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Legal Updates

Supreme Court Invalidates Hundreds Of NLRB Rulings

In a landmark ruling, Noel Canning v. NLRB, the U.S. Supreme Court recently invalidated President Obama’s appointment of three new members to the National Labor Relations Board (“NLRB” or “Board”) during a short Senate break in January 2012.

As a result of the Supreme Court’s holding, hundreds of Board decisions that were made over the ensuing year and a half have been nullified. The Board will now have to begin the arduous task of reevaluating and re-deciding these cases. That process may also hamper the agency’s ability to take action in other arenas, including implementing proposed changes to the procedures governing union elections.

Background

The NLRB is a five-member federal agency that bears primary responsibility for interpreting and applying the National Labor Relations Act (“NLRA”). Under a 2010 Supreme Court decision, the Board must have at least three members in order to issue decisions and take other official actions.

The expiration of Member Craig Becker’s term on January 3, 2012, left the NLRB with only two members, Mark Gaston Pearce and Brian Hayes. At the time, President Obama had nominated three new Board members – Sharon Block, Terence Flynn, and Richard Griffin. However, due to a political logjam between the President and Senate Republicans, the Senate had not taken any action on those nominations. Thus, on January 4, 2012, the President announced that the three nominees would join the Board as recess appointments.

As authority for this action, President Obama cited the Recess Appointments Clause of the U.S. Constitution, which creates an exception to the requirement that the president obtain the “advice and consent” of the Senate before appointing government officials such as NLRB members. Specifically, the Recess Appointments Clause allows the president to “fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.” Unlike regular appointees, recess appointees do not need to be confirmed by vote of the Senate.

At the time of these appointments, the Senate had not formally recessed but was on a scheduled holiday break. During this break, the Senate formally reconvened for brief, pro forma sessions every three days but did not conduct any actual business. The President’s recess appointments took place during a three-day break between these pro forma sessions.

Members Block, Flynn, and Griffin served on the NLRB until mid-2013, when four new Board members were confirmed by the Senate as part of a bipartisan agreement.

NLRB’s Noel Canning Decision

In February 2012, a three-member panel of the Board held that Noel Canning, a Pepsi bottler in Washington state, had violated the NLRA by refusing to reduce to writing and execute a collective bargaining agreement containing terms to which Noel Canning and a union representing its employees had agreed.

Noel Canning appealed the Board’s decision to the U.S. Court of Appeals for the D.C. Circuit. In support of its appeal, Noel Canning argued that the President’s recess appointments were constitutionally invalid because the three-day interval between pro forma Senate sessions during which the appointments were made was not long enough to trigger President Obama’s powers under the Recess Appointments Clause. Thus, Noel Canning contended, the Board lacked a valid quorum when it decided the case, thereby nullifying its ruling.

D.C. Circuit’s Holding

The D.C. Circuit agreed with Noel Canning’s position that the President’s appointments were constitutionally invalid, but on different grounds. The court held that the term “the Recess,” as used in the Recess Appointments Clause, refers only to breaks between formal sessions of Congress and does not include intra-session breaks or adjournments. Thus, since the Senate had not formally recessed when the President made these appointments to the NLRB, the D.C. Circuit concluded that the appointments were null and void.

Further, the D.C. Circuit held that a recess appointment can be made only if the vacancy first comes into existence during a formal Senate recess, which was not the case here.

Supreme Court’s Decision

At the Board’s request, the Supreme Court agreed to review the case. Subsequently, the Court unanimously affirmed the D.C. Circuit’s holding, concluding that the recess appointments, and thus the Board’s Noel Canning decision, were constitutionally invalid.

The Supreme Court, however, based its decision on narrower grounds than the D.C. Circuit. Specifically, the Supreme Court held – in agreement with Noel Canning’s original argument – that the three-day Senate recess during which the appointments were made was too brief to trigger the President’s powers under the Recess Appointments Clause. While declining to establish a bright-line rule, the court indicated that Senate recesses of fewer than ten days are “presumptively too short” for recess appointments to be made.

In addition, a majority of the Court held that recess appointments may be made during an inter-session or intra-session Senate recess, and regardless of whether the vacancy to be filled by an appointment arose during or prior to the recess.

Implications Of Decision

The Supreme Court’s Noel Canning decision has far-reaching repercussions. Most significantly, hundreds of Board rulings that were issued with the involvement of Members Block, Flynn, or Griffin have been invalidated and will have to be re-decided. Many of these decisions involved controversial and important rulings adverse to employers, such as the following:

      • WKYC-TV, Gannet Co. This Board decision reversed longstanding precedent and held that an employer must continue to honor a dues check-off provision in a collective bargaining agreement (“CBA”) after the CBA expires, while the parties are negotiating a new CBA.
      • Piedmont Gardens. In this case, the Board overturned longstanding case law under which employers could refuse to provide unions with witness statements obtained in the course of investigating employee misconduct. The Board instead held that an employer must demonstrate a specific confidentiality concern that justifies its refusal to produce witness statements.
      • Banner Health System. This decision by the NLRB significantly restricted employers’ ability to require employees to keep internal investigations confidential.
      • Costco Wholesale Corp. And Knauz BMW. In these decisions, the Board held that employer social media policies were overly broad and violated employees’ NLRA rights to engage in concerted activity.

These and other pro-labor holdings may largely be rubber-stamped when they are re-decided, in light of the Board’s continued union-friendly bent. Given, however, that the agency now has two Republican members who could comprise a majority of the panel deciding a matter, this is not a foregone conclusion in every case. Nonetheless, employers would be wise to act in the assumption that the Board is likely to reaffirm the vast majority of the holdings invalidated by the Supreme Court’s Noel Canning decision.

Further, the challenges the Board will likely face in attempting to process the backlog of invalidated decisions may temporarily impede its abilities to take action on other fronts. In particular, the Board may need to delay implementing the significant, labor-friendly changes to union election procedures that the agency announced earlier this year. (A recent article by Schwartz Hannum detailing those proposed changes can be found here.)

Recommendations

In light of Noel Canning, we recommend that employers:

      • Act on the assumption that the Board decisions nullified by the Supreme Court in Noel Canning will eventually be reaffirmed, at least until the Board rules otherwise in a particular case;
      • Closely monitor the NLRB’s disposition of those invalidated decisions; and
      • Remain vigilant on other matters on which the Board has indicated its intention to take action, including, particularly, the proposed changes to union election procedures.

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If you have any questions about Noel Canning or would like guidance on any other labor-law issue, please don’t hesitate to contact us.