Tuesday, January 17, 2023: U.S. Appellate Court for D.C. Circuit Blocked Key Aspects of Trump-Era NLRB Union Election Rule
Trump NLRB Should Have Sought Public Comment on 3 Key Changes, Court Majority Ruled
Double-edged Sword as Biden Federal Agencies Are Also Trying to Force Regulatory Shortcuts
In a 2-1 decision, the U.S. Court of Appeals for the D.C. Circuit ruled that the (Trump) National Labor Relations Board (NLRB) violated the Administrative Procedure Act (APA) by failing to seek formal APA Rulemaking through public “Notice and Comment” before adopting three changes to its 2019 Rule to increase the time for union elections (AFL-CIO v. NLRB, Case Nos. 20-5223 and 20-5226). However, two other parts of the Rule impacted only internal agency procedures and, thus, did not require APA Rulemaking, the court concluded. Accordingly, the Biden NLRB may change those internal agency procedures tomorrow without formal APA Rulemaking.
The panel included Obama-appointees Circuit Judges Cornelia Pillard and Sri Srinivasan and Trump-appointee Neomi Rao. Judge Pillard wrote the 47-page majority opinion. Judge Rao, whose name might sound distantly familiar, wrote a 22-page opinion concurring in part and dissenting in part. (Sidenote: From July 2017 to the time of her appointment to the D.C. Circuit in March 2019, Judge Rao was the Administrator of the Office of Information and Regulatory Affairs (OIRA) in the White House Office of Management and Budget.)
How We Got Here
Once a union seeks a union election, an election campaign begins under strict rules as the union and the company then vie for the votes of the employees to be in a union or not upon a secret ballot majority vote. Companies usually prefer a longer period of time to campaign because the union has typically been planning its campaign and has been secretly meeting with disgruntled employees for some time before the union alerts the company to its plan to call for a vote to unionize the company’s employees.
In December 2019, the Trump-Era NLRB published a Final Rule that rolled back the Obama-Era NLRB’s “Quickie Election Rule.” The Obama NLRB had published the Quickie Election Rule in December 2014 which took effect in April 2015. (See our story here.) The 2014 Rule dramatically shrank the election campaign timeframe. Score 1 for union supporters.
Although the Board issued the 2019 Rule without a public notice and comment period, the Trump NLRB asserted at the time that the Rule fell within the APA’s exception for “rule of agency organization, procedure, or practice” (at 5 U.S.C. §553(b)(A)). Score 1 for opponents of unions, although the Trump NLRB should have known that it could not skirt proper regulatory procedures the APA has required now for almost three quarters of a century.
In March 2020, the AFL-CIO (unsurprisingly) sued in federal District Court, claiming that the 2019 Rule ran afoul of the APA. Specifically, the union challenged five of the 2019 Rule’s provisions:
- the reinstitution of pre-election hearings for litigating eligibility issues;
- timing of the date of the election;
- voter list timing;
- election observer eligibility; and
- timing of Regional Director certification of representatives.
On May 30, 2020 – one day before the 2019 Rule was slated to take effect – then D.C. federal District Court Judge Ketanji Brown Jackson (now a U.S. Supreme Court Justice) struck down the Rule. She ruled that the five challenged provisions of the Rule did not fall within the APA’s procedural exception. The remaining changes took effect as scheduled.
The (Trump) Board (unsurprisingly) appealed Judge Jackson’s decision.
D.C. Circuit Majority Upheld Two Provisions, But Struck Down the Remainder
The appellate court first ruled unanimously that the District Court had jurisdiction over the case. The lower court had jurisdiction because the statutory provision for direct review in federal appellate courts of NLRB orders regarding unfair labor practices does not apply to Rules that are exclusively concerned with representation elections, such as the 2019 Rule at issue.
Turning to the merits, the panel majority held that Judge Jackson erred in concluding that none of the five challenged provisions comes within the procedural exception. The court found that two of them – the reinstitution of pre-election hearings for litigating eligibility issues and the timing of the date of the election – did. Because those two provisions are rules of agency procedure, they were validly put into effect without a notice and comment period, the D.C. Circuit held.
However, the appellate court majority affirmed Judge Jackson’s invalidation of the rules regarding the eligible employee-voters list, the timeline for certification of election results, and election-observer eligibility. The majority affirmed Judge Jackson’s holding that these three provisions were substantive changes that did not fall within the APA’s procedural exception allowing the Board to by-pass formal APA rulemaking. This meant that the NLRB should have undertaken formal APA Rulemaking before issuing these three of its new Rules.
The appeals court panel majority also agreed with Judge Jackson’s rejection of the AFL-CIO’s assertion that the 2019 Rule was “arbitrary and capricious” as a whole. Because, as Justice Jackson explained, “‘the record establishes that the Board exercised its discretion with relevant information in hand and with eyes wide open concerning the impact of the significant changes that it was adopting,’” the 2019 Rule as a whole passed APA muster.
Finally, the appeals court majority agreed with the union’s assertion that a provision in the 2019 Rule regarding ballot impoundment procedures when a request for review is pending (one of the provisions that took effect as scheduled) was unlawful. Under that provision, if a party had filed a request for review of a direction of election within ten business days of its issuance by the Regional Director, and the Board then either granted the request or did not rule on it before the election occured, then “all ballots shall be impounded and remain unopened pending such ruling or decision.” The D.C. Circuit ruled that the impoundment provision violated Section 3(b) of the National Labor Relations Act (29 U.S.C. § 153(b)) because it was a prohibited stay of action by Regional Directors.
Judge Rao’s Dissent Asserted Majority Used Obsolete Legal Standard
While Judge Rao concurred with the majority’s decision to reject the AFL-CIO’s challenge to the 2019 Rule as a whole, she dissented as to the majority’s invalidation of the specified provisions. Judge Rao stated that the majority applied an obsolete legal test in holding that three of the provisions in the 2019 Rule were substantive, and therefore did not fall under the APA’s exception to its otherwise required Notice and Comment procedures. The majority applied an outdated standard, Judge Rao opined, based on whether a change had a “substantial impact” on the parties. In her view, the threshold question should be whether a Rule regulates primary or secondary conduct. “A rule is presumed procedural when it regulates only secondary conduct and the mere fact that such a rule impacts legal rights does not make it a substantive rule,” she wrote. All of the provisions at issue are “classic procedural rules” she stated, and thus, a Notice and Comment period was not necessary.
Moreover, Judge Rao wrote that the court should have upheld the “undisputedly procedural provision that requires ballots to be impounded pending review of an election by the Board because the provision is consistent with statutory requirements and reasonably explained.”
Editor’s Note: This case takes on significance beyond the NLRB issues presented in the case. This is because:
- the D.C. Court of Appeals enjoys great deference from other federal appellate circuit courts of appeals as the federal appellate Court with the greatest knowledge and insight into federal administrative law issues with its home in the nation’s capitol and with jurisdiction over every federal Executive agency Rulemaking;
- The Court’s majority opinion, written and signed by two Obama appointees took direct aim at and rebuked the analytical thinking of the lower federal District Court Judge in the case (former Judge Ketanji Brown Jackson) who now sits on the U.S. Supreme Court (as Justice Ketanji Brown Jackson). The opinion not only wounds her reversing her decision, but also by concluding she was wrong on both ends of her analysis (finding all five Trump changes in error and not finding a sixth change (NLRB Regional Director impoundment of union election ballots) in direct violation of the NLRB’s authorizing statute, the NLRA.) This amounts to a “slap in the face” of the newly sworn in Justice as she now begins to hear and write SCOTUS case decisions and with what ability to properly undertake “statutory construction” analyses advocates before the Court now do not know.
- Adherence to APA formal Rulemaking requirements has emerged as a primary legal issue in the Biden Administration as it has repeatedly tried to end-run the APA. When challenged, as in the vaccination mandate cases we have previously reported on for the past two years, the Biden Administration has lost repeatedly and badly. And, with the divided Congress now lost to the President to endorse and implement his policy agenda, many political pundits have written that the Biden White House has left to it only to ramrod policy changes through the federal Executive Branch agencies the President controls. Indeed, in this issue today of the Week in Review, we report on not fewer than two OFCCP initiatives which contractor advocates have commented improperly seek to end-run APA formal Rulemaking (i.e., (a) OFCCP’s decision announced Friday to seek to sanction federal contractors with 500 punitive OFCCP audits of contractors that did not choose to “certify” their AAPs in “OFCCP’s Verification Portal” even though OFCCP launched that electronic portal without any APA Rulemaking to require such “certifications” (so sanctioned for not doing something not required); and (b) not undertaking APA Rulemaking before seeking to change many audit Scheduling Letter requirements and other unrelated substantive policy decisions (such as what is a “promotion?”).
In now seeking to proceed without proper legal authorization on these (and other) policy initiatives, OFCCP has “thrown down its gauntlet” and has now dared adversely impacted federal contractors to sue it to stop the agency’s forced policy and enforcement changes. Whether federal contractors, or one of them, will pick up OFCCP’s gauntlet and challenge the agency in the courts is now the open practical question.