Labor & Employment Alert: New Process Steel, L.P. v. NLRB: Supreme Court Invalidates Hundreds of Decisions Issued by Two-Member Board
Due to a political stalemate in Washington, D.C. from 2007 through 2009, the National Labor Relations Board ("Board") acted for more than two years with only two out of five appointed members. During that time, the two-member Board decided almost 600 cases. On June 17, 2010, the United States Supreme Court held that the National Labor Relations Act ("NLRA") requires that, to exercise its authority properly, the Board must consist of at least three members. The Court's decision invalidates all of the decisions of the two-member Board and imposes a significant administrative burden on the now four-member Board. The long-term substantive impact of the Court's decision is much less significant given that almost all of the decisions at issue have been accepted by the parties or are likely to be reaffirmed by the new Board.
The Issue in Context
The Board is an independent federal agency that conducts elections related to labor union representation and investigates and adjudicates claims of unfair labor practices under the NLRA. The Taft-Hartley Act expanded the Board's membership from three members to five and increased the Board's quorum requirement (i.e., the number of Board members who must participate for the Board to exercise its powers) from two to three members. At the end of 2007, the Board consisted of four members, with one vacancy. Given that two members' recess appointments were about to expire, and knowing the Board could not meet the quorum requirement with only two members, the Board delegated its authority to three of its members—Members Liebman, Schaumber, and Kirsanow—effective midnight December 28, 2007. Three days later, Member Kirsanow's recess appointment expired, and the remaining two members of the group continued to exercise the Board's delegated authority, relying on the clause of Section 3(b) of the NLRA that provides that two members of a delegee group constitute a quorum. Members Liebman and Schaumber continued to exercise the Board's delegated authority until March 27, 2010, when President Obama made two recess appointments.
During the 27 months with only two members, the Board decided nearly 600 cases. Two of these decisions sustained unfair labor practice complaints against New Process Steel, which challenged the authority of the two-member Board to issue orders before the Seventh Circuit Court of Appeals. The Seventh Circuit found that the two members constituted a valid quorum of a three-member group. In contrast, the Court of Appeals for the District of Columbia reached the opposite conclusion in another case the same day. The Supreme Court stepped in to resolve the conflict.
The Supreme Court's Ruling and Rationale
The Supreme Court reversed the Seventh Circuit, finding that the two remaining Board members could not continue to act as a quorum for the delegee group once Member Kirsanow's term expired. Justice Stevens delivered the opinion of the Court, joined by Chief Justice Roberts and Justices Scalia, Thomas, and Alito. Justice Kennedy authored a dissenting opinion, joined by Justices Ginsburg, Breyer, and Sotomayor.
The Court gave three reasons for its holding that a group must maintain three members in order for delegation to remain valid. First, the Court asserted that no other interpretation would "harmonize and give meaningful effect to all of the provisions of § 3(b)." Section 3(b) of the NLRA provides:
The Board is authorized to delegate to any group of three or more members any or all of the powers which it may itself exercise [the delegation clause]…. A vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board [the vacancy clause], and three members of the Board shall, at all times, constitute a quorum of the Board [the Board quorum provision], except that two members shall constitute a quorum of any group designated pursuant to the first sentence hereof [the group quorum provision].
29 U.S.C. § 153(b). Since, in light of the Board quorum requirement, the Board needs at least three members to act, "[i]nterpreting the statute to require the Board's powers to be vested at all times in a group of at least three members is consonant with the Board quorum requirement … " and with the delegation clause. Conceding that the government's alternative reading was "textually permissible in a narrow sense," the Court maintained that reading the delegation clause to permit "two members to act as the Board ad infinitum" strips both the Board quorum requirement and the delegation clause of "meaningful effect."
Second, the Court reasoned, if Congress had intended to permit two Board members to act as the Board in perpetuity, it could have drafted the statute to permit that result in an uncomplicated way, by keeping the Board quorum requirement at two members or by permitting delegation to two-member groups. Instead, the only way the Board could bestow its powers in a two-member group was through the convoluted measures it undertook in December 2007. The Court saw no evidence that it was Congress' intent to allow such maneuvers.
Third, the Court relied on the Board's history to support its ruling. While the Board has permitted two members to issue decisions when the third member of the group was disqualified, the Board had not "allowed two members to act as a quorum of a defunct three-member group" prior to December 2007.
The Practical Impact of New Process Steel
At first glance, New Process Steel appears to have undone 27 months of Board action, invalidating almost 600 Board decisions from that period. While this technically is so, the parties in many of these cases have complied with the Board's order or have otherwise resolved their differences, rendering the issues underlying the nullified decisions moot. The Board will see a significant spike in the cases it must now decide, which will likely create a backlog in cases and divert the Board's attention from other initiatives, such as reversing certain of the Bush Board decisions that are widely unpopular with labor.
Regardless of the number of decisions that need to be reconsidered, it is unlikely that the outcome of those decisions will change upon reconsideration. All of the two-member Board decisions were issued where the Republican (Schaumber) and Democratic (Liebman) appointees agreed on the outcome. Having those decisions reviewed by an additional Democrat (or even by an all Democratic three-member panel) is unlikely, in most cases, to result in a different outcome. Nevertheless, the Board will have to address decisions it hoped had been laid to rest, even as new cases continue to arise, and it may be a long while before those 27 months are behind them.
For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com.
Lawrence C. DiNardo
Brian W. Easley
F. Curt Kirschner
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