NLRB Has No Power
The current National Labor Relations Board (“Board”) has been upending settled employment practices at a furious rate. Legal karma may have caught up to the agency and the Obama Administration, with both facing an unsettling legal ruling upending a decades old practice of presidents making executive appointments during Senate recesses. On January 25, 2013, the U.S. Court of Appeals for the DC Circuit ruled that recent Board members were appointed in an unconstitutional manner and the Board has not had a quorum to conduct any business since January 2012.
Rare Constitutional Challenge Rescues The Employer
The case came about when a union at Noel Canning, a bottler and distributor for Pepsi-Cola, filed unfair labor practice charges against the company. The company lost in front of the Administrative Law Judge (ALJ) and the Board affirmed the decision. The company appealed and would have lost if it had to rely on the arguments presented to the ALJ. However, the company was able to persuade the court on some unprecedented arguments.
The company raised two constitutional arguments challenging the Board’s authority to validate and ultimately uphold the ALJ’s decision. The company had not raised the constitutional arguments prior to the appeal and usually this would mean an appellate court would ignore them, absent extraordinary circumstances. In addition, there was no direct precedent here to support the company’s argument. However, relying on an analogous case challenging an agency’s jurisdiction, the court ruled there are extraordinary circumstances if there are questions about an agency’s ability to exercise its authority.
The court then considered two constitutional arguments; both leading to the conclusion the Board did not have the statutorily required quorum to take any actions.
Invalid Recess Appointments
The Board is composed of five members and it needs three for a quorum. The company argued that on the day the Board affirmed the ALJ’s decision, there was no quorum because only two of the Board members had valid appointments.
President Obama had appointed three Board members under recess appointments. Under the Recess Appointments Clause of the U.S. Constitution, presidents can temporarily fill vacant positions while the Senate is in recess, which is supposed to allow the government to keep functioning. Recess appointments only last until the end of the next session of the Senate. A key benefit, sought regularly in modern times, is that a president can fill a position without seeking the advice and consent (or experiencing obstruction) of the Senate.
The 112th Congress had two sessions and in order to thwart recess appointments, the Senate did not adjourn, instead staying in session for the most part only as a formality. President Obama appointed three Board members during this time, on January 4, 2012. The company argued recess appointments have to happen during an intersession recess; when the Senate is actually away and unable to receive and act upon nominations. The court agreed and ruled that since the appointments happened while the Senate was still in session, the Board did not have quorum.
The court could have, and perhaps should have, stopped its analysis after accepting the first argument. Instead, it kept going and in the process made an even broader ruling: to make a recess appointment, the vacancy must happen or occur during that specific intersession recess.
Two of the recess appointments to the Board immediately failed to meet this standard because the vacancies occurred on August 27, 2010 and August 27, 2011, while the Senate was in regular session. The last vacancy happened on January 3, 2012 but did not qualify since the Senate had not adjourned.
The court did not address and did not seem troubled by a thorny question: is there a constitutional problem, perhaps affecting separation of powers, where the Senate can obstruct the president’s authority to make appointments during a regular session and can then interfere with recess appointments by refusing to adjourn? As it stands, the Senate does not appear to have formally adjourned, using the term sine die, since the 111th Congress began on January 6, 2009.
The court’s ruling suggests that essentially any formal action that required the Board’s authority will require review. All of the Board’s final actions since January 4, 2012 are suspect, including any actions approving ALJ decisions.
Currently, there are only three members on the Board, with two considered invalid appointments. The remaining member, Chairman Mark Gaston Pearce, should not be able to exercise the Board’s powers. However, Chairman Pearce released the following statement:
“The Board respectfully disagrees with today’s decision and believes that the President’s position in the matter will ultimately be upheld. It should be noted that this order applies to only one specific case, Noel Canning, and that similar questions have been raised in more than a dozen cases pending in other courts of appeals. In the meantime, the Board has important work to do…and…will continue to perform our statutory duties and issue decisions.”
The statement is quite amazing in limiting the decision’s impact to just one case and for claiming the Board will continue issuing decisions. At the very least, the Board should be unable to exercise any authority in the geographic area covered by the DC Circuit, and it could face similar legal challenges in other jurisdictions.
The Obama Administration may appeal the decision to the U.S. Supreme Court. While the Court has the discretion to reject the appeal, there are three compelling reasons to take it: 1) The DC Circuit’s opinion regarding recess appointments conflicts with the 2nd, 9th, and 11th Circuits and the case presents an opportunity to clarify the law. 2) The DC Circuit may have gone too far by limiting recess appointments to vacancies that occur within an intersession and the Court may want to correct that ruling. 3) The decision opens up the possibility of the Senate completely thwarting a president’s ability to make appointments and the Court may want to clarify the constitutional powers and limits of the other two branches.
In the meantime, it is unclear when the agency will have enough Board members to resume normal operations, such as rule-making and final approval of ALJ decisions. With the Senate still in regular session, President Obama will not be able to make recess appointments and will have to rely on the Senate approving nominees.
Impact for Employers
Employers affected by the Board’s final actions since January 4, 2012 will want to review whether those actions can be overturned or invalidated. Employers should also evaluate whether it will be worth the litigation costs to pursue further legal action. Even if a decision is invalidated, it is possible the ALJ’s decision will go into a backlog, awaiting final approval once enough Board members are in place.
As a practical matter, the vacuum with the Board leadership should not affect the agency’s enforcement actions. District offices will likely pursue unfair labor practices and the General Counsel’s Office will likely continue issuing interpretations on how the agency will enforce the National Labor Relations Act.
Employers should ensure they appeal ALJ decisions in a timely manner. Even if there is no quorum for the Board, failure to file a timely objection may mean the ALJ’s decision becomes final under previously established rules.
Overall, this may be a temporary setback for the agency. However, considering the fast pace at which the Board was overturning precedents and upending established employment practices, this legal decision may slow down the agency just enough for employers to focus on something other than the latest effort by the National Labor Relations Board to regulate union and non-union workplaces.