When both the Administrative Law Judge and the National Labor Relations Board ("Board") ruled that Noel Canning, a bottler of Pepsi-Cola products, had committed an unfair labor practice by refusing to execute a written collective bargaining agreement incorporating terms agreed upon during labor negotiations, what did it do? It went to court and challenged not only the merits of the Board's unfair labor practice decision, but also the jurisdiction of the Board itself to rule on the case.
Last week, the D.C. Circuit Court of Appeals found no basis under the National Labor Relations Act ("NLRA") to disturb the Board's conclusions regarding the merits of Noel Canning's case. However, in a stunning setback for the Obama Administration, the Court determined that the Board had no jurisdiction to rule on Noel Canning's case in the first place, and therefore invalidated the Board's decision. The reason? The Court's conclusion that the Obama Administration's appointment of three of the five Board members in January 2012 during a purported Congressional "recess" violated the Recess Appointments Clause of the United States Constitution because the Senate was not actually in "recess" at the time. As a result, the President's three 2012 appointments were invalid and the Board therefore lacked a quorum to act.
The Board is comprised of five members, which are appointed by the President and must be confirmed by the Senate. Each Board member is appointed for a 5-year term, with the term of one Board member expiring each year. The United States Supreme Court, in its 2010 New Process Steel decision, has already ruled that a two-member Board has no authority to act. At the time of the Noel Canning decision in February 2012, only two of five Board members had been confirmed by the Senate (Chairman Mark G. Pearce, a Democrat, and Member Brian Hayes, a Republican, both confirmed in 2010). The other three members (Democratic members Sharon Block and Richard Griffin, and Republican member Richard Flynn) were appointed by the Obama Administration under the Recess Appointments Clause of the U.S. Constitution during a purported "recess" in January 2012. The Clause permits the President to fill senior level government vacancies without prior Senate consent. However, Senate approval must be obtained by the end of the next session of Congress. At the time of the three appointments in 2012, the Senate had been stonewalling Obama appointments to the Board and the move by the President has been widely viewed as an attempt to circumvent such Senate gridlock.
The implications of this decision are potentially far-reaching for both non-union and union employers in the private sector. Although the Board governs the relationship between employers and labor unions, in the past year, the Board also has decided issues affecting non-union employers that the Board never previously touched upon. Among other things, the Board has decided that it has the power to regulate social media policies, arbitration agreements, internal investigations, and general employment policies. Should the Supreme Court either affirm the D.C. Circuit's decision or choose not to hear it, arguably all of the Board's employee-friendly decisions on these topics would be invalidated as having been decided by an improperly constituted Board.
Legal pundits expect this decision to reach the U.S. Supreme Court, not because of the labor issues involved, but rather because of the constitutional issues relating to the President's ability to sidestep an uncooperative Congress. Should that happen, we expect final resolution of this case before the end of the Supreme Court's next term.
We will continue to update you on these and other important developments in labor and employment law. Visit our blog for periodic updates. If you would like further information, please contact Dan Handman at 310.255.1820 or by email at dhandman@HKemploymentlaw.com or Jayne Benz Chipman at 415.835.9013 or by email at jchipman@HKemploymentlaw.com.