ruling may lead to similar structural challenges against other agencies.
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