On January 25, 2013, a panel of the D.C. Circuit Court of Appeals ruled that all three of the President’s 2012 appointments to the National Labor Relations Board (NLRB or Board) violated the Constitution’s Appointments Clause. See Noel Canning, A Division of the Noel Corporation v. NLRB, Case No. 12-1115 (D.C. Cir. Jan. 25, 2013), denying enf. to 358 N.L.R.B. No. 4 (Feb. 8, 2012). This was no mere technicality: Without the three appointments, the NLRB has lacked a proper quorum to issue decisions since January 4, 2012. An entire year of the agency’s work is now cast in doubt.  

A defiant NLRB says it is not accepting the decision and will appeal. In the meantime, though, the NLRB faces its second major crisis of authority in less than three years. (The last crisis was the Supreme Court’s New Process Steel decision, which threw out more than two-and-a-half years of NLRB decisions for a previous lack of a quorum.)  

This Advisory covers four main topics: (1) the background and holding of the Noel Canning case; (2) the immediate effects of the D.C. Circuit’s ruling on what the NLRB can — and can’t — do; (3) the implications of the ruling on several controversial decisions just issued by the NLRB; and (4) where the Administration and the NLRB may be headed after this ruling.  

Noel Canning and the Recess Appointments Controversy

By all accounts, the D.C. Circuit’s ruling in Noel Canning came as a devastating surprise to the Obama Administration. The case was expected to turn on technical details about how long Congress must adjourn before the President can exercise the Recess Appointment power. (The Constitution requires that Officers of the United States must be confirmed by the Senate, but the President may make temporary appointments to fill vacancies that happen during “the Recess” of Congress.)  

The January 2012 NLRB appointments were in dispute because Congressional Republicans attempted to prevent a “recess” from occurring at all from December 2011 to January of 2012. Instead, the Senate met in a series of brief and sparsely attended “pro forma” meetings that extended the First Session of the 112th Congress until seconds before the Second Session began on January 3, 2012. The “pro forma” meetings then continued until January 23, 2012, when the Congress resumed its work in earnest. It was between two “pro forma” meetings – but after the Second Session formally began — that the President appointed three Members of the NLRB on January 4, 2012. (Two of these appointees were Democrats; the third, a Republican, has since resigned.)  

Critics of the disputed appointments alleged that Congress remained in session because of the “pro forma” meetings. This, they claimed, made recess appointments improper. The Obama Administration countered that the “pro forma” meetings were a sham because Congress was not actually conducting business and was therefore in recess even if it said it wasn’t.  

The test case for this constitutional problem ended up being a run-of-the-mill dispute involving a company’s alleged failure to bargain in good faith with a union. The NLRB sided with the union and ordered a remedy. The company sought review from the D.C. Circuit — contesting the NLRB’s findings, but also challenging the Board’s authority to act when its quorum depended on the members appointed in 2012. Commenters expected the case to resolve the longstanding debate over “pro forma” meetings and their effect on the President’s Recess Appointments power.  

The D.C. Circuit sided with the employer on the constitutional issue. (The employer lost on the issue of its good-faith bargaining.) But the court’s decision dug much deeper than was expected. The only proper “Recess” of Congress, the Court held, is before and after the “Sessions” of Congress (each Session is typically a year long, meaning that each Congress has two Sessions). In other words, the President has no power to make “intra-Session” recess appointments at all, even though Presidents have done so for years. Here, the disputed NLRB Members were appointed a day after the Second Session of the 112th Congress began (after the inter-Session “Recess”). Under the court’s analysis, all three of the January appointments were therefore invalid. The issue of “pro forma” meetings of the Senate ended up being an unnecessary sideshow. (In addition, the court held by a 2-1 margin that “Recess” appointments are limited to vacancies that “arise” during the inter-Session Recess, which would be an additional ground for invalidating the January 2012 appointments.)  

At this point, some déjà vu is in order. In 2010, the US Supreme Court decided that the National Labor Relations Act does not permit the NLRB to exercise its full authority unless it has a quorum of three members. See New Process Steel, L.P. v. NLRB, 130 S.Ct. 2635 (2010). Subtracting members appointed in 2012, the NLRB now has only two members. (Indeed, it was concern about a repeat of New Process Steel and the NLRB’s lost quorum that led the President to make the January 2012 appointments.)  

The Noel Canning saga continues, to be sure. The Obama Administration will seek review of the decision, either from an en banc D.C. Circuit Court and/or from the Supreme Court. In addition, other circuit courts are free to disregard Noel Canning, and an earlier decision from the Eleventh Circuit Court of Appeals (covering much of the Southeast, including Florida and Georgia) concluded that the President does have the power to make “intrasession” recess appointments. See Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004).  

Impact of the Noel Canning Decision on Employers

The NLRB is not required to follow the D.C. Circuit’s precedent and shut itself down until all appeals are exhausted. And it has stated that it will not do so.  

In the short term, though, the case is incredibly disruptive. For one thing, the D.C. Circuit hears more NLRB cases than any other circuit court of appeal, and its jurisdiction is nationwide. Thus, any case decided by the NLRB faces a significant risk of being vacated regardless of its merits.  

To be clear, the NLRB retains some authority to act even without a quorum. The term “NLRB” describes both the actual Board in Washington (comprised of five Members when at full strength) but also a major federal agency that includes a General Counsel, Regional Directors around the country, field agents and attorneys, and administrative law judges. The Noel Canning decision affects only actions of the Board that are decided by the Board Members themselves, not lower-level agency work.  

However, the NLRB can only do so much without a quorum. For example:

  • Without a quorum, the NLRB’s Regional Directors can investigate alleged unfair labor practices, and the General Counsel can try those cases before administrative law judges (ALJs). But ALJ decisions must be adopted and/or reviewed by the Members of the Board to take effect — otherwise they are unenforceable. Thus, the lack of a quorum renders the Board’s enforcement powers toothless.
  • The NLRB may not issue regulations without a quorum.
  • Without a quorum, the Regional Directors can still conduct union representation elections and hold hearings on objections to elections. They can even issue certifications of elections, which require employers to recognize and bargain with unions that win elections. However, neither unions nor employers will be able to challenge contested election issues to the Members of the Board.„
  • Although the NLRB cannot issue final orders in unfair labor practice cases without a quorum, the Acting General Counsel of the NLRB has claimed an independent authority to file federal injunction actions in cases of alleged unfair labor practices. How far this power reaches raises a number of thorny statutory issues, however.„
  • Although the NLRB typically permits the litigants (unions and/or employers) to select between the D.C. Circuit or local circuits for judicial review cases, it is possible the NLRB will engage in more active “forum shopping” to avoid the D.C. Circuit.

Thus, even if the D.C. Circuit’s ruling holds up, employers will still find themselves subject to union organizing campaigns and (the first stages of) unfair labor practice cases. However, already-lengthy delays in the Board’s decisionmaking process will go even longer, as a new wave of legal challenges based on Noel Canning is now inevitable.  

Status of 2012 NLRB Decisions

Organized labor may be particularly upset with the Noel Canning decision because it threatens a series of recent favorable 2012 rulings from the NLRB:  

Costco Wholesale Corp. - The NLRB invalidated a series of employer rules (including social media guidelines) for allegedly impeding employees’ rights to support union activity. This included seemingly common-sense rules like a prohibition on leaving the workplace without authorization and respecting the privacy of co-workers’ medical leave issues.  

Hispanics United of Buffalo - The NLRB required reinstatement of employees who criticized a co-worker for complaining to management, even though the employer had a written cyber-bullying policy.  

Alan Ritchey, Inc. - It was held that employers with newly recognized labor unions must bargain all forms of discipline (even written warnings). In some cases (such as discharges and suspensions), advance notice would also have to be provided to the union.  

WKYC-TV, Gannet Co. - The Board reversed 50 years of its own precedent and held that employers must continue to deduct dues payments from employee paychecks, even after a union contract requiring union membership has expired.  

Piedmont Gardens - The Board reversed more than 30 years of precedent and now requires that employers produce to unions the statements that employees have given to management regarding their co-workers’ misconduct, with only limited exceptions.  

The NLRB will continue to follow these decisions internally, but without judicial enforcement, they risk becoming meaningless. And appeals in these cases will now involve not only the merits of these controversial cases, but also the Board’s authority to issue any decisions at all.  

If nothing else, this is as good a reminder as any that the NLRB’s decisions are not always judicially enforced. Employers should bear this in mind when considering whether they will follow every twist and turn of the NLRB’s jurisprudence. For example, how often will employers revise their social media policies every time a new NLRB decision on this trendy topic issues? While taking adverse Board decisions all the way through to the court of appeals can be a time-consuming (and expensive) proposition, there are circumstances that can justify it. Noel Canning will only increase employers’ incentives to resist unfavorable Board decisions.

What Next?

As noted above, the immediate next step for the Obama Administration will be to seek review of the Noel Canning decision. The NLRB will also argue that other circuit courts should not follow the case’s precedent.  

However, unless the Administration convinces the Supreme Court to take the case this Term (typically ending in June), it may be a year or more until the courts have definitively ruled on this issue.  

This means the agency will find itself functioning with a nontrivial threat to its jurisdiction. While it is tempting to think the Board will constrain its decision-making and attempt to avoid drawing further controversy to itself, it seems just as likely that the Board will continue down its path of altering US labor law to favor unions more than employers.  

One final point: Noel Canning illustrates the continuing cost of Washington gridlock. One could imagine — in an ideal world — a compromise in which the President agreed to appoint moderate NLRB members (such as academics or former judges), if their confirmation would be assured. But no such outbreak of bipartisanship or moderation seems imminent.