U.S. Supreme Court finds hundreds of labor cases were improperly decided due to lack of sufficient quorum

Marcia Coyle   National Law Journal  June 17, 2010

The vacancy-plagued National Labor Relations Board did not have authority to issue nearly 600 decisions in the last two years with only two board members, the U.S. Supreme Court ruled on Thursday.

In New Process Steel v. National Labor Relations Board, a 5-4 Court upended the NLRB’s attempt, dating back to 2007, to continue functioning when it foresaw that its membership was in imminent danger of dropping from four to two.

The immediate effect of the Court’s decision will be to return to the board an estimated 75 to 80 cases pending in the lower courts that are challenging the legitimacy of two-member board decisions. Another 500 or so cases involve appeals not raising the two-member board issue; cases where the parties already have complied with a board decision; and cases where the parties are in the process of complying and did not appeal.

All of those decisions are void, but whether the aggrieved parties petition the board or the courts of appeals to review their cases as a result of the Supreme Court decision, may depend on the facts of those cases, according to labor and management attorneys.

“I think it’s going to be very difficult for those employers or unions that had cases decided but didn’t challenge the decisions on the ground that the two members lacked authority to try to go back and revisit the issues,” said Peter Conrad, a partner in the labor and employment department of New York’s Proskauer Rose and a former NLRB hearing officer.

Conrad said, for example, that many board orders in discrimination cases require reinstatement and back pay for the employee. If that has been done, he said, “It is conceivable, but not likely, an employer is going to terminate that employee because the order is now invalid. Even if the case were revisited by the board, it is unlikely the board would reach a different outcome.”

Those decisions, he said, were made by one member from each of the two major political parties. “If they were able to reach a decision in those cases, most of which were fairly routine matters, when these cases are reassigned to a three-member panel of the now four-member board, adoption of those decisions is not difficult to foresee,” Conrad said.

John Raudabaugh, a former NLRB member and now counsel to the Washington office of Nixon Peabody, said he believes that parties who did not appeal their two-member board decisions have waived any opportunity for reconsideration. “That would leave a much smaller number affected,” he said.

But no one really knows how many cases ultimately may go back to the board.

The New Process Steel case involved a steel processing plant in Butler, Ind., 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 fall 2007 and make employees whole for any income lost while the employer failed to honor the contract.

In the Supreme Court, the justices faced a classic statutory interpretation challenge.

Section 3(b) of the National Labor Relations Act 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.” It also provides that “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” to which the board has delegated its powers.

Toward the end of 2007, the five-member board had four members and one vacancy. Anticipating that the terms of two of the four members were about to expire, the board delegated powers to three of its four members. Two of that three-member group — Chairwoman Wilma Liebman, a Democrat, and Peter Schaumber, a Republican — would remain in January 2008 and be the quorum needed to do business.

The question before the Supreme Court was whether two members constituted a quorum in this instance, or whether three members were still required to issue a decision.

Writing for the majority, Justice John Paul Stevens said interpreting the law to require that the board’s powers be vested at all times in at least three members harmonizes and gives effect to the law’s quorum, delegation and vacancy clauses.

“Secondly, and relatedly, 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,” he wrote.

The law, as it currently exists, he added, “does not authorize the Board to create a tail that would not only wag the dog, but would continue to wag after the dog died.”

Justice Anthony Kennedy, joined by justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor, dissented. He said there was nothing in the law’s text to support the majority’s conclusion.

“The Board’s delegation to a three-member group that ultimately dwindled to two was a thoughtful and considerate exercise of its reasonable discretion when it was confronted with two imperfect alternatives,” he wrote. “During the past two years, events have turned what Congress had undoubtedly thought would be an extraordinary circumstance into an ordinary one.”

New Process Steel’s counsel, Sheldon Richie of Richie & Gueringer in Austin, Texas, said, “We believe the decision is correct and we’re pleased we got it in our favor.”

Liebman said in a statement, “When the Board went to two members in January 2008, Member Schaumber and I made a difficult decision in difficult circumstances. 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 shutdown. 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 term of board member Schaumber will expire at the end of August. Three nominations for board seats are currently pending before the Senate, including those of members Craig Becker and Mark Pearce, who were recess-appointed by President Barack Obama in late March.

In a statement after the ruling, Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) blamed the board’s “vacancy crisis” on “continuing obstruction in the Senate” of confirmation of Obama’s nominations.

“More than 500 disputes resolved by the Board are now called into question, including disputes involving allegations of unfair labor practices, secret ballot elections relating to union representation and challenges to requiring workers to pay union dues,” Leahy said. “It is unfortunate that there has long been a vacancy crisis in the National Labor Relations Board, but it was never the intent of Congress that the Board cease operating entirely when three vacancies arise.”

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