Supreme Court Rules Two-Person NLRB Lacked Authority to Issue Decisions
June 21, 2010
Todd D. Steenson- Chicago
In a surprising decision, the U.S. Supreme Court ruled last week, 5-4, that the National Labor Relations Board (NLRB) did not have the authority to issue decisions in unfair labor practice and representation cases during a more than two-year period in which the Board operated with only two members. New Process Steel v. National Labor Relations Board, No. 08-1457 (June 17, 2010). As a result, the almost 600 rulings issued by Board Members Wilma B. Liebman (D) and Peter C. Schaumber (R) between early January 2008 and late March 2010 are invalid.
Background
The National Labor Relations Act (NLRA) provides that the NLRB is comprised of five members. But Section 3(b) authorizes the Board “to delegate to any group of three or more members any or all of the powers which it may itself exercise.” It further states that “[a] vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board, and three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to the first sentence hereof.”
In late 2007, the Board had had four members. With the terms of two of those four members about to expire, the Board delegated its authority to a group of three members, including Members Liebman and Schaumber. One of those three members departed a few days later. This left Members Liebman and Schaumber, who made almost 600 decisions between early January 2008 and late March 2010, when President Obama made a recess appointment of two new Democratic members to the Board.
Numerous litigants, including New Process Steel, argued that the NLRA did not authorize a two-member Board to issue decisions. At the time the New Process Steel case reached the Supreme Court, five of the six federal appellate courts to address the issue had ruled that the two-member Board did have proper legal authority to issue decisions.
Court Cites a Three-Member Minimum
On appeal, the Supreme Court disagreed. It concluded that the plain language of the National Labor Relations Act mandates that the NLRB have at least three members to validly issue decisions. This interpretation gives effect to all the parts of Section 3(b) and is “consistent with the Board’s longstanding practice” of reconstituting three-member groups when a member leaves the board, Justice John Paul Stevens wrote for a majority that included Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Samuel Alito.
The Court recognized the difficulties its decision could cause, but said it was compelled by the plain language of the statute. “We are not insensitive to the Board’s understandable desire to keep its doors open despite vacancies. Nor are we unaware of the costs that delay imposes on the litigants,” Justice Stevens wrote. “If Congress wishes to allow the Board to decide cases with only two members, it can easily do so. But until it does, Congress’ decision to require that the Board’s full power be delegated to no fewer than three members, and to provide for a Board quorum of three, must be given practical effect rather than swept aside in the face of admittedly difficult circumstances.”
Impact on Rulings by the Two-Member Board
As a formal matter, the Supreme Court’s decision means that Members Liebman and Schaumber lacked authority to issue the decisions they rendered as a two-person Board. The more difficult question, which the Supreme Court does not address, is what the practical effect is on the rulings issued by Members Liebman and Schaumber. The effect on the five other cases pending in the Supreme Court and the approximately 70 cases pending in the federal appeals courts challenging the validity of two-member rulings is fairly clear. It is likely that those cases will need to be vacated and that the Board will have to reconsider them now that it has a proper quorum.
The impact of the Supreme Court’s decision on the remaining cases, in which the parties have either complied with the two-Member Board’s ruling or which have become final, is less clear. As a general matter, parties cannot challenge or reopen a judgment that has become final. But parties may be able to argue that they should be allowed to challenge a final judgment that was issued by a body that lacked authority to issue the judgment. Similarly, parties that failed to challenge the NLRB’s lack of quorum when their case was before the Board would ordinarily waive such an argument – but again, waiver principles may not apply given the Court’s holding that the Board had no authority to act at all. And parties may be allowed to petition the Board itself for reconsideration.
As a practical matter, it may not be worth the time and expense for most parties to challenge prior decisions. The two-member Board at issue was comprised of a Democrat and a Republican who agreed on the result – they did not issue decisions in cases in which they could not agree and in cases that raised significant issues. Moreover, if the party already challenged the decision in the court of appeals, that court will have already decided that the two-member panel’s decision was substantively lawful. The likelihood of getting a different result from a properly authorized panel of the Board or in a late appeal may not warrant the costs.
The Question of Precedent
The final question is what precedential effect the decisions issued by the two-member panel will have. Other parties will be able to argue that because the decisions were issued without lawful authority, they should not have precedential effect. But the now-properly-constituted Board may attempt to issue a blanket order adopting some or all of those decisions. Or the questions may just need to be reexamined in future cases.
New Process Steel raises many questions. The one thing that is clear is that it is likely to generate significant litigation in the coming months and years.
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