Fifth Circuit Rejects NLRB's Expansive View Of "Make-Whole" Relief

The U.S. Court of Appeals for the Fifth Circuit on October 31 issued a significant decision in Hiran Management, Inc. v. National Labor Relations Board, curbing the National Labor Relations Board's (NLRB) authority to award broad “make-whole” remedies in unfair labor practice cases. The ruling aligns the Fifth Circuit with the Third Circuit's restrictive interpretation of the Board's remedial powers and directly conflicts with the Ninth Circuit's more expansive approach—setting up a clear split that could draw the attention of the U.S. Supreme Court.

The dispute in Hiran Management arose after a Texas restaurant operator fired several employees who had participated in a strike. The NLRB found that the company's actions violated the National Labor Relations Act (NLRA) and ordered relief not only in the form of reinstatement and back pay—the traditional remedies under Section 10(c) of the Act—but also “compensatory” damages for “all direct or foreseeable pecuniary harm” suffered by the employees. This expanded remedy reflected the NLRB's 2022 decision in Thryv, Inc., in which the Board announced it would henceforth require employers to compensate employees for the full range of financial losses flowing from unfair labor practices, including things like medical expenses, credit card interest and penalties, or other consequential costs.

In its opinion, the Fifth Circuit rejected that approach outright. The court held that the NLRA does not authorize the Board to award tort-style or consequential damages, and that Section 10(c)'s reference to “affirmative action, including reinstatement with or without back pay,” limits the Board to traditional equitable relief designed to restore the status quo—not to make employees whole for every conceivable financial harm. The court characterized the Board's Thryv-based order as an expansion of remedial authority unsupported by statutory text or longstanding precedent.

In reaching this conclusion, the Fifth Circuit echoed reasoning recently adopted by the Third Circuit in a similar case. In NLRB v. Starbucks Corp., decided late last year, the Third Circuit likewise held that the NLRA does not permit the Board to award compensation for all “direct or foreseeable pecuniary harms.” The Third Circuit stressed that the Act's make-whole language authorizes the Board to restore what an employer unlawfully withheld, but not to impose damages that resemble private civil remedies. Both the Third and Fifth circuits thus interpret the NLRA as confining the Board's remedial powers to equitable restoration rather than general compensation.

The Ninth Circuit has taken the opposite view. In International Union of Operating Engineers Local 39 v. NLRB, the court upheld the Board's expanded approach, reasoning that the “direct or foreseeable pecuniary harm” standard is consistent with the NLRA's goal of fully restoring employees to the financial position they would have occupied absent the unfair labor practice. The Ninth Circuit likened such relief to back pay, describing it as “a natural extension of traditional make-whole principles” rather than a punitive or tort-based remedy.

With Hiran Management, the Fifth Circuit has deepened this emerging circuit split. Employers in the Fifth Circuit – which includes Texas, Louisiana, and Mississippi – are now shielded from the NLRB's broader remedial orders that go beyond reinstatement and back pay. Those in the Third Circuit – which includes Pennsylvania, Delaware, New Jersey, and the U.S. Virgin Islands – can rely on a narrower interpretation similar to that of the Fifth.

By contrast, employers in the Ninth Circuit's jurisdiction – which includes California, Oregon, Alaska, Montana, Nevada, Idaho, Washington, Hawaii, and Arizona – remain subject to the Board's expanded “foreseeable harm” standard.

The implications for employers are significant. Within the Fifth Circuit, the decision provides a powerful basis to challenge NLRB orders that seek compensation for consequential damages, effectively limiting the Board's remedial reach to traditional equitable measures. Employers elsewhere should recognize that the law on this issue now varies by region: while some circuits have curtailed the NLRB's remedial powers, others continue to permit the Board's broader interpretation. This disparity increases the strategic importance of where a case arises or is litigated.

Although Hiran Management does not alter the NLRB's core authority to remedy unfair labor practices, it narrows the financial exposure employers face in certain jurisdictions and reinforces a judicial trend toward stricter textual limits on administrative agencies. Given the clear circuit conflict, the issue of the NLRB's remedial powers may soon be headed to the Supreme Court.

For now, employers should work with counsel to evaluate any pending or potential unfair labor practice matters in light of this decision. Those employers operating in the Fifth Circuit may have new grounds to challenge the scope of the Board's remedies, while those outside it should continue monitoring developments closely. The Supreme Court's eventual resolution of this divide could fundamentally reshape the NLRB's enforcement landscape nationwide.

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