On May 7, 2013, in yet another significant legal setback for the National Labor Relations Board (“Board”), a unanimous panel of the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) invalidated the Board’s 2011 rule (“Rule”) mandating that all employers subject to the National Labor Relations Act (‘Act”) post a lengthy notice of alleged employee rights on their websites and at their workplaces. National Association of Manufacturers et al v. National Labor Relations Board, No. 12-5068 (D.C. Cir., May 7, 2013). The D.C. Circuit’s sound rejection of the Board’s Rule knocks out a signature element of the Board’s attempt to expand the reach and scope of federal labor law under the direction of former Chairman Wilma Liebman, with support from members Craig Becker and Mark Pearce. When viewed together with other recent Court decisions, such as Noel Canning v. NLRB, 705 F.3d 490 (D.C. Cir. 2013), which invalidated President Obama’s recess appointments to the Board, as discussed here, one does not need to be an expert in reading the tea leaves to see that the future does not look bright for many of the Board’s aggressively pro-labor rules and decisions since 2010.

  1. Background

On August 30, 2011, the Board issued a rule requiring employers subject to its jurisdiction to post on their properties and websites a “Notification of Employee Rights under the National Labor Relations Act” (“Notice”) 76 Fed. Reg. 54,006 (August 30, 2011). The Notice comes in prescribed size and format and identifies general and specific employee rights under the National Labor Relations Act. The enumerated rights include the more general rights to form a union, to bargain collectively, to discuss wages and benefits, to strike and picket, and so forth. The Notice also states that it is illegal for an employer to prohibit employees from wearing union hats, buttons, t-shirts, and pins in the workplace, or to spy on or videotape peaceful union activities or pretend to do so. Perhaps not surprisingly, the Notice made no mention of the employees’ other rights under the Act, such as the right to decertify a union, the right to refuse to pay dues in a right to work state, and to object to dues in excess of those required for representational purposes.

The Rule also suspends the Section 10(b) six-month statute of limitation for the filing of any charge unless the employee has received actual or constructive notice that the conduct complained of is unlawful. As an additional enforcement mechanism, the Rule provides that the Board may consider an employer’s knowing and willful failure to comply with the requirement to post the employee notice as evidence of unlawful motive in a case in which motive is an issue.

As justification for the Rule, the Board invoked Section 6 of the Act, which provides that the “Board shall have authority from time to time to make, amend, and rescind, in the manner prescribed by the [Administrative Procedures Act], such rules and regulations as may be necessary to carry out the provisions of the Act.” 29 U.S.C. § 156. The Board offered various justifications for the exercise of its alleged powers under Section 6 to promulgate the Rule.

Various small business and employer groups challenged the Rule, under a variety of theories, and the federal District Court for the District of Columbia in 2012 invalidated two portions of the Rule: the blanket tolling of the limitations period and the blanket presumption of an anti-union animus if the employer failed to post the notice. The District Court, however, allowed the Rule to stand despite its invalidation of portions of the rule, and the Plaintiffs appealed the case. On April 17, 2012, a Panel of the D.C. Circuit Court of Appeals stayed the enforcement of the Rule pending the Appeal. Shortly after the District Court opinion, a federal district court in South Carolina found that the Board lacked the authority to promulgate the rule–a decision now on appeal to the United States Court of Appeals for the Fourth Circuit.

  1. Decision

The Court of Appeals initially reviewed the issue of whether the Board even had a legal quorum at the time it promulgated the Rule in light of the D. C. Circuit’s invalidation of President Obama’s recess Board appointments in the Noel Canning decision. The Court determined that because the Board still had at least three lawfully appointed members at the time it promulgated the Rule for publication in the Federal Register in late August 2011, it had the necessary quorum to act. (Interestingly, the Court noted that Craig Becker’s appointment to the Board was assumed to be constitutionally invalid under Noel Canning, although it did not need to decide that issue because there was a quorum regardless).

The Court then noted that Section 8(c) of the Act, which was enacted in 1947, implemented an employer’s First Amendment right to engage in non-coercive speech about unionization and expressed a congressional intent to encourage debate on labor-related issues. Section 8(c) provides, in relevant part:

The expressing of any views, argument, or opinion, or the dissemination thereof, whether in written, printed, graphic or visual form, shall not constitute or be evidence of any unfair labor practice under any of the provisions of this [Act], if such expression contains no threat of reprisal or force or promise of benefit. 29 U.S.C. § 158(c).

The Court went on to say that although Section 8(c) “precludes the Board from finding non-coercive employer speech to be an unfair labor practice, or evidence of an unfair labor practice, the Board’s rule does both.” The Court noted that the Rule mandates that the failure to post the required Notice constitutes an unfair labor practice, and that same failure can also be evidence of anti- union animus to support another unfair labor practice. The Court found that both of these provisions violated the plain language of Section 8(c) by requiring the employer to disseminate the Board’s Notice in order to avoid one or more unfair labor practice charges. In reaching this decision, the Court also analyzed the First Amendment implications of the Rule, and suggested (without holding) that the First Amendment prohibited the Board from compelling employers to disseminate its carefully selected speech.

The Court then analyzed that portion of the Rule that purports to toll six-month limitations period of the Act when an employer has failed to post the Notice. The Court rebuffed arguments made by the Board in support of the so-called equitable tolling. The Court ultimately concluded that the 1947 Congress could not have foreseen the type of alleged equitable tolling the Board would attempt to enact into law in 2011, and thus could not have intended that equitable tolling be incorporated into the Act. Consequently, the Board’s equitable tolling theory violated the Act.

Having found all three enforcement mechanisms for the Rule invalid, the Court concluded that it need not reach the question whether the Board had the authority under Section 6 to promulgate the Rule. The Court concluded that the Board would not have adopted the Rule absent any basis for enforcement, and so invalidated the Rule as a whole.

In a separate concurring opinion, two of the three members of the panel stated that they alo beleived that the Board did not have authority under Section 6 to promulgate the Rule in the first place. (Judge Randolph, who wrote the lead opinion, did not reach the issue due to his reliance on Section 8(c)). The concurring judges found the Board to be bound in its regulatory authority not only by the purpose that Congress has selected, but also by the means chosen by Congress to achieve that purpose. The concurring opinion then notes that Congress established the Board as a reactive agency to act in response to an unfair labor practice charge or petition. After reviewing the Board’s purported justifications for the Rule, the concurring opinion concluded that the rule was not “necessary” to carry out a substantive provision of the Act, and that the Act “simply does not authorize the Board to impose on an employer a freestanding obligation to educate its employees on the finer points of labor relations law.” According to the concurring opinion, the remedial and reactive nature of the Act supports the conclusion that Congress did not intend to authorize such an “aggressively prophylactic” posting rule.

  1. Conclusion

The D.C. Circuit’s decision is a particularly devastating blow for the agenda of the Obama-appointed Board. The posting was a highly publicized attempt by the Board to implement some of organized labor’s wish list–an attempt which the Court unanimously rejected in a decision that one assumes is relatively secure given the current make-up of the Supreme Court. In the decision, and particularly in the concurring opinion, the Court also raised the specter of serious issues for future attempts by the Board to implement proactivelyits agenda throughthe rule-making process by relying on Section 6 of the Act. Similarly, the Court’s lengthy discussion of the First Amendment implications of compelled speech could seriously undermine other contemplated or pending Board rules, such as the mandatory reading of postings by employers as well as the Board’s possible attempts to limit captive audience meetings or mandate increased labor access to employer property. In any case, the short term effect of the decision is that the Board’s posting Rule will continue to be on hold for at least the foreseeable future, and most likely forever.