In a 5-4 decision issued June 17, 2010, the Supreme Court ruled that the National Labor Relations Board (the “Board”) acted without authority during the 27-month period in which it operated with only two members. The Court’s ruling in New Process Steel, L.P. v. NLRB impacts nearly 600 National Labor Relations Act decisions issued by the Board from January 2008 through March 2010. The ruling raises both practical and legal questions for the parties to these already-decided disputes, including whether and how to go about challenging the previous decision. Furthermore, because any guidance that could be taken from the now-invalidated decisions has been called into question, the outcome of New Process Steel may serve to complicate labor-related decisions for many employers. Finally, the decision has enhanced the caseload for the Board because that agency must now reconsider scores of previous decisions.   

Vacancies Reduce Board Membership to Two 

In 1947, Congress amended the National Labor Relations Act (the “Act”) to increase the size of the Board from three to five members, to raise the Board’s quorum requirement to three members, and to allow the Board to delegate its authority to groups of at least three members. Members are appointed by the President, with the consent of the Senate, and serve five-year terms. The regular terms are staggered so that the term of one member expires each year.   

In late 2007, a vacancy left the Board with only four members. With the recess appointments of two of the remaining members set to expire, the Board would be left with only two members as of January 1, 2008. In an attempt to preserve the Board’s ability to function, and relying on advice from the Justice Department's Office of Legal Counsel, the four sitting members delegated all of the Board’s powers to a three-member group, consisting of Members Liebman, Schaumber and Kirsanow. On December 31, 2007, Member Kirsanow’s recess appointment expired, leaving Liebman and Schaumber as the only members of the Board. During the 27 months that followed, Members Liebman and Schaumber remained the only members of the Board and issued nearly 600 decisions concerning union representation and allegations of various unfair labor practices by both unions and employers.

The New Process Steel Decision 

One of the cases considered by the two-member Board involved claims of unfair labor practices against New Process Steel, L.P. When the Board sustained the complaints, the company appealed to the Seventh Circuit, challenging the authority of the two-member Board to issue the order. The Seventh Circuit ruled in favor of the Board, and the company appealed to the Supreme Court.

Writing for the five-Justice majority, which included Chief Justice Roberts and Justices Scalia, Thomas, and Alito, Justice John Paul Stevens concluded that Section 3(b) of the Act requires that a group to whom the Board’s authority is delegated must maintain a membership of three in order to validly exercise its delegated authority. In relevant part, Section 3(b) provides: 

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. . . . A vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board, and 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 designated pursuant to the first sentence hereof.

See 29 U.S.C. § 153(b).

The majority opinion relied principally on the Act’s “quorum requirement,” reasoning that where the Board as a whole did not have at least three members, a quorum of the Board did not exist, and the Board could not act. As such, the majority concluded that even if Members Liebman and Schaumber constituted a quorum for the purposes of the smaller group, two members alone could not constitute a quorum of the Board itself. As Justice Stevens colorfully put it: “Section 3(b), as it currently exists, does not authorize the Board to create a tail that would not only wag the dog, but would continue to wag the dog after the dog died.” Thus, the majority concluded that the Board was without authority to act during the 27 months in which it had only two members.

The dissent, authored by Justice Kennedy, noted that the Act plainly stated that two members of a group to which authority was delegated were sufficient to constitute a quorum and questioned the distinction drawn by the majority between the effect of member absences due to illness or recusal and those absences due to a vacancy. In the majority’s view, a two-member group constituted a quorum in the former instance but not in the latter. Noting that the Act 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,” Justice Kennedy concluded that the majority decision effectively and erroneously re-wrote “the group quorum provision to say, ‘two members shall constitute a quorum of any group [unless the third member’s absence is due to vacancy].’”

Practical Implications

In a press release issued in response to the Supreme Court’s ruling, the Board indicated that New Process Steel and other pending cases challenging the two-member decisions, five of which are currently before the Supreme Court with another 69 pending in the federal courts of appeal, are expected to be remanded for consideration  by the current four-member Board, consisting of Members Liebman, Schaumber, Becker and Pearce. For the employers, unions and individuals that were parties to the hundreds of other cases decided without authority, the implications of the Court’s ruling are less clear. However, for a number of reasons, it would appear likely that the Board would reach the same conclusion in many of these cases even if the parties sought a rehearing of the matter. First, the decisions in question were issued in relatively noncontroversial cases in which Member Liebman, a Democrat appointee, and Member Schaumber, a Republican appointee, agreed on the outcome. With Member Schaumber’s term expiring on August 27, 2010, the Board will soon be comprised of Member Liebman and President Obama’s two recess-appointees, Members Becker and Pearce – both Democrats. Although not impossible, it seems unlikely that Members Becker and Pearce would reach different decisions from those reached by Member Liebman in these noncontroversial cases. Thus, in determining whether a challenge would be worthwhile, the parties to these cases should consider whether the presence on the Board of the new, labor-friendly Obama appointees might alter the previous outcome. And, from a practical standpoint, the parties must also consider whether it will be worth the time and money to pursue a challenge.

The invalidation of two years of Board decisions also deprives employers and unions of the benefits of legal guidance these decisions may have provided. While the Board’s rulings in these cases might be viewed as persuasive authority, these decisions are almost certainly without precedential value in future disputes. But perhaps the most significant implication of the Supreme Court’s decision will be the impact on the caseload of the Board itself. Not only must it revisit dozens of decisions, it will probably now begin to take up a number of long-pending, controversial cases. For example, the Board has indicated it is set to reconsider its decision in Brown University and take up the question of whether graduate students at New York University may form a union. This increased caseload will mean that employers and unions can expect to wait even longer for the Board to rule on present and future unfair labor practice charges and representation questions. And given that President Obama’s recess appointments are set to expire in January 2011, the Board could soon be reduced to a single member unless the Senate acts to confirm the President’s nominees.