This post was also written by Daniel J. Moore.

On June 17, 2010, the U.S. Supreme Court held that the National Labor Relations Board (“NLRB” or “Board”) lacked the authority to issue any decisions during a 27-month period when it had only two members. New Process Steel, L.P. v. NLRB, No. 08-1457. The Court’s ruling effectively invalidates nearly 600 decisions issued by the two-member Board, leaving unclear how those cases will be resolved by a Board that is now back to a full five members, three of whom are generally expected to favor unions. Read a full copy of the Court’s decision.

Background

The Board, which decides cases involving union elections and unfair labor practices under the National Labor Relations Act (“Act”), has five members. The Act allows the Board to delegate any of its powers to three or more members, and provides that “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” in the event of a delegation. The Act also says that a vacancy in the Board “shall not impair the right of the remaining members to exercise all the powers of the Board.”

In late 2007, the Board was down to four members, and the terms of two of those members were set to expire at year-end. In an effort to continue functioning, the Board delegated its powers to a three-member group, consisting of Members Liebman, Schaumber, and Kirsanow. Starting in January 2008, after Member Kirsanow’s term had expired, Members Liebman (a Democratic former union lawyer) and Schaumber (a Republican former management lawyer) continued to issue decisions on behalf of the Board, acting as a two-member quorum of that three-person group. With only two members, they issued decisions only where they agreed, and tabled controversial cases until the Board had at least one more member. The Board continued to operate that way for 27 months, issuing nearly 600 decisions during that time. At that point, President Obama made a recess appointment to the Board, and just this month, Congress approved two other members, bringing the Board back to its full five-member strength.
In New Process Steel, the two-member Board upheld a finding that the employer had committed unfair labor practices. The employer appealed to the U.S. Court of Appeals for the Seventh Circuit, arguing that a two-member Board had no authority to issue decisions. The court disagreed, holding that the two members who had decided the case constituted a valid quorum of a three-member group of the Board. The same day, however, the U.S. Court of Appeals for the D.C. Circuit reached the opposite conclusion in another case. Indeed, by the time the Supreme Court decided New Process Steel, the same issue had been raised in five cases before that Court and 69 cases before the Courts of Appeals.

The Court’s Decision

In a 5-4 decision, Justice Stevens, writing for the majority, held that two members could not act for the Board, even though the Board had delegated its authority to a three-person group. The Court held that the Act requires the Board’s powers to be vested in a group of at least three members at all times, noting that if Congress had meant to allow two members to act for the Board, it could have said so.

In dissent, Justice Kennedy argued that “[n]othing in the statute suggests that a delegation to a three-member group expires when one member’s seat becomes vacant,” seizing on the Act’s language that “[a] vacancy in the Board shall not impair the right of the remaining members to exercise all the powers of the Board.”

Impact of the Case

At the very least, the Court’s decision means that the Board must now issue new decisions in all 74 cases that were pending before the Supreme Court or federal courts of appeals in which the losing party challenged the authority of the Board to act with only two members. Because Members Liebman and Schaumber issued decisions only where they agreed, the Board, in the interest of stability, may resolve those cases by issuing new decisions that simply adopt the Board’s earlier reasoning. Still, with the Board now consisting of three Democrats and two Republicans, it is at least possible that the majority could use this as an opportunity to issue new opinions in some of those cases that favor labor over management.

Even more uncertain is what will happen to the 500 or so cases in which neither party challenged a ruling by the Board based on it having been decided by only two members, including many in which the parties have moved forward by treating the Board’s decision – now invalidated – as controlling. It is not clear whether the Board can or will issue a ruling adopting the two-member panel’s reasoning in some or all of those cases, or how it will treat a losing party in such a case that now seeks “another bite at the apple” in the hopes of reversing an unfavorable outcome. With an “Obama Board” in place that is expected to issue rulings that are less favorable to employers, unions that lost those cases may be particularly motivated to seek such reversals. Still, it seems reasonable to expect that the Board will be reluctant to engage in a wholesale reversal of those earlier decisions – not only because they were, by definition, not controversial, but also because parties have relied on the Board’s earlier decisions.

Finally, employers should keep in mind that the two-member Board could not and did not decide cases on which its members expected to disagree, creating an even larger backlog awaiting action by the full Board. With the Board now consisting of a Democratic, pro-union majority, it seems safe to say that most of those delayed decisions are likely to come down in favor of labor.