Thursday, June 17, 2010

NLRB Loses Two-Member Board Case (New Process Steel)

NLRB Hot of the presses is the Supreme Court's New Process decision.  In a 5-4 decision (with Stevens writing for a largely conservative majority and Kennedy writing for a largely liberal minority), the Court agreed with the employer that the NLRB had no authority to issue two-member decisions.  In the interest of getting the news out fast, I haven't had time to read the decision yet, but as I've said before, I think this is the correct result on the law although an unfortunate rejection of an admirable attempt by Liebman and Schaumber to get cases out. 

What remains to be seen is how the Board will deal with the now-vacated cases.  I'm assuming that a new three-member panel will look at all the cases again.  The Board may simply add either Member Becker or Pearce to a panel with Liebman and Schaumber, who have obviously given their opinion on the cases already.  This will obviously take some time, but given that these are noncontroversial cases, hopefully not too long.

Here is the full syllabus:

The Taft-Hartley Act increased the size of the National Labor Relations Board (Board) from three members to five, see 29 U. S. C. §153(a),and amended §3(b) of the National Labor Relations Act to increase the  Board’s quorum requirement from two members to three and to allow the Board to delegate its authority to groups of at least three members, see §153(b). In December 2007, the Board—finding itself with only four members and expecting two more vacancies— delegated, inter alia, its powers to a group of three members. On December 31, one group member’s appointment expired, but the others proceeded to issue Board decisions for the next 27 months as a two-member quorum of a three-member group. Two of those decisions sustained unfair labor practice complaints against petitioner, which sought review, challenging the two-member Board’s authority to is-sue orders. The Seventh Circuit ruled for the Government, concluding that the two members constituted a valid quorum of a three-member group to which the Board had legitimately delegated its powers.

Held: Section 3(b) requires that a delegee group maintain a membership of three in order to exercise the delegated authority of the Board.

    (a) The first sentence of §3(b), the so-called delegation clause, authorizes the Board to delegate its powers only to a “group of three or more members.”  This clause is best read to require that the delegee group maintain a membership of three in order for the delegation to remain valid. First, that is the only way to harmonize and give meaningful effect to all of §3(b)’s provisions: (1) the delegation clause; (2) the vacancy clause, which provides that “[a] vacancy in the Board of the powers of the Board” shall not impair the right of the remaining members to exercise all of the powers of the Board; (3) the Board quorum requirement, which mandates that “three members of the Board shall, at all times, constitute a quorum of the Board”; and (4) the group quorum provision, which provides that “two members shall constitute a quorum” of any delegee group. This reading is consonant with the Board quorum requirement of three participating members “at all times,” and it gives material effect to the delegation clause’s three-member rule. It also permits the vacancy clause to operate to provide that vacancies do not impair the Board’s ability to take action, so long as the quorum is satisfied. And it does not render inoperative the group quorum provision, which continues to authorize a properly constituted three-member delegee group to issue a decision with only two members participating when one is disqualified from a case. The Government’s contrary reading allows two members to act as the Board ad infinitum, dramatically undercutting the Board quorum requirement’s significance by allowing its permanent circumvention. It also diminishes the delegation clause’s three-member requirement by permitting a de facto two-member delegation. By allowing the Board to include a third member in the group for only one minute before her term expires, this approach also gives no meaningful effect to the command implicit in both the delegation clause and the Board quorum requirement that the Board’s full power be vested in no fewer than three members. Second, had Congress intended to authorize two members to act on an ongoing basis, it could have used straight-forward language. The Court’s interpretation is consistent with the Board’s longstanding practice of reconstituting a delegee group when one group member’s term expired.
    (b) The Government’s several arguments against the Court’s interpretation—that the group quorum requirement and vacancy clause together permit two members of a three-member group to constitute a quorum even when there is no third member; that the vacancy clause establishes that a vacancy in the group has no effect; and that reading the statute to authorize the Board to act with only two members advances the congressional objective of Board efficiency—are unconvincing.

Some thoughts:

The majority's decision boils down to its interpretation of the most consistent reading of 3(b).  Essentially, the Court held that the NLRB's interpretation, while perhaps having some textual support (or at least not wholly inconsistent with the text), is simply too weird to be the appropriate reading.  As noted in the syllabus above, the NLRB's argument would allow it--as it did here--to undermine the quorum and delegation clauses.  In short, it seems that Congress did not write 3(b) with the intent of allowing a semi-permanent two-member Board to continue issuing cases; rather, the two-member language was reserved for a recusal, death, or something similarly temporary (which the Court stated it's OK with, in footnote 6).  That basic argument is the one that has had me convinced all along.  It's too bad that Congress has put the Board in this position, but the main fault lies with the confirmation process (or lack thereof).

Footnote 4 raises--but does not address--whether delegations to the General Counsel or Regional Directors under similar circumstances are valid.  The reason is the Court's holding that a delegee groups ceases to exist once the Board no longer has three members.  If such delegations are ultimately deemed invalid, this would significantly broaden the impact of New Process.

The dissent takes a more practical view, essentially arguing that the text should be interpreted in a wat that doesn't undermine the policies of the NLRA (not issuing decisions tends to do that).  In other words, both the majority and dissent recognize that the NLRB's interpretation can be gleaned from the text; the majority rejects it because that interpretation is a more awkward fit, while the dissent accepts the NLRB's view because it is more consistent with the overarching policies of the NLRA (and also argues that it's more consistent with the text).

Also, not surprisingly, there was no discussion of the Second Circuit's Chevron deference argument.

Finally, the NLRB has issued a press release on the decision.

Hat Tip:  Justin Keith (who was one of the attorneys for the employer) & Amy Cocuzza


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I don't see why one of the new members couldn't simply vote "present" and have the Board re-issue the original decision. The new member's vote would affect the outcome in any event, so why not?

Posted by: jw | Jun 17, 2010 8:34:53 AM

All of the arguments offered by the Board were simply attempts to make the words of the Act (that in all cases, THREE members constitute a quorum) mean something that they don't (that in some cases, "three" means "two"). It was a loser from the beginning. A far better course of action would have been for the Board to conclude that it couldn't issue decisions with two members, thus forcing the Senate to approve nominees or at least to recess to permit recess appointments. By maintaining the fiction of remaining in session, for no other reason than to prevent Bush recess appointments, Senate Democrats put the Board in this untenable position.

Getting out of the problem isn't quite as simple as jw suggests. While I don't anticipate any changed results, the Board will at least have to go through the motions of reconsidering the cases. Perhaps they can do that by adding one person to the existing panels, but to respect the concept of panel deliberations they would have to present the cases to the newly constituted panel. Schaumber's term ends on Aug. 27, so chances are that even a quick process won't resolve all the back cases. Merely having a new member rubber-stamp "present" on all the case files would give the losing party in each case a wonderful peg on which to hang a court challenge. Would you like to be the person defending the Board in one of those challenges?

Posted by: Dennis Nolan | Jun 17, 2010 10:27:01 AM

"All of the arguments offered by the Board were simply attempts to make the words of the Act (that in all cases, THREE members constitute a quorum) mean something that they don't (that in some cases, "three" means "two")."

The Act expressly says that in some cases "Two" is ok. I'll quote it for you:

"three members of the Board shall, at all times, constitute a quorum of the Board, [i]except that two members shall constitute a quorum [/i] of any group designated pursuant to the first sentence hereof."

I believe that the textual, logical, reading of this act supports the gov.'s position. Stevens calls it a "Rube Goldberg" argument to logically work through the language and premises of the text. But this is exactly what one does in Logic, Math, Science, or critical reasoning, so why not do it in the law? We do it in tax law, surely; I guess we don't have too many tax lawyers on the bench.

In any event, I find it additionally worrisome that the majority decides that what the labor board should have done is stop hearing cases for two years.

Take Away: In the future, the Board should go against the plain language of the statute, provided it is "rube goldberg[esque]", even if that means complete shutdown of all labor board disputes.

Posted by: mulder | Jun 17, 2010 11:24:52 AM

Sorry, but that doesn't work in this case. Yes, in "some cases" two is OK, e.g., where there is a group of three but one of those misses a vote. The "first sentence" your quote refers to states unequivocally that the Board can delegate its powers to "any group of three or more members," not to a group of two or more. Two of such a group of three can constitute a quorum of that group of three. Two of of a group of two cannot. The problem is that by the time the two were voting, there was no longer a group of three of which they could constitute a quorum.

The majority did not decide that the Board should stop hearing cases for two years. If the Board had recognized that it lacked the power to act once it was down to two members, the Senate would have been forced to do what it should have done much earlier --- either confirm nominees or recess to allow recess appointments. In fact, if the Board had announced earlier that it would not act with just two members, rather than trying to channel Rube Goldberg, this problem would never have arisen. The chances that the Democrats in the Senate would have allowed the Board to shut down for two years approximate zero.

Posted by: Dennis Nolan | Jun 17, 2010 12:41:17 PM

Observing strictly as a person with free speech rights, the SCOTUS description of the four Board members devising the Rube Goldberg contraption to stay in business portrays a quasi-bunker mentality of a government-in-exile, not an administrative agency, or maybe there is little difference. There may be more to the story than found in the opinion. But if not, was a more collaborative approach available, building on input from the stakeholders and their elected representatives?

Sadly, after the shaky, minoritarian contraption was built and harnessed, not many cared. Organized labor has for some time given up on the R case machinery, and finds the C case process to frequently be a black hole. Some employers may have been glad to buy time to avoid remedies that others find too soft. Hopefully, the new upper echelons of the Agency will try to figure out how to invigorate it, and this will not be done in small meetings away from the fray.

Posted by: BoardAgent | Jun 18, 2010 6:53:28 AM

I have to agree with Dennis Nolan that rubber stamping all of the remanded decisions would be very unwise. I believe any appellate court would take a dim view of that tactic. Now, it's another question entirely whether the current Board will merely "go through the motions" of reconsidering each case with an implicit understanding that all decisions will be upheld. But, that too will raise challenges, in my judgment.

Posted by: Jeff Wilson | Jun 18, 2010 7:04:59 AM

Mr. Nolan is living in a dream world if he thinks that Senators, be they Republican or Democratic, care enough about the Board to act just because it is unable to issue decisions. That may apply to a few Senators, but not enough to force them to take action. I have been a victim of the confirmation process, and I can attest to the fact that the Senate as a body simply does not care. If they did, the way that Board nominations are currently handled would have been fixed long ago. Thus, the Board, which understands the political realities much better than Mr. Nolan, took the prudent course and decided to continue making decisions.

Posted by: Dennis Walsh | Jun 18, 2010 7:25:31 AM

It would appear that there is virtually no chance that any 2-member decisions will be reversed. Thus, from a practical standpoint, this case was merely a mechanism for a law-breaking employer to severely delay its inevitable and forced compliance with federal law. Let's not lose sight of what this case is *really* about. In New Process Steel, the ALJ and two-member Board found that the employer repudiated a first collective bargaining agreement and withdrew recognition because it did not like the way the union conducted its internal ratification. This is extremely unsavory anti-union and unlawful employer behavior. Given that the employer engaged in such clear law-breaking, the real losers in this case are the employees who have been unlawfully denied recognition of their union. For this, there are many to blame, including the Senate/President for failing to timely confirm/recess-appoint Board members. But we should not forget that, bottom line, New Process Steel is still to blame for its lawbreaking.

Posted by: James A.W. Shaw | Jun 18, 2010 10:06:21 AM

Dennis Walsh adds a critical element that I considered addressing earlier but didn't. He suggests that most senators wouldn't care if the Board shut down. That was my thought exactly, although I do think that the political embarrassment caused by the shutdown of an agency (not any admiration for the Board itself) would likely have caused Senator Reid to allow recess appointments. The last thing he would have wanted going into and coming out of the election would be newspaper headlines about how the Senate majority leader single-handedly forced the Board to stop operating. And make no mistake about it, the decision to keep the Senate in pro forma session for no reason other than to prevent recess appointments was Reid's personal call.

Here is what I had written on that point before limiting my comments: "If the Senate did let the Board shut down, that would tell us something extremely important about the utility and viability of the NLRB. If even the Democrats in the Senate don't believe it's worth saving, we should pull the plug on it now rather than keep it alive in a vegetative state."

Posted by: Dennis Nolan | Jun 18, 2010 11:07:32 AM

Here's the language:

“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.”

I'll walk us through it.

(1) The board can delegate to any group of three all of the powers of the board.

Check. They did this here.

(2) A vacancy in the board shall not impair the remaining members to exercise all of the powers of the board.

Good to know, since we had a vacancy. So the remaining two still had all of the powers of the board. The last issue seems to be one of quorum.

(3) Well, three members satisfies a quorum, except when a group is created that began with at least three members, see (1), in which case, 2 members will constitute a quorum. This is what happened here.

Summed up: We satisfied my premise (1) by creating a group of three, and we gave them all of the powers of the board. Then Premise (3) says that in such a group, two members can satisfy a quorum as long as there are only two because of a "vacancy." There is nothing in the language that says anything about temporary vacancy, or anything to that extent. here we had a vacancy, that brought the number to two.

Please tell me where the language is ambiguous. The dissent is pretty convinced it's not, and Stephens concedes that if you read through the language you reach the government's position. But he thinks this is too strained.

Posted by: mulder | Jun 18, 2010 11:18:37 AM

Mr. Nolan draws the wrong conclusion from the Senate's indifference to the Board. It is the subservience of some Senators to the corporate interests which have no interest in a working Board that drives their indifference, not the fact that the Board no longer has any role to play. And it only takes a few Senators to obstruct the appointment process. If the Senate really thinks the Board is no longer useful then they should repeal the NLRA. But I submit that this will never happen, as there is still strong support for its basic principles among the American people. But unfortunately because of the fact that some Senators are beholden to interests which are opposed to those principles, those Senators will also continue to obstruct any meaningful reform to the Act, which it so desperately needs. Hence we continue in the current stalemate, which may very well lead us down the path to a Board without a quorum once again before next year is out.

Posted by: Dennis Walsh | Jun 19, 2010 6:02:00 PM

Dennis Walsh is too polite to say so, but he must include Senator Reid among those obstructionist senators who are subservient to corporate interests. The Board would have had a quorum for the entire period if Senator Reid hadn't kept the Senate in pro forma session just to block recess appointments. After blocking Bush's nominees and claiming piously that recess appointments are somehow intolerable, Senator Reid welcomed Obama's recess appointments. And no doubt he will welcome another round of Obama recess appointments when the current appointees reach the end of their terms.

That next group of recess appointees, by the way, will prevent the lack of a quorum. The only danger of another lack of a quorum would be if the Republicans take over the Senate in the election and then use Senator Reid's neat trick of pro forma sessions to prevent the president from making recess appointments. It would be hard to shed any tears if they do so, having learned that trick from Senator Reid himself.

One of Washington's worst problems, which Dennis W has experienced personally, is the "what goes around, comes around" mentality. It's like a gang feud where each murder has to be matched with at least one more. After the Senate Democrats blocked Bush nominations, the Republicans have blocked Obama nominations. No doubt when the shoe is on the other foot again, the Democrats will respond in kind. That's a terrible way to run the Senate. In the case of the NLRB, though, Senator Reid bears primary responsibility. That's why I find it hypocritical of him to blame the opposition for doing what he did in 2008.

Posted by: Dennis Nolan | Jun 20, 2010 11:30:44 AM

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