NLRB loses in fifth round – Davis Wright Tremaine

The recent ruling by the U.S. Court of Appeals for the Fifth Circuit has brought attention to the structural constitutionality of the National Labor Relations Board (NLRB). The decision highlighted the issue of “removal protections” for the NLRB’s administrative law judges (ALJs) and Board Members and whether the president can easily remove them to enact his or her labor agenda. This ruling, which is likely to be appealed to the U.S. Supreme Court, has the potential to significantly impact labor law and the functioning of the NLRB.

The case originated from three separate unfair labor practice charges filed by employers, including SpaceX, before the NLRB. Prior to the commencement of proceedings, these employers filed complaints in federal district courts in Texas, arguing that the for-cause removal protections for ALJs and Board Members are unconstitutional and violate the president’s rights under Article II of the Constitution. All three district courts agreed that the removal protections for the NLRB’s ALJs were unconstitutional and barred the NLRB from proceeding with the cases. Furthermore, the Southern District of Texas found that the removal protections for the NLRB’s Board Members were also unlawful.

The implications of this decision are significant. While federal district courts are generally prohibited from issuing injunctions in labor disputes, the Fifth Circuit determined that the employers’ structural claims against the NLRB did not fall under this definition as they were not related to typical labor dispute issues like wages, hours, or working conditions. This ruling opens the door for employers nationwide to challenge the NLRB’s structure in a similar manner. This is the second instance where the Fifth Circuit has found that the ALJs of an administrative agency are unconstitutionally protected from removal, indicating a potential trend in challenging the constitutionality of administrative agencies.

In assessing the harm caused by the unconstitutional removal protections, the Fifth Circuit found that irreparable injury occurs when a party is subjected to a proceeding before an agency with officials who are unconstitutionally insulated from removal. This departure from previous circuit court decisions suggests that similar challenges may not always guarantee success. It is likely that the issue of whether the harm in these cases was legally sufficient will be a focal point for the Supreme Court to consider.

Despite this decision, the National Labor Relations Act (NLRA) remains in effect, and the protections it offers to employees are still intact. Employers should continue to comply with the statute while considering potential impacts on the enforcement of the NLRA due to the Fifth Circuit’s decision. Legislative action or judicial intervention may be necessary to address the NLRB’s structural issues in the future to ensure the agency can effectively proceed with unfair labor practice cases. Employers currently involved in proceedings before the NLRB should carefully consider their next steps in light of this ruling and seek legal guidance on how to navigate potential challenges to the agency’s structure.