Appellate Court holds NLRB Recess Appointments unconstitutional; status of hundreds of NLRB rulings in doubt

Summary

On January 25, 2013, the U.S. Court of Appeals for the D.C. Circuit ruled that President Obama's January 2012 "recess" appointments to the National Labor Relations Board ("Board" or "NLRB") were unconstitutional because the Senate was not "in recess" at the time the appointments were made. Based on this determination, a unanimous three-judge panel of the court concluded that the Board order under review in Noel Canning v. NLRB was invalid because the Board lacked a quorum when it issued its decision and thus lacked the legal capacity to act. Significantly, the court's decision calls into question the status of all Board decisions issued since January 2012.

What happened?

The case arose from a dispute between Noel Canning, a bottler and distributor of Pepsi-Cola products, and a Union representing its employees regarding whether the company had unlawfully refused to execute a written agreement the parties purportedly had reached during negotiations for a collective bargaining agreement in 2010. Following a two-day hearing, an Administrative Law Judge of the NLRB ("ALJ") determined that the company's refusal to execute the agreement constituted an unfair labor practice under section 8(a)(1) and (5) of the National Labor Relations Act. The ALJ ordered Noel Canning to sign the agreement, and the company appealed to the Board. On February 8, 2012, the Board issued an order affirming the decision of the ALJ. The company filed an appeal to the U.S. Court of Appeals for the D.C. Circuit, arguing that the Board's order was invalid and unenforceable because the Board lacked authority to act for want of a quorum. The crux of the company's argument was that three members of the five-member Board were never validly appointed because they took office under putative "recess appointments" by the President, which were made when the Senate was not in recess.1

The "Recess Appointments Clause"

Like judicial appointments, Cabinet secretaries and certain other high-level positions within the Executive Branch, appointments to the NLRB are subject to confirmation by the Senate in accordance with its constitutional role to "advise and consent." However, the Constitution provides that when the Senate is in recess, the President may make such appointments on an interim basis, until the end of the next (one year) session of Congress. Specifically, the Recess Appointments Clause of the Constitution provides: "the 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." (emphasis added).

Over the last 20 years, due to partisan wrangling between the Executive and Legislative branches and controversy surrounding several persons nominated to the Board, Presidents of both parties, at times, have sought to avoid the arduous Senate confirmation process by appointing Board Members when the Senate was not in session.

On January 4, 2012, President Obama appointed three members (Sharon Block (D), Terence Flynn (R) and Richard Griffin (D)), to vacancies purportedly pursuant to the Recess Appointments Clause of the Constitution. Block was appointed to a seat that became vacant on January 3, 2012. Flynn filled a seat that became vacant on August 27, 2010. Griffin filled a seat that became vacant on August 27, 2011. On January 4, 2012, the Senate was operating under a unanimous consent agreement, which provided that the Senate would meet in pro forma sessions every three business days.

Critically, the court determined that the Senate was not in recess on January 4, 2012. In reaching its decision, the court found that as used in the Recess Appointments clause, the term "recess" refers only to "the Recess," which is the inter-session break between the first and second session of each Congress' term at the end of each calendar year. The court rejected the NLRB's argument that other periods when the Senate was not in session could constitute a recess within the ambit of the Recess Appointments Clause. The court further rejected the argument that the court should defer to the President's determination of when the Senate was in recess. Such deference, the court explained, effectively would allow the President to determine the scope of his own appointments power. Clearly, under the administration's argument, the President could simply wait for a recess period to make a chosen appointment, and effectively avoid the need for Senate confirmation. The court opined that such a result would "eviscerate" the Constitution's critical separation of powers.

Notably, the court also held that the President may use the power afforded by Recess Appointments clause to fill only those vacancies which arise during "the Recess" of the Senate. As explained above, this is limited to the period of time between the sessions of the Senate, usually occurring in mid to late December and ending on January 3. Under the court's ruling, and contrary to recent practice by Presidents of both parties, vacancies that arise at any other times during the year may not be filled by a "recess appointment." Instead, nominees to these positions must be confirmed by the Senate. Under this rationale, since the vacancies that the President attempted to fill in January 2012 did not occur during the Senate's recess, they could not be filled by "recess" appointments.

Impact on the NLRB

The court's decision calls into question the validity of more than 200 decisions issued by the Board since January 2012. Under the Supreme Court's 2010 decision in New Process Steel v. NLRB, (2010), it is clear that the Board must have a minimum of three Members to issue decisions and exercise its rule-making authority. In New Process Steel, the Supreme Court held that the Board lacked authority to issue decisions with only two members, and effectively invalidated all of the rulings issued by the two-member Board. If the Court of Appeals' decision in Noel Canning is sustained on appeal – and it is virtually certain that the Administration will seek review either by the full Court of Appeals, and/or most likely the Supreme Court – all cases decided by the NLRB since January 4, 2012 would be invalid and unenforceable. Based on this, several Board decisions that have been a source of great concern to employers would be null and void, including decisions 1) limiting employers' ability to control employees' use of social media; 2) prohibiting employers from exercising discretion in determining when off-duty employees may access the employer's premises and 3) preventing employers from requiring employees to keep confidential the process and results of certain internal investigations in the workplace.

Late Friday afternoon, NLRB Chairman Pearce issued a statement in which he declared that the Members of the Board would continue to operate notwithstanding the decision of the Court of Appeals. It remains to be seen whether the court will enjoin the Board's Members from continuing to act and issue rulings, as its decision would seem to require. Alternatively, the Board may seek to obtain a stay of the court's order pending further review by the full court or the Supreme Court.

Nevertheless, contrary to some published reports, the court's ruling does not mean that the NLRB will "shut down." The NLRB's Regional Offices still will be open for business, i.e., receiving, processing and investigating unfair labor practice charges, processing election petitions, and conducting secret ballot elections. Likewise, the court's ruling does not curtail the ability of the Acting General Counsel to issue complaints in unfair labor practice cases, nor the ability of Administrative Law Judges to hear such cases. However, if the Board lacks a quorum, it cannot authorize requests for injunctive relief under Sections 10(j) and (l) of the Act.

Early indications from the NLRB and the White House suggest that the Board will continue to conduct business as usual, including issuing decisions in cases before it. Because the Act allows parties aggrieved by a decision of the NLRB to appeal to D.C. Circuit Court of Appeals (as well as the circuit court of appeals for the state in which the relevant NLRB Regional Office is located), it would seem at this time that any employer who receives an adverse decision from the Board has a ready-made issue for appeal to the D.C. Circuit.

Guidance for Employers

The court's decision in Noel Canning is extremely significant, with widespread ramifications extending well beyond the National Labor Relations Act. Nevertheless, for employers, it bears emphasizing that for the present, the Board's decisions from January 2012 have not been set aside, and employers should continue to abide by them until such time as a reviewing court – probably the Supreme Court – determines otherwise.

In the upcoming weeks, Saul Ewing's Labor, Employment and Employee Benefits Practice will be conducting a webinar series for clients and friends to review the court's decision in Noel Canning and recent notable decisions by the NLRB. In the interim, we will keep you apprised of any additional developments regarding the status of the Board in view of the Noel Canning decision.

1. The company also asked the court to overrule the Board's decision on the "merits" of the case, i.e., that the Board's decision was incorrect, but the court declined to overturn the Board's decision on those grounds.

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