With last year’s Supreme Court decision in Noel Canning only slightly in the rearview mirror, another court has ruled that the NLRB made yet another unlawful end-run around the laws that limit its authority to act.  In a case involving an Arizona ambulance company, the U.S. Court of Appeals for the D.C. Circuit ruled on August 7 that a complaint issued by the NLRB’s Acting General Counsel against that employer was void because, at the time he issued that complaint, he had been improperly appointed to that position in violation of the Federal Vacancies Reform Act.  As a consequence of the D.C. Circuit’s decision, all complaints issued by the Acting General Counsel between January 5, 2011 and November 4, 2013 may be deemed void, and thus cannot be the basis for the finding of any unfair labor practices, if – and this is a very big if – the defendant challenged the NLRB’s authority to issue the complaint in the first instance based on the FVRA.  The court was careful to explain that its decision did not mean that all NLRB complaints issued during that nearly two-year period are void.  Rather, it explained that its decision opens the door to success on an FVRA defense for those employers that had the foresight to raise the issue in litigation before the NLRB.

To put this all in context, some background is necessary.

The FVRA and Presidential Appointments

Congress passed the FVRA in 1998 to tighten control over the appointments process. Officers of the United States (such as the General Counsel of the NLRB) must be appointed by the President and approved by the Senate before they may take office.  The FVRA and its predecessor vacancy acts were passed to regulate presidential appointments of interim officers and keep agencies operating during what can become a very long confirmation process.

In the event of a vacancy under the FVRA, if the President appoints someone to serve as in an interim capacity, that person may only serve as an acting officer for 210 days, or until the President nominates that person for the permanent position.  Generally, any actions taken by the interim officer serving in violation of the FVRA’s requirements are void.

In June 2010, the NLRB’s General Counsel resigned, and President Obama appointed Lafe Solomon to serve as Acting General Counsel on an interim basis. The President then nominated Mr. Solomon for the permanent position on January 5, 2011. The Senate rejected Mr. Solomon’s nomination and ultimately a different candidate, former NLRB Member Richard Griffin, received a nomination and was confirmed as the NLRB’s new, non-interim General Counsel on October 29, 2013. Mr. Solomon, however, continued to serve as Acting General Counsel during the entire nomination-rejection-second nomination-confirmation process, issuing complaints against employers until leaving the post on November 4, 2013.

The D.C. Circuit Case: SW General v. NLRB

The D.C. Circuit case decided last week involved a provider of ambulance services to hospitals in Arizona. Its paramedics, nurses and technicians are unionized and had a longevity pay clause in their collective bargaining agreement. When that agreement expired, and before a new one was in place, the employer stopped making longevity payments. The union immediately filed an unfair labor practice charge with the NLRB, and the agency, based on Mr. Solomon’s purported authority as Acting General Counsel, issued a complaint on January 31, 2013 – more than two years after Mr. Solomon had been officially nominated (but not confirmed) to serve as the NLRB’s permanent General Counsel.

An administrative law judge ruled for the union on the merits, but the ambulance provider challenged the ALJ’s decision on numerous theories, one of which involved the FVRA. Specifically, it argued that the NLRB’s formal complaint was void on its face because it was issued by Mr. Solomon, who it contended was serving in violation of the FVRA when the agency issued the complaint.  If Solomon was serving in violation of the statute, it argued, then he had no authority to issue the complaint in the first instance, and thus not only was the complaint issued by him against the ambulance provider void, but all complaints issued under his authority were void.

The NLRB rejected the ambulance company’s arguments, ignoring the FVRA claim, and adopted the ALJ’s recommended order in May 2014.  The employer then appealed to the D.C. Circuit, again raising the FVRA issue.

Last week’s D.C. Circuit decision vacated the NLRB order and held that (1) Mr. Solomonwas serving in violation of the FVRA from January 5, 2011 (the date he was nominated to the permanent post) until he left the position on November 4, 2013; and (2) that violation rendered the decision voidable and required a finding for the employer, as it had timely raised the issue below in the proceedings before the NLRB (and not for the first time on appeal).

The appellate court reviewed the text of the FVRA and determined that it clearly supported the employer’s position. The NLRB attempted to rescue its position by relying on an exception in the FVRA to the rule that decisions made by officers serving in violation of the statute are automatically void.  The court however held that in the NLRB context, those decisions are voidable if there is harm to the party challenging the decision.

In the ambulance company’s case, the circuit court held that the harm done was structural – if there had been no General Counsel, the NLRB could not have filed a complaint against the company; therefore, the company only faced the harm of a complaint because of the statutory violation that improperly allowed Mr. Solomon to remain in office, invalidly issuing complaints charging unfair labor practices.

Although much of the case seems to read like NLRB v. Noel Canning, in which the Supreme Court voided 18 months’ worth of NLRB decisions by overturning several of the President’s recess appointments to the Board, the D.C. Circuit put an important limitation on its decision in an attempt to avoid causing similar problems. The court specified that a challenging party must meet two criteria before succeeding on an FVRA defense to an NLRB complaint issued under Mr. Solomon’s purported (but invalid) authority: (1) the party must raise the issue, whether as a separate claim or as a defense, “at or around” the time of the challenged government action; and (2) the agency must have had “reasonable notice” of the claimed defect in the official’s title to office.

The court held that the ambulance company had raised the defense of an FVRA violation at the proper time in the proceedings against it and that the NLRB had reasonable notice of the defect. Thus, the court held for the employer, and vacated the NLRB ruling.

The Bottom Line

SW General v. NLRB does not ensure victory for employers who are defending NLRB complaints issued between January 5, 2011 and November 4, 2013.  However, if the employer raised an FVRA violation as a defense before the ALJ or as an exception to adverse ALJ findings before the NLRB, then under this ruling, the complaint against it likely would be declared void.  In most cases, that should end the matter, as the National Labor Relations Act’s six-month statute of limitations should prohibit the refiling of a defective, voided complaint.  With the NLRB suffering yet another embarrassment at the hands of the federal courts, perhaps the agency finally will get the message that there is a correct way to do things, and it will exercise more restraint going forward, rather than engaging in self-serving maneuvers (such as improper delegations of authority) that evade the laws that exist to reign in what has become its regrettable practice of administrative overreaching.