Noel Canning Decision Holds President Obama's NLRB Appointments Unconstitutional

By Richard D. Alaniz

On Friday, January 25, 2013, a unanimous panel of the D.C. Circuit ruled that President Obama had unconstitutionally appointed three board members to the National Labor Relations Board (NLRB). According to the D.C. Circuit, the NLRB has lacked its required quorum of three members for the past year, calling all of the board's decisions into question. This ruling comes as huge blow to the Obama administration and especially to the NLRB, while it provides a boon to companies with cases before the NLRB and for companies who have recently lost before the board.
 
Labor unions have been continuously losing membership; in fact, according to new figures from the Department of Labor, union membership is now at a new post-war low. At their peak in the mid-1950s, unions represented roughly one-third of employed workers. Today, unions represent 11.3 percent of employed workers and only 6.6 percent of private sector workers. Public sector employees have become the backbone of the labor movement, with 35.9 percent unionized.
 
In light of the loss of union membership and its accompanied power, unions have been rigorously fighting back. Although organizing activity by unions has dwindled in recent years, political efforts have not. According to at least one estimate, unions contributed more than $160 million in political cash to President Obama's reelection campaign and are estimated to have contributed more than $400 million in the 2008 campaign. In fact, Richard Trumka, president of the AFL-CIO, took credit for Obama's victories in union-heavy states, such as Ohio, Wisconsin, and Nevada. "We did deliver those states," said Trumka. "Without organized labor, none of those would have been in the president's column." Moreover, the AFL-CIO's affiliated super PAC, Workers' Voice, spent more than $13 million during this election cycle in support of Obama and pro-union policies.
 
President Obama's support from Big Labor has been returned wholeheartedly by the president. One result of his support for unions has been the most openly pro-union NLRB in the history of the agency. Under the current administration, there are currently no management-side representative board members. Instead, the board currently is composed of three former union lawyers - Mark Pearce, Sharon Block, and Richard Griffin. The result of such a stacked board has been a slew of rule-making and administrative decisions designed to buoy a floundering Big Labor.
 
Examples of the NLRB's pro-union policies include the Specialty Healthcare decision, which on August 26, 2011, overturned twenty years of precedent and permits unions to organize micro-units of an employer's workforce. Also in 2011, the NLRB issued a special rule requiring all employers to post a conspicuous notice describing the unionization rights of all employees. This rule has been blocked in federal court, but the matter is still pending. More recent decisions of the NLRB include requiring employers to rewrite their "at-will" employment language; rulings striking down standard no-solicitation policies; decisions taking aim at employers' rules regarding appropriate e-mail use; decisions targeting social media policies; a ruling overturning fifty years of precedent and changing dues-check-off rules; and a ruling expanding the National Labor Relations Act's jurisdictional rules.
 
President Obama did not put such pro-union members on the board with the approval of the Senate. On January 4, 2012, Obama unilaterally appointed Democratic union lawyer Richard Griffin, Democratic Labor Department official Sharon Block, and Republican NLRB lawyer Terence Flynn to the NLRB under the guise of the Recess Appointments Clause of the US Constitution. Flynn stepped down from the board in May of 2012 amid allegations that he leaked confidential information during a stint as a staff lawyer at the agency, leaving Chairman Mark Gaston Pearce; Brian Hayes (whose term expired on December 16, 2012); Richard Griffin; and Sharon Block on the board. 
 
The Recess Appointments Clause (Article II, Section 2, Clause 3 of the US Constitution) states: "The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session." And on Friday, January 25, in Noel Canning v. NLRB, the D.C. Circuit ruled that the Senate was not in recess on January 4, 2012. As such, the appointments of Richard Griffin, Sharon Block, and Terence Flynn were unconstitutional.
 
This decision has huge implications for both the NLRB and the Obama administration because under the New Process Steel decision, the NLRB must have at least three board members in order to lawfully conduct business. Because of the unconstitutional appointments of Griffin and Block, for most of 2012 the NLRB only had two lawful members - Pearce and Hayes - and now since Hayes' term has expired, the NLRB only has one - Pearce. Accordingly, all of the NLRB's decisions over the last year have now become suspect and subject to challenge.
 
The Obama administration is not likely to take this decision lying down. After the ruling was announced, White House Press Secretary Jay Carney told reporters: "The decision is novel and unprecedented, and it contradicts 150 years of practice by Democratic and Republican administrations. So we respectfully but strongly disagree with the ruling."
 
The NLRB also spoke out in opposition of the ruling. Pearce issued a statement, saying: "The board respectfully disagrees with today's decision and believes that the president's position in the matter will ultimately be upheld. It should be noted that this order applies to only one specific case, Noel Canning, and that similar questions have been raised in more than a dozen cases pending in other courts of appeal."
 
As such, an appeal to the US Supreme Court is likely forthcoming, but any decision will take time. Furthermore, as employers challenge NLRB decisions in other circuits, other courts may not follow the lead of the D.C. Circuit.
 
In addition, the D.C. Circuit's reasoning can be applied beyond President Obama's January 4, 2012 appointments; in fact, employers are already making this argument. On Tuesday, January 29, counsel for D.R. Horton, Inc., which is challenging an NLRB decision in the Fifth Circuit, filed a letter with the court arguing that the Noel Canning decision's holding applies beyond the facts of that specific case and in fact applies to former-NLRB member Craig Becker's appointment. (Becker was appointed by President Obama in 2010 during a "recess" similar to that at issue in Noel Canning.) D.R. Horton argues that Becker's appointment is also unconstitutional and because, after the removal of Becker, only Pearce and Hayes were on the NLRB when the board ruled on D.R. Horton's case, the board's decision in its case should be overturned as well for lack of quorum. The Fifth Circuit heard oral argument February 5 in the D.R. Horton case.
 
On February 13, President Obama did resubmit Black and Griffin to the Senate as board nominees. However, Senate approval is anything but certain. Most Republicans, and some Democrats, are calling for the president to put forth additional names to put the board up to a full five members. For example, Senator Lamar Alexander (R-Tenn) called on the president to "promptly send" two Republican nominees "respecting the tradition of a bipartisan NLRB." This issue is likely to drag out in a particularly partisan Washington, DC.
 
While the board's composition is sorted out, the NLRB has been left mostly powerless. Although the NLRB has stated that it disagrees with the decision and that the decision only applies to this specific case, every company with a matter pending before the board will now be preparing its objection to the proceeding. In addition, the board is about to face an avalanche of resistance to its policies and decisions that came down after the members in question were nominated. Finally, unions are placed in a bad position as well. Unions will likely not wish to waste the resources and time taking issues to the board and getting a ruling, only to see that ruling undone should the Supreme Court uphold the D.C. Circuit. Effectively, the NLRB is likely handcuffed for the foreseeable future. But in the event that new members are confirmed, the board will likely decide, as it did in 2010 after the US Supreme Court's ruling in New Process Steel, to unilaterally vacate all decisions made by the unconstitutional board and to issue new decisions adopting the findings and conclusions from the vacated decisions. Irrespective of what happens on the procedural issues, it is not likely that the Obama administration will change course from its decidedly pro-union agenda.
 
Read additional labor and employment law articles by Richard Alaniz.
 
About the author:
Richard D. Alaniz is senior partner at Alaniz and Schraeder, a national labor and employment firm based in Houston. He has been at the forefront of labor and employment law for over thirty years, including stints with the US Department of Labor and the National Labor Relations Board. Rick is a prolific writer on labor and employment law and conducts frequent seminars to client companies and trade associations across the country. Questions about this article can be addressed to Rick at (281) 833-2200 or ralaniz@alaniz-schraeder.com.
 

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