Employers Intensify Constitutional Attacks Against Labor Board

Employers are increasingly turning to the US Constitution for ammunition to disrupt the work of the National Labor Relations Board, as companies have notched early victories in their challenges to fundamental aspects of the agency.

The NLRB faces constitutional arguments in myriad settings, including in-house unfair labor practice proceedings, district court lawsuits, appellate review of board and lower court rulings, and as a defense against an agency bid to get a court to force a company to bargain with a union.

Those challenges will continue proliferating, legal observers said.

“While there are live questions having to do with something as fundamental as the constitutionality of the agency’s structure, defense lawyers and employers really are in a position where they have to raise them until they’re resolved,” said Michael Duff, a law professor at St. Louis University and former NLRB attorney. “Even if the arguments seem borderline ridiculous, they have to do it.”

This approach can find traction. SpaceX and Energy Transfer LP, for example, have won orders from Trump-appointed judges in Texas temporarily stopping the NLRB from moving forward with administrative cases against the companies based on constitutional claims.

The impact thus far has been delays in a few ULP cases, but some of the constitutional allegations could lead to courts invalidating otherwise sound NLRB rulings, legal observers say. Other arguments strike deeper, threatening the only means to police violations of the National Labor Relations Act.

These constitutional battles are playing out amid the US Supreme Court’s push this year to reduce the power of federal regulators, typified by back-to-back rulings that eliminated judicial deference to agency interpretations of vague law and opened regulations to perpetual legal challenge. The justices also barred the Securities and Exchange Commission from seeking civil penalties in administrative proceedings.

And the high court specifically rolled back the NLRB’s power in a decision that directed federal judges to treat the agency’s requests for immediate court orders the same way they would any other petition for a preliminary injunction.

“The Supreme Court has signaled it wants to bring down the administrative state, and now employers are making arguments that would have seemed unthinkable a decade ago,” said Anne Marie Lofaso, a law professor at West Virginia University and former NLRB attorney.

NLRB spokesperson Kayla Blado declined to comment. NLRB General Counsel Jennifer Abruzzo in April said that large employers are only challenging the agency’s constitutionality to divert its scarce resources away from enforcing labor law against them.

Constitutional Targets

Two of the most common constitutional arguments against the NLRB target the protections safeguarding board members and administrative law judges from being fired by the president, and the litigation of unfair labor practices in administrative proceedings rather than federal court.

The NLRA doesn’t provide a path to bring ULP charges in federal court. So aside from trying to get preliminary injunctions, labor law violations could largely go unpoliced if the NLRB is barred from handling those cases through their in-house process.

“This is the staging ground for corporate America to take away workers’ rights,” said Seth Goldstein, a union attorney with Goldstein & Singla PLLC.

The stakes are potentially lower for the removal protection issue, because the ultimate remedy if those shields are found unconstitutional would likely be for courts to nix them. That would leave administrative law judges and board members more susceptible to politically motivated firings, however.

Firing Shields

The SpaceX and Energy Transfer preliminary injunctions were based on claims against removal protections, which are buoyed by favorable precedent from the Supreme Court and the US Court of Appeals for the Fifth Circuit.

Safeguards for multi-member boards and commissions appear to be the next part of the administrative state that conservative justices may strike at, said William Araiza, a constitutional and administrative law scholar at Brooklyn Law School.

The high court has already issued a series of decisions striking down firing shields for individual agency heads. But there could be due process concerns related to exposing administrative law judges to politically motivated terminations that keep the high court from going that far, Araiza said.

Until the Supreme Court weighs in, companies in Texas, Louisiana, and Mississippi have an edge on challenges against NLRB judges thanks to the Fifth Circuit’s ruling that the removal shields on the SEC’s in-house judges are unconstitutional.

So while that decision helped SpaceX obtain an injunction in one of its two constitutional lawsuits against the NLRB, the company waged an extended legal battle to keep its other suit in Texas rather than see it transferred to California—where it would have lost the binding power of that Fifth Circuit precedent.

Employer Calculus

Companies have more frequently raised constitutional arguments within administrative proceedings rather than filing separate lawsuits in court. Starbucks Corp., Amazon.com Inc., Trader Joe’s, and BJ’s Wholesale Club, Inc. are among the employers to take that route.

Although neither administrative law judges nor the NLRB has the authority to rule on such claims, companies can ensure that they can raise them during appellate court review of a board decision by bringing them up during the agency’s in-house process. Employers could then argue courts should strike down adverse rulings because they were tainted by an unconstitutional process.

The decision on whether to sue the NLRB in court or save the constitutional challenges in case they’re needed during judicial review depends on several considerations, such as what’s at stake in terms of potential board remedies, the strength of the agency prosecutors’ case, and which administrative law judge is overseeing the dispute, legal observers said.

“Factor number one is cost,” said Steven Suflas, a management-side attorney at Holland & Hart LLP. “If you’re asking for an injunction, that’s litigation at Warp 9. Everything’s accelerated and costs are front loaded, rather than spread over 18 to 24 months.”

In contrast, bringing those constitutional arguments in unfair labor practice cases is simply done, Suflas said. They need to be included in the briefs so they’re preserved, and they wouldn’t come up again unless the employer loses at the NLRB and challenges that outcome in court, he said.

Preservation Necessary?

Lawyers at the Pacific Legal Foundation, a conservative advocacy group, are testing whether employers even need to preserve constitutional arguments during administrative proceedings in order to raise them in court.

They’re representing two related film production companies that violated labor law in response to their workers’ union organizing, according to an NLRB ruling in March.

3484 Inc. and 3486 Inc. argued in a brief that they can lodge constitutional challenges for the first time on appeal because the NLRB has no power to resolve those claims, making it futile to have raised them previously.

The companies cited Supreme Court precedent recognizing an exception to the restriction on appellate courts considering arguments that weren’t raised earlier when it would be useless to do so, including a 2021 decision saying appeals courts erred by barring judicial review based on Social Security claimants’ failure to bring constitutional claims before agency judges.

3484 and 3486 challenged the NLRB’s constitutionality on multiple fronts, including that the agency’s administrative process violates the Seventh Amendment right to a jury and Article III’s vestment of judicial power with the courts. They also brought a claim under the nondelegation doctrine, a constitutional theory that hasn’t been endorsed by the Supreme Court since 1935.

“The Supreme Court is more favorable to these issues than they’ve been in a long time,” said Oliver Dunford, a senior attorney with Pacific Legal Foundation’s Separation of Powers practice. “It’s a good time to be raising these types of questions.”