In New Process Steel, L.P. v. National Labor Relations Board, (— S.Ct. —-, U.S., June 17, 2010), the United States Supreme Court considered whether following the delegation of the National Labor Relations Board’s powers to a three-member group, two members may continue to exercise that delegated authority once the group’s (and the Board’s) membership falls to two. The Supreme Court held the two remaining Board members cannot exercise such authority.
Facts
In 1947, the Taft-Hartley Act increased the membership of the National Labor Relations Board (“Board”) from three to five members. The Taft-Hartley Act also amended the National Labor Relations Act (“NLRA”) “to increase the quorum requirements for the Board from two members to three, and to allow the Board to delegate its authority to groups of at least three members.” As the year was coming to a close in 2007, Board only had four members and had one vacancy. The Board anticipated two more vacancies at the end of 2007 because the appointments of members Kirsanow and Walsh were set to expire. After the expiration of these two appointments, Board would only be left with two members and the remaining members would not meet the quorum requirements.
The Board made the following two delegations of its authority to become effective on December 28, 2007: (1) “the Board delegated to the general counsel continuing authority to initiate and conduct litigation that would normally require case-by-case approval of the Board;” (2) “the Board delegated ‘to Members Liebman, Schaumber and Kirsanow, as a three-member group, all of the Board’s powers, in anticipation of the adjournment of the 1st Session of the 110th Congress.'” The Board thought “its action would permit the remaining two members to exercise the powers of the Board “after [the] departure of Members Kirsanow and Walsh, because the remaining Members [would] constitute a quorum of the three-member group.” The Board’s delegation to the three-member group became effective on December 28, 2007. On December 31, 2007, the appointment of the third member, Member Kirsanow, expired.
Beginning January 1, 2008, there were only two remaining Board members, Members Liebman and Schaumber. The two started “to issue decisions for the Board as a two-member quorum of a three-member group.” The Board’s delegation of authority terminated on March 27, 2010, after the President made two recess appointments. Between January 1, 2008, and March 27, 2010, the Board decided approximately 600 cases.
One of the cases decided by the two-member Board involved New Process Steel, L.P. (“New Process”). The Board sustained two unfair labor practices complaints against New Process. New Process challenged the two-member Board’s authority to issue orders. The United States Court of Appeals for the Seventh Circuit ruled in favor of the Board.
Decision
The quorum requirements and delegation procedures for the Board are set out in the NLRA at §3(b) which provides in its first sentence that the Board may delegate any or all of its powers to “any group of three or more members.” Section 3(b) further provides, “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.” The Supreme Court held “the delegation clause requires that a delegee group maintain a membership of three in order to exercise the delegated authority of the Board.”
The Court found it was undisputed that §3(b)’s first sentence “authorized Board to delegate its powers to the three-member group effective on December 28, 2007, and the last sentence authorized two members of that group to act as a quorum of the group during the next three days if, for example, the third member had to recuse himself from a particular matter.” The question before the Supreme Court was whether the remaining two Board members could continue to act for the Board after the Board’s membership dwindled to two. The Court held the two members could not.
The Court listed three main reasons for its decision: (1) “reading the delegation clause to require that the Board’s delegated power be vested continuously in a group of three members is the only way to harmonize and give meaningful effect to all of the provisions in §3(b);” (2) “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;” and (3) the Court’s “interpretation is consistent with the longstanding practice of the Board.”
Prior to the passage of the Taft-Hartley Act, the Board regularly issued decisions in which only two members participated. However, the Taft-Hartley Act “changed the requirement to a three-member quorum for the Board.” “[I]f Congress had wanted to allow the Board to continue to operate with only two members, it could have kept the Board quorum requirement at two.”
What This Means To You
On June 17, 2010, the NLRB issued a press release regarding this decision. The following is an excerpt of that statement:
The Board operated with two members from January 2008 to late March 2010, when President Obama recess-appointed two additional members. In continuing to issue decisions during that period, the two remaining members—current Chairman Wilma B. Liebman, a Democrat, and Member Peter C. Schaumber, a Republican—relied on Section 3(b) of the National Labor Relations Act as well as an opinion issued by the U.S. Department of Justice’s Office of Legal Counsel, which concluded that “if the Board delegated all of its powers to a group of three members, that group could continue to issue decisions and orders as long as a quorum of two members remained.” The Board made such a delegation in December 2007 to a group of three members, which included Liebman and Schaumber, who, acting under that delegation, issued about 600 decisions Losing parties sought review of dozens of Board decisions in the federal courts of appeals, arguing that the two-member Board lacked authority to issue those decisions. The Supreme Court agreed to take up the question after the Courts of Appeals split on the issue, with five circuits ruling in the Board’s favor and the D.C. Circuit ruling against it.
The same question has been raised in five more cases pending before the Supreme Court, and 69 that are pending before the Courts of Appeals. It is expected that those cases will be remanded to the Board, and the now-four member Board will decide the appropriate means for further considering and resolving them.
The case in question, New Process Steel, LP v. NLRB, involved a steel processing plant in Butler, Indiana that unilaterally withdrew recognition from the International Association of Machinists. The two-member Board had ordered the employer to recognize the union, honor a contract negotiated in the fall of 2007 and make employees whole for any income lost while the employer failed to honor the contract. “When the Board went to two members in January 2008, Member Schaumber and I made a difficult decision in difficult circumstances,” said Chairman Liebman. “In proceeding to issue decisions in nearly 600 cases where we were able to reach agreement, we brought finality to labor disputes and remedies to individuals whose rights under our statute may have been violated. We believed that our position was legally correct and that it served the public interest in preventing a Board shut-down. We are of course disappointed with the outcome, but we will now do our best to rectify the situation in accordance with the Supreme Court’s decision.”
The more difficult question is what happens to the over 525 cases that are final already. Ordinarily, the principles of res judicata would preclude re-litigating a matter that has already reached final judgment. However an argument can be made that res judicata principles do not apply with respect to a final judgment issued by a body lacking jurisdiction to enter the judgment. As a practical matter, it may not be worth the time and expense for parties to challenge prior final judgments. Parties will have to gauge the chances of getting a different result from a properly authorized panel or in a subsequent appeal.
What is more troubling is the unknown precedential effect of the decisions issued in that two-year period. Since they were issued unlawfully, they may be deprived of any precedential effect. Employers should tread quite cautiously before relying on any of the holdings from those two member Board decisions until further action by the courts or the Board occurs.
Questions
If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.
Bruce A. Scheidt, Laura Izon Powell or David W. Tyra | 916.321.4500