United States: The Supreme Court's Noel Canning Decision And The NLRB's Response

Mark L. Shapiro is a partner in our Chicago office, David J. Santeusanio is a partner and Brian M. Doyle is an associate both in our Boston office.

HIGHLIGHTS:

  • Since the Supreme Court affirmed a decision by the D.C. Circuit Court of Appeals on June 26, 2014, invalidating President Obama's appointment in January 2012 of three members to the National Labor Relations Board, the NLRB has taken quick action to address the decision. This includes setting aside certain board decisions on appeal to the federal circuit courts and filing motions in other cases asking the courts to vacate and remand the cases to the board.
  • The decision affects employers as it raises uncertainty concerning the validity of NLRB decisions, rulings and administrative actions issued since the president made the appointments. Political maneuvering, coupled with the current fallout of the Noel Canning decision, will likely continue to affect the NLRB.

The U.S. Supreme Court affirmed a decision by the D.C. Circuit Court of Appeals on June 26, 2014, invalidating President Obama's appointment in January 2012 of three members to the National Labor Relations Board (NLRB or "board"). National Labor Relations Board v. Noel Canning, No. 12-1281, ___ S. Ct. ___ (June 26, 2014). The decision raises uncertainty concerning the validity of NLRB decisions, rulings and administrative actions issued since President Obama made the appointments. Since the Supreme Court's decision, NLRB has taken quick action to address the decision, including setting aside certain board decisions on appeal to the federal circuit courts and filing motions in other cases asking the courts to vacate and remand the cases to the board. This alert describes the Supreme Court's decision and the NLRB's initial response.

Noel Canning Case Background

The Noel Canning Corporation, a Washington state bottling company, first raised the issue of the authority of the recess appointments in connection with its defense of an unfair labor practices charge. The NLRB concluded that Noel Canning committed an unfair labor practice, and Noel Canning appealed the decision to the D.C. Circuit, arguing that the board lacked the authority to issue the ruling because it was not comprised of constitutionally appointed board members. At that time, the board consisted of three members appointed by President Obama in January 2012 pursuant to the Recess Appointments Clause of the U.S. Constitution.

In January 2013, the D.C. Circuit issued its decision in Noel Canning v. NLRB, ruling that President Obama's "recess appointments" to the NLRB were unconstitutional. See 705 F.3d 490 (D.C. Cir. 2013). The court concluded that the three "recess" appointments made by the president in January 2012 were invalid on two grounds.

  • First, the court held that recess appointments may only be made during the recess between each session of Congress (an intersession recess, which happens only once per year), rather than on a break in Congress that occurs while Congress is still in session (an intrasession recess, which occurs rather frequently, such as during holidays).
  • Second, the court held that recess appointments can be made to fill only those positions that become vacant during the recess, such that the president cannot make recess appointments to fill preexisting or long-standing vacancies. The NLRB appealed the decision to the Supreme Court, which issued its unanimous decision on June 26, 2014, affirming the opinion of the D.C. Circuit.

The Supreme Court affirmed the D.C. Circuit's judgment, but its reasoning was different.

  • First, and contrary to the D.C. Circuit's opinion, the Supreme Court held that the Recess Appointments Clause empowers the president to fill any existing vacancy during any recess of sufficient length – regardless of whether it is intrasession or intersession.
  • Second, and also contrary to the D.C. Circuit's opinion, the Supreme Court held that the phrase "vacancies that may happen during the recess of the Senate" includes both vacancies that arise while the Senate is in recess and vacancies that already exist at the time the Senate goes into recess.

Despite disagreeing with the reasoning of the D.C. Circuit's opinion, the Supreme Court ultimately affirmed the decision on a separate basis. The Supreme Court concluded that for purposes of the Recess Appointments Clause, the Senate is in session when it says that it is, provided that, under its own rules, the Senate is able to conduct Senate business. However, the Senate was not, in fact, in a "recess" when the president invoked the Recess Appointments Clause in January 2012. Instead, the Senate had passed a resolution providing for a series of pro forma sessions in which it decided that it would not transact any business, although, as the Supreme Court concluded, it remained capable of doing so. The president made his appointments during a three-day break between two of the pro forma sessions, which the Supreme Court ruled was presumptively too short a period of time to bring the recess within the scope of the Recess Appointments Clause.

Impact on Board Decisions and the NLRB's Response

The Supreme Court's decision has an immediate impact in favor of Noel Canning, which invalidates the adverse board decision finding that Noel Canning engaged in an unfair labor practice. The decision also has an immediate impact on the board decisions – including high-profile and controversial decisions – that the board decided between Jan. 4, 2012 (the day of the recess appointments), and Aug. 5, 2013 (the day the Senate confirmed nominations for the three board positions). Many of those cases are currently working their way through the federal court system. As for those board decisions that are not currently pending in federal court, it is not immediately clear how this decision will affect those proceedings.

Since the Supreme Court's decision, NLRB has taken steps in response. On the day the Supreme Court decided the case, NLRB Chairman Mark Gaston Pearce issued a statement saying that the board is "analyzing the impact that the Court's decision has on Board cases in which the January 2012 recess appointees participated." He further stated that the board "is committed to resolving any cases affected by today's decision as expeditiously as possible."

Then, at a July 9, 2014, ABA webinar, NLRB General Counsel Richard Griffin explained the actions the board had taken in response to the decision. He stated that in the federal appeals courts, there were 98 cases involving the recess appointees. In 43 of those cases, the board had not yet filed the records of NLRB proceedings. Section 10(d) of the National Labor Relations Act states that until the record of the case is filed in the court, "the Board may at any time, upon reasonable notice and in such manner as it deems proper, modify or set aside, in whole or in part, any findings or order made or issued by it." Griffin explained that under Section 10(d), the NLRB will modify or set aside the orders in those cases. Of the remaining 55 cases (in which the board record has already been filed with the court), the board has filed motions in 49 of the cases asking the court to vacate and remand the cases to the board.

Griffin further explained that other cases affected by the Noel Canning decision had not proceeded to the court of appeals. Of those cases, the general counsel may seek to return some of those cases to the NLRB or, if the parties have no interest in having the NLRB further address the dispute (because for example, the dispute was resolved), the cases would not return to the board and no further action would be taken. He also explained that the board is still addressing the issue of the board's appointment of regional directors and the validity of their actions. The board will continue to address the short-term and long-term consequences of the Noel Canning decision.

The decision and the board's initial response show the complexities and administrative burdens associated with this issue. This is not the first time that the board has confronted a similar issue. After the Supreme Court's decision in New Process Steel, L.P. v. NLRB, 130 S. Ct. 2635 (2010), in which the Court concluded that the board lacked authority to issue decisions without a quorum of at least three members, the board simply re-issued the decisions that were previously rendered by a delegated two-member panel, after it obtained quorum. Given the composition of the current board – three pro-labor members on a five-member board – it is likely that any decisions revisited by the board will be affirmed.

Questions Remain About the Validity of Other NLRB Actions

Practically, many of the board's decisions have resulted in orders that have already been implemented for over two years, including the negotiations of contracts and the hiring of workers. It would be difficult to undo what has already been done. But the Supreme Court's decision raises questions as to the validity of other actions taken by the board, including the appointment of those regional directors who were appointed during the relevant time and the promulgation of new rules. In addition, there may be arguments that decisions rendered by a regional director appointed by an unconstitutional board are also invalid. Given the administrative burdens associated with addressing the effects of the Noel Canning decision, case backlogs and related delays will likely occur at NLRB in the near future.

Although the Supreme Court's decision has provided clarity to Noel Canning and resulted in immediate action by NLRB in those cases currently pending in federal court, there remain questions that employers should assess with counsel concerning the reach of the decision. There is also the political question of what happens the next time there is a vacancy on the board and opposite parties control the White House and the Senate. The next board vacancy will occur on Dec. 16, 2014 (when the term of Democrat member Nancy Schiffer will expire), leaving a two-two split between Democratic and Republican board members. In connection with that upcoming vacancy, President Obama on July 10, 2014, re-nominated Democrat Sharon Block, one of the three recess appointments invalidated by the Noel Canning decision. Political maneuvering on the vacancy, coupled with the current fallout of the Noel Canning decision, will likely continue to affect the NLRB. 

To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

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