US employers continue to face uncertainty and increased risk due to decisions and enforcement actions by governmental agencies, including the National Labor Relations Board. The recent decision from the D.C. Circuit Court of Appeals is adding to that uncertainty. On January 25, 2013, the D.C. Circuit ruled that President Obama's three “recess” appointments to the NLRB in January 2012 while the Senate was allegedly on break were invalid. As a result, at least in the D.C. Circuit, the NLRB has been acting without the necessary three-member quorum and therefore all of its orders issued since January 2012 are void and unenforceable. The NLRB has announced it will file a petition for certiorari with the US Supreme Court for review of the decision. In the meantime, the NLRB is conducting business as usual and continuing to seek enforcement of its rulings.

Employers, on the other hand, are confronting difficult questions: Should a company comply with the NLRB's rulings? Should it appeal recent NLRB rulings? Should it challenge NLRB orders in pending matters? Should a company rush to file an appeal in the D.C. Circuit? For answers, employers are closely monitoring Noel Canning (and a crop of other appellate cases challenging the legitimacy of President Obama's “recess” appointments), as well as the outcomes of recent actions challenging the NLRB's authority to act in various forums, which have been mixed.

Looking ahead, if the court's decision is affirmed by the Supreme Court, all of the NLRB's decisions and orders over the past year would likewise be rendered unenforceable. More significantly, the President's power to make recess appointments would be sharply curtailed. As a result, President Obama may be forced to nominate centrist members to the NLRB in order to obtain Senate approval.

The Noel Canning Decision

In Noel Canning  v. NLRB, No.12-115 (D.C. Cir., January 25, 2013), Noel Canning petitioned for the review of an NLRB decision finding that it violated the National Labor Relations Act by refusing to reduce to writing and execute a collective bargaining agreement reached with the union. On the merits, the D.C. Circuit rejected the petitioner's argument that the Board did not follow applicable contract law when determining that an agreement had been reached. The D.C. Circuit nonetheless overturned the order, holding that the Board did not have a quorum and thus could not lawfully act. According to the court, President Obama's appointments of Sharon Block, Terence Flynn, and Richard Griffin to the NLRB on January 4, 2012 were not valid “recess” appointments under the Constitution.

In reaching its decision, the D.C. Circuit addressed two constitutional challenges to the NLRB's authority. First, the court considered whether the NLRB lacked authority to act for want of a quorum because three members of the five-member Board took office under putative recess appointments made when the Senate was not in recess. Second, the court addressed whether the NLRB lacked a quorum because the vacancies did not “happen during the Recess of the Senate,” as required for recess appointments by the Constitution. U.S. Const. art. II, § 2, cl. 3.

What does "the Recess" mean?

The "Recess Appointments Clause,” provides that “[t]he President shall have Power 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.” Id. art. II, § 2, cl. 3. Based on the natural meaning of the text as it would have been understood at the time of the ratification of the Constitution, as well as constitutional background and historical practice, the Court concluded that "the Recess" refers to the intersession recess of the Senate, i.e., "the period between sessions of the Senate when the Senate is by definition not in session and therefore unavailable to receive and act upon nominations from the President."

In doing so, the Court rejected the NLRB's position that the alternative appointment procedure created by that Clause is available during intrasession “recesses,” or breaks in the Senate’s business when it is otherwise in a continuing session. According to the Court, "as a matter of cold, unadorned logic, it makes no sense to adopt the NLRB's proposition that when the Framers said 'the Recess,' what they really meant was 'a recess.'" The court also dismissed the NLRB's attempt to find support for its interpretation in the practice of recent administrations to make intrasession appointments, noting that the "practice of a more recent vintage is less compelling than historical practice dating back to the era of the Framers."

Here, because the Senate had convened a new session on January 3, 2012 (even though it was not actively conducting business) and was not in the recess at the time of the putative appointments, the appointments were constitutionally invalid.

When does a vacancy "happen" during the Recess?

The D.C. Circuit next considered whether the NLRB lacked a quorum because the vacancies filled by President Obama's three appointments did not “happen during the Recess of the Senate.” After close examination of the text, structure, and history of the Recess Appointments Clause, the court concluded that "happen" means “arise” or “come into being." Accordingly, the Court concluded that the vacancies must occur during an intersession recess for the President to make a valid recess appointment. The President cannot fill vacancies that "happen to exist" during the recess. Accordingly, the appointments were invalid from their inception and the NLRB lacked a quorum of three members.

Implications for Employers

The decision is not likely to have an immediate impact on cases currently pending before the NLRB. The NLRB is continuing with business as usual and issuing decisions. Similarly, the NLRB will continue to investigate newly filed unfair labor practices, Regional Offices will continue to process election petitions and NLRB Administrative Law Judges will continue to hold hearings and issue decisions. While Republican legislators have introduced a bill which would prohibit the NLRB from enforcing or implementing decisions and regulations or taking any other action that requires a three-member quorum, it is unlikely to become law.

If the Obama administration loses before the Supreme Court, the NLRB's rulings since January 4, 2012 are invalid. Moreover, the NLRB would be unable to issue further rulings until President Obama appoints at least two new members and those members are confirmed by the Senate. Craig Becker’s intrasession recess appointment by President Obama also arguably would be invalid, with the result that any decision in which he participated would be invalid. A similar situation played out in 2010, when the NLRB had only two members and various federal appellate courts disagreed about whether its rulings were valid. The Supreme Court ultimately weighed in, holding that the NLRB lacked authority to make rulings with less than three members as required by law. This decision invalidated nearly 600 decisions. President Obama has formally re-nominated Members Griffin and Block. If the Supreme Court were to reverse the D.C. Circuit's ruling, the NLRB's decisions would stand, and the members appointed during the Senate break could continue to serve.

While employers await the outcome of the likely review of the D.C. Circuit's decision by the Supreme Court, there are several points to keep in mind:

  • When it comes to appeals, Noel Canning should have an immediate impact on employer strategy. Employers considering appealing a Board decision should file their appeal in the D.C. Circuit Court (federal appeals courts in other jurisdictions are not bound by the D.C. Circuit's opinion) and raise the quorum issue as a defense.
  • Employers confronting NLRB proceedings should consider challenging the NLRB's authority to act where appropriate. In addition, employers should take steps to preserve arguments regarding the NLRB's lack of authority to act by, for example, filing exceptions in unfair labor practice matters, filing requests for review, and raising the point in briefs.
  • Employers should proceed cautiously when considering changes to policies or practices based on NLRB decisions. The NLRB rattled corporate America last year, issuing decisions generally viewed as highly favorable to unions and organized labor on a wide variety of topics. See our U.S. Labor Law Year in Review, which recaps the most significant decisions. While these controversial decisions may ultimately be overturned as a result of the ruling, the NLRB likely will reaffirm its rulings if and when new nominees are approved. In addition, it is clear that the NLRB's General Counsel and Regional Directors will continue to rely on and prosecute employers based on those rulings.
  • Given the current uncertainty surrounding the NLRB's authority and the validity of its decisions, employers should consult with labor counsel about available options before taking action based on Noel Canning and closely monitor additional developments.