Employment Law | Expert Legal Commentary

September 29, 2010

New Process Steel v. NLRB: NLRB Cannot Make Decisions with Only Two Members

New Process Steel L.P. v. NLRB

By Jeremy Gray of Zuber Lawler & Del Duca

New Process Steel v. NLRB: NLRB Cannot Make Decisions with Only Two Members

In a sharply divided opinion, the U.S. Supreme Court resolved a Circuit Split and held that the National Labor Relations Board could not validly issue labor decisions as a two-member body, which it did for a period of about 27 months from January 2008 until March 2010. The decision, New Process Steel L.P. v. NLRB, ___ U.S. ____, 130 S.Ct. 2635 (2010), could potentially invalidate nearly 600 decisions the two-member Board reached during that time period.

BACKGROUND

The National Labor Relations Act dictates that the National Labor Relations Board (“NLRB”) should have five members, but the statute specifically allows the Board to operate with a vacancy. 29 U.S.C. section 153(b). That same statutory section states 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].” Id.

In 2007, the Board consisted of four members, two who had undergone the standard confirmation process and two who were recess appointees with terms set to expire Dec. 31, 2007. As the end of 2007 drew near, it did not appear that new members would be appointed so the Board delegated all of its powers to a three-person group of the two regular appointees and one recess appointee. Beginning January 1, 2008, the Board operated with only the two regular remaining appointees, one Democrat and one Republican. They operated under the theory that so long as they agreed on decisions, they constituted a quorum of the delegated three-member group.

Two two-member Board made NLRB decisions for the next 27 months, until two more (pro-union) appointees were named to the Board. During that time, they issued nearly 600 decisions, but they were careful not to issue decisions in controversial cases where they did not agree. Instead, they basically followed Board precedent.

Several employers appealed unfair labor practice determinations made by the two-member Board, arguing that the Board had no statutory authority to make such decisions without at least three members. The D.C. Circuit Court of Appeals agreed with the employers, finding that the two-member Board had no authority to act. Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB,  564 F.3d 469 (D.C. Cir. 2009). But at least five other Circuit Courts – the First, Second, Fourth, Seventh, and Tenth—interpreted the statute as authorizing the two-member Board as a quorum of the delegee three-person group. (See cites to the other Circuit Court cases in New Process Steel L.P. v. NLRB, 130 S.Ct. 2635, n.1.) The appeal heard by the U.S. Supreme Court was the opinion from the Seventh Circuit, New Process Steel v. NLRB, 564 F.3d 840 (7th Cir. 2009).

The 2-Person Board Lacked Statutory Authority to Act

The majority of the Court focused on the varying interpretations of the statute to determine which one best gave effect to the entire statute and Congress’ intent in passing it. The Court considered the following two competing interpretations: 1) A delegee group need only contain three members, and two members of that group alone may exercise the full powers of the Board as long as they were part of the initial three-person delegee group; or 2) In order for the delegation to remain valid and authorize the delegee group to make Board decisions, the delegee group must maintain three members at all times it acts. In other words, the second interpretation would hold that because the delegee group no longer had three members because the third member had left the Board, the group was no longer valid and the statute did not authorize the remaining two members to make decisions. New Process Steel L.P. v. NLRB, ___ U.S. ____, 130 S.Ct. 2635, 2640 (2010).

The Supreme Court majority determined that the second interpretation was correct, for several reasons. First, requiring the delegee group to maintain no less than three members at all times gives effect to the entire statute, whereas the first interpretation would essentially replace the three-member quorum requirement with a two-member requirement. Id. Second, the Court determined that 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.” Id. at 2641.

Finally, the three-member delegee group was consistent with the NLRB’s “longstanding practice.” Id. at 2641-2642. In the past, a two-person quorum had only taken action when the third member of a delegee group was disqualified from a particular case, but he was still otherwise in the group. Id. at n.2. When one member of a three-person group has left because his term expired, the Board has always immediately replaced that person with another member in order to maintain a three-person group. Id. at n. 3.

In response to the NLRB’s argument that the plain language of the statute authorizes actions by a two-person quorum, the Court pointed out that the statute only authorizes a two-person quorum, not a two-person group. Id. at 2642-2643. Moreover, the language allowing the Board the operate with a vacancy references a vacancy in the Board at large, not specifically to a vacancy in a three-person delegee group. Id. at 2643. Neither of these provisions supports an argument for a perpetual two-member delegee group.

The Court similarly rejected the NLRB’s argument that a two-member group meets the Congressional objective of Board efficiency. Before Congress passed the Taft-Hartley Act, the Board had authority to issue decisions with only two members. If Congress wanted that practice to continue, it would not have changed the statutory requirements. Id. at 2644.

CONCLUSION

The Supreme Court’s decision in New Process Steel has raised questions about the validity of the hundreds of decisions the two-person Board issued during those 27 months. Following the Supreme Court’s decision, the Board issued a press release stating that more than 70 decisions of the two-member Board were pending on appeal, and that it expected those non-final cases to be remanded to the now-four-member Board for adjudication.

For those impacted by a final decision – one that was either not appealed or has exhausted its appeals – the question of what to do in light of New Process Steel arises. While those decisions can likely be challenged given the Supreme Court’s ruling, parties will have to weigh the cost and potential outcome of doing so. While res judicata principles arguably do not apply since the Board did not have jurisdiction to enter the decision in the first place, more political issues may prove relevant. In particular, employers unhappy with a previous decision may find it not worth the cost to challenge a previous decision, given the heavily pro-union slant of the current Board.

About the Author

Jeremy Gray is a Partner of Zuber Lawler & Del Duca, focusing on employment law.

Image Credit: ©iStockphoto.com/vicnt

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Companies Mentioned

National Labor Relations Board

New Process Steel L.P.

Also See:

Sutherland v. Ernst & Young LLP: Second Circuit Denies Class Arbitration for Low-Value Employment Claims

Sun Capital Partners III, LP v. New England Teamsters: First Circuit Targets Private Equity Funds for Pension Withdrawal Liability

Univ. of Tex. Southwestern Med. Ctr. v. Nassar: Supreme Court Mandates Strict Burden for Title VII Retaliation Plaintiffs

Vance v. Ball State University: Supreme Court Limits Employer Exposure to Strict Liability Under Title VII

Parisi v. Goldman Sachs & Co.: Second Circuit Upholds Arbitration Clause Barring Title VII ‘Pattern-or-Practice’

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