New Process Steel LP v. NLRB, Supreme Court Rules On NLRB Composition

On June 17, 2010, a sharply divided United States Supreme Court resolved the case of New Process Steel LP v. NLRB. The highly anticipated decision resolved a Circuit split that had developed after the National Labor Relations Board, which normally has five members, spent 27 months issuing decisions as a two-member body. In a 5-4 decision, written by Justice Stevens and joined by Chief Justice Roberts and Justices Scalia, Thomas, and Alito, the Court held that while the National Labor Relations Act allows the five-member Board to delegate its powers to three members, and that two of those three members may constitute a quorum sufficient to exercise the Board’s powers, the Board has no authority to decide unfair labor practice and representation cases unless at least three of the Board’s five seats are filled.  The decision presumably invalidated hundreds of decisions reached since January 1, 2008.

By Chris Amundsen

Christopher Amundsen

Christopher Amundsen

 Factual Background

The NLRA provides that “a vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board,” that the “Board is authorized to delegate to any group of three or more members any or all of the powers which it may itself exercise,” and that “three members of the Board shall, at all times, constitute a quorum of the Board, except that any two members shall constitute a quorum of [a three member] group [to which the Board has delegated its powers].”

In 2007, the Board consisted of four members, two who had undergone the standard confirmation process, and two others who were recess appointees with terms set to expire on December 31. As that date approached, it appeared likely that no new members would be appointed.  In a plan designed to maintain its legitimacy, the Board delegated all its powers to a three-person group consisting of the two regularly appointed members and one recess appointee.  Beginning January 1, 2008, the Board operated indefinitely with its remaining two members, one Democrat and one Republican, based on the theory that, so long as they agreed on a decision, they constituted a quorum of the three-member delegee group.

Subsequently, several employers appealed unfair labor practice determinations issued by the two-member Board, arguing that it had no authority to act with less than three members.  In Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB, the D.C. Circuit Court of Appeals agreed with this position and held that the two-person Board had no authority to act.  In New Process Steel v. NLRB, the Seventh Circuit held that the two-person Board was a valid quorum of the three-person delegee group.  The First, Second, Fourth, and Tenth Circuits adopted positions similar to the Seventh Circuit’s.  The Supreme Court took the New Process Steel case to resolve this split of authority.

The Supreme Court’s Decision and Reasoning

The majority opinion in New Process Steel focuses on the validity of competing interpretations of the clause in the NLRA providing that the Board may delegate its powers to a “group of three or more members.”  First, the Court said the clause could mean a delegee group need only contain three members at the precise moment of the delegation, and that two members alone may exercise the full powers of the Board as long as they were part of a group that initially included three members.  Second, the Court said the clause could mean that, for the delegation to remain valid, a delegee group must maintain three members.

The Court then explained three reasons the second interpretation is correct.  First, requiring the delegee group to maintain three members gives effect to all the statute’s provisions while the first interpretation would replace the three-member quorum requirement with a two-member quorum requirement.

Second, if Congress “had intended to authorize two members alone to act for the Board on an ongoing basis, it could have said so in straightforward language.”  The NLRB was essentially arguing that even though the NLRA explicitly requires a three-member delegee group, Congress had actually intended to allow for a two-member delegee group.  The Court held that there was no evidence that Congress had intended such a convoluted scenario.

Third, maintaining a three-member delegee group is most consistent with the “longstanding practice of the Board.”  The Court noted that the only time the Board has tolerated a two-person quorum is when one member of a three-member delegee group was disqualified from a particular case.  When a member leaves the three-person group because the member’s term has expired, the Board has consistently reconstituted the group with three members.

Next, the Court confronted two arguments about the plain text of the statute.  It rejected the argument that the statute’s text (“any two members shall constitute a quorum of [a three member] group”) authorized a perpetual two-member delegee group, explaining that while two members can constitute a valid quorum, the NLRA does not say that two members constitute a valid group.  Then, for similar reasons, the Court rejected the argument that the statute’s text (“a vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board”) specifically says that the absence of the third member does not impair the rights of the two-member delegee group, reasoning that the language only applies to a vacancy on the Board, and does not apply to a vacancy in a three-member group.

Finally, the Court rejected the argument that a two-member group supports the Congressional objective of Board efficiency.  It explained that before Congress passed the Taft-Hartley Act, the Board had authority to issue decisions with two members, and that if Congress had wanted to allow the Board to continue to operate with only two members, it would not have increased the requirement to three.

Practical Implications

The practical implications of New Process Steel are less than clear.  Notably, the Court did not decide (or even discuss) the validity and the fate of the hundreds of decisions issued by the two-member panel.  As a result of the Court’s decision, the validity of the two-member panel’s rulings and any actions resulting from those rulings are questionable.  The Board stated in a press release following the Court’s decision that it expected more than seventy pending appeals of two-member decisions to be remanded to it “[t]o decide the appropriate means for further considering and resolving [the matters].”

We suspect that in most cases where a party did not specifically challenge the authority of the two-member Board to issue a decision, the affected parties will not try to re-open the cases and re-litigate the matters at issue.  An exception might arise in situations where the two-member Board denied an employer’s challenge to the appropriateness of a bargaining unit a union was attempting to represent, resulting in an election won by the union.  An employer in such a situation may well wish to grapple with the legal and practical implications posed by the New Process Steel decision.

In some of the cases decided by the two-member Board, one of the members followed existing precedent to ensure that the Board could continue to function and issue decisions even though the member might not have agreed with the existing precedent.  The two-member Board did not issue decisions in controversial cases and none of its decisions were much of a departure from existing Board law.  Due to the recent recess appointments of two new pro-union Board members, thus skewing the Board to three Democratic members and only one Republican member, there is a chance that, as the Board reconsiders two-member decisions, the new decisions may not be as favorable to employers.

Dorsey & Whitney

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