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Supreme Court Strikes Down Nearly 600 NLRB Decisions

The National Labor Relations Board (the “Board” or “NLRB”) lacked the authority to issue nearly 600 decisions from December 2007 to March 2010, ruled the U.S. Supreme Court in a June decision captioned New Process Steel, LP v. NLRB.  This has meant additional work for the current Board and almost certainly will result in additional delays for the parties litigating before it.  In addition, employers should exercise caution when relying on any of those nearly 600 decisions in formulating labor-relations or litigation strategies.

The decisions vacated by the Court had been issued by the Board, which has five seats, when it was operating with only two members, Wilma B. Liebman and Peter C. Schaumber.  This unusual situation arose as 2007 was coming to a close.  At that time, the Board was operating with four members—Ms. Liebman, Mr. Schaumber, Peter N. Kirsanow and Dennis P. Walsh—and one vacancy.  However, the recess appointments of Members Kirsanow and Walsh were set to expire on December 31, 2007, and political gridlock was expected to prevent the appointment of any Board nominees.

In an effort to preserve the Board’s authority to function, the four members delegated “to Members Liebman, Schaumber and Kirsanow, as a three-member group, all of the Board’s powers.”  The Board expressed the opinion that its action would permit the remaining two members, Ms. Liebman and Mr. Schaumber, to exercise the powers of the Board “after [the] departure of Members Kirsanow and Walsh, because the remaining members will constitute a quorum of the three-member group.”

As authority for its action, the Board relied upon Section 3(b) of the National Labor Relations Act (the “Act”).  The first sentence of this provision, known as the “delegation clause,” authorizes the Board to delegate its powers to “any group of three or more members.”  Section 3(b) further provides that “three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to the first sentence hereof.”

Over the ensuing 27-month period, Members Liebman and Schaumber decided nearly 600 cases as a purported two-member Board.  They made a point of avoiding cases involving controversial issues during this time, focusing their review on errors by administrative law judges, rather than on novel questions of law.  New Process Steel, LP, a respondent in one of those cases, appealed their decision to the U.S. Court of Appeals for the Seventh Circuit, arguing that Members Liebman and Schaumber lacked authority to issue any decisions at all.  The Seventh Circuit sided with the NLRB, ruling that the two-member decision was valid.  This decision was consistent with the rulings of five other federal appeals courts that had been presented with this issue.

A divided Supreme Court reversed the Seventh Circuit’s decision, ruling, in agreement with New Process Steel, LP, that the purported two-member decision was invalid.  The Court interpreted Section 3(b) to always require a quorum of at least three sitting members in order for the Board to exercise its powers.  The language “two members shall constitute a quorum of any group designated pursuant to the first sentence hereof,” the Court held, was for limited circumstances, such as when a member needed to recuse himself or herself from a three-member quorum because of a conflict of interest, and did not allow the Board to operate with only two members in the ordinary course.

At the time of the Supreme Court’s decision, 96 of the two-member decisions were pending on appeal before the federal courts—six at the Supreme Court and 90 in various Courts of Appeals.  The Board, which was brought to full capacity by the recent appointments of Craig Becker, Mark Pearce and Bryan Hayes, sought the remand of each of those cases for further consideration and on August 5, 2010, issued decisions in four of those cases.  These were the Board’s first decisions in the 96 returned cases.

While the Board is making some headway, albeit slowly, the returned cases may be just the tip of the iceberg.  In this regard, the Board stated as follows in a recent press release:

Meanwhile, hundreds of other two-member cases were closed through compliance with the original Board decision, settlement, withdrawal or other means.  Still more are in some stage of litigation or compliance stemming from the original decision.  It is unclear how many of those rulings can or will be contested.

Potentially adding to the complexity of this situation, Member Schaumber (a Republican) departed from the Board on August 27, 2010; now, three of the four remaining Board Members are Democrats.  It is possible that this political shift may influence how the present Board reviews the remaining 92 returned cases or any challenges that arise from the additional cases referenced in the Board’s press release.

For employers involved in the nearly 600 vacated Board decisions, New Process Steel, LP may present an opportunity to seek a more favorable outcome now that the Board is officially up and running again.  We would be happy to assist any such employers in developing a strategy to achieve this.  And while the “two-member Board” deliberately refrained from making any major new pronouncements or interpretations of the National Labor Relations Act, at least some the decisions it did reach could be overruled in the coming months.  Therefore, employers should be cautious about relying on any decisions from this time period.  Finally, employers with imminent or pending proceedings before the Board should expect delays as a result of New Process Steel, LP.

We will provide further updates on this situation as material developments emerge.  Meanwhile, if you have questions about New Process Steel, LP or need assistance with any NLRB matter or proceeding, please feel free to contact us.