The Fifth Circuit Finds that the National Labor Relations Board is Unconstitutional

Happy Labor Day! The Fifth Circuit tells workers, “Go pound sand!”

Three companies, Space Exploration Techonlogies Corporation (SpaceX), Energy Transfer, L.P. (Energy Transfer), and Findhelp (collectively Plaintiffs), faced complaints alleging unfair labor practices in proceedings before the National Labor Relations Board (NLRB). In all three cases, the Plaintiffs sought and were granted injunctions against administrative hearings on the ground that the structure of the NLRB shielded its officers from removal in ways that violated the constitutional separation of powers.

Here’s how the NLRB has operated for years: The NLRB has an investigative arm. If complaints are filed against an employer, an NLRB officer undertakes an investigation and can initiate proceedings before an Administrative Law Judge (ALJ). ALJs can only be removed from office for good cause, as determined by the Merit Systems Protection Board (MSPB). MSPB members also can only be removed for cause. ALJ rulings can be challenged before the five-member NLRB Board, whose members can only be removed by the President for malfeasance or neglect of office. The Plaintiffs here challenge these multi-layered removal protections. Under the unitary executive theory as embraced by the U.S. Supreme Court, the President should be able to remove any executive officer for any reason at any time. According to the theory, the structure of the NLRB, the MSPB, and other executive agencies (but apparently not the Federal Reserve, for now?) is unconstitutional.

In Space Exploration Technologies Corporation v. National Labor Relations Board, the Fifth Circuit affirmed the District Courts’ decisions. Given the way things are going in the Supreme Court, the NLRB, perhaps because it had to adopt the position of the current administration, withdrew its arguments defending the constitutionality of the removal protections for the NLRB members and for ALJs. Rather, the NLRB argued only that the District Courts lacked jurisdiction under the Norris-LaGuardia Act and that Plaintiffs would not be irreparably harmed if denied injunctive relief.

The Norris-Laguardia Act bars federal courts from issuing injunctions in labor disputes. However, the Fifth Circuit found that the dispute at issue is not a labor dispute. The parties are not an employer and an employee; they are an employer and a regulatory body. The NLRB next argued that the issue of the removability of the Board members and ALJs was severable and need not be considered on the motion for injunctive relief. The Fifth Circuit quickly disposed of that argument. Echoing the District Court in the SpaceX case, a “statute must be found to be inoperative or unconstitutional as it was written before the issue of severance can be reached.”

On the merits, the demise of removal protections for ALJs was foreordained in the SCOTUS’s Jarkesy decision. One might think the NLRB members would be safe under Humphreys Executor, but SCOTUS shrugged off that ninety-year-old precedent in a shadow docket opinion. The Fifth Circuit notes that SCOTUS has been reluctant to extend Humphreys, but the truth is more like the case has been limited to its facts, and if the courts were being honest, they would just say that they were overruling that precedent in favor of the unitary executive theory. So, the Plaintiffs are likely to win on the merits, and subjecting them to a proceeding before an unconstitutionally structured agency would cause irreparable harm. The dissenting judge take issue only with this last part of the opinion.

Q.E.D. The Overton Window has shifted. Off-the-wall arguments are not only now on the wall. They are slam-dunk winners. Nearly century-hold precedents and decades of practice collapse in the face of a theory of executive power hatched in the 1980s. That theory will now empower one person to staff all executive agencies, including the agencies that have traditionally acted as constitutional checks on that one person’s exercise of lawful authority. And remember, each administrative body that enjoyed removal protections did so because Congress passed a statute giving them such protections. Those statues were signed into law by a President. If the past Presidents thought that such protections encroached on the constitutional separation of powers, they could have vetoed the measures. None did. That would have been off the wall.