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DESPITE UNCONSTITUTIONAL APPOINTMENTS, NLRB AUTHORITY CONSIDERED RETROACTIVELY VALID BY THE THIRD CIRCUIT

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The Third Circuit Court of Appeals recently held that actions taken by the National Labor Relations Board (“NLRB”), including its Regional Directors, during a time when it did not maintain a constitutionally valid quorum are nevertheless binding and have full legal force.  In Advanced Disposal Servs. E., Inc. v. NLRB, the NLRB found that an employer violated sections 8(a)(1) and 8(a)(5) of the National Labor Relations Act (“NLRA”) when it refused to collectively bargain with a newly-certified bargaining unit.  The NLRB issued an order to enforce the election, and the employer appealed. 

In 2012, President Obama appointed three members to the NLRB while the Senate was between “pro forma” sessions.  For an insightful discussion on the procedural mechanisms controlling the subject NLRB recess appointments, see this blog’s previous coverage of the topic here.  The U.S. Supreme Court held that the three appointments were invalid in NLRB v. Noel Canning, decided in 2014.  During the time the NLRB lacked a constitutionally valid quorum, it appointed Regional Director Dennis Walsh (“Director Walsh”).

The unconstitutional NLRB quorum lasted from January 4, 2012, to August 5, 2013.  On July 18, 2014, the NLRB – with a properly appointed quorum – ratified all administrative, personnel, and procurement matters approved by the NLRB for the applicable timeframe.  Director Walsh similarly issued a ratification of his decisions on July 30, 2014.

On March 5, 2014, the Teamster Local Union No. 384 sought to represent a unit of workers at three Advanced Disposal Services (“Employer”) facilities.  The Union filed a representation petition with Director Walsh.  However, Director Walsh’s authority was uncertain at that time because the Noel Canning decision had not yet been decided.  Then, on March 13, 2014, the Union and the Employer entered into a Stipulated Election Agreement – an agreement that a representation vote will be held, and that any post-election issues may be reviewed by the NLRB at either party’s request.  The election was held between April 16 and 17.  Sixty voters supported unionization and fifty-eight opposed it.  The employer challenged the election outcome and eventually appealed the outcome to the NLRB.  On December 16, 2014, the NLRB overruled the employer’s challenge, and ordered the employer to collectively bargain with the bargaining unit.

The employer refused to bargain with the Union, and the NLRB ordered the employer to enforce the election and held that the employer was violating the NLRA.   On appeal to the Third Circuit, the employer challenged – for the first time – that Director Walsh did not have valid authority to administer the election because of the timing of his appointment.  When considering the employer’s challenge, the Third Circuit remarked that the Noel Canning decision was “rare and remarkable” creating “a situation in which the validity of hundreds of NLRB orders and other official actions were cast into doubt” raising several novel questions yet to be addressed by the Third Circuit.

Of the several novel questions yet to be addressed, the Third Circuit addressed three: 1) did the employer forfeit its right to challenge the Director’s authority because it failed to raise the issue prior to the representation election, 2) did the employer’s execution of the Stipulated Election Agreement constitute sufficient accession to Director Walsh’s authority, and 3) did Director Walsh and NLRB sufficiently ratify the ultra vires (meaning without legal authority) election?

First, the Third Circuit held that the attack on the Director’s authority was not forfeited, even though the employer failed to properly preserve the issue below.  The court held that such a challenge constitutes an extraordinary circumstance it and could be raised for the first time on appeal.

Second, the Third Circuit held that the Stipulated Election Agreement did not preclude the employer from challenging the Director’s authority because such a challenge was jurisdictional, and it may be raised at any time.  Moreover, the Agreement was executed on March 13, 2014, and Noel Canning was not decided until June 26, 2014.  Since the employer had no way of knowing the outcome of Noel Canning when it executed the Agreement and the Agreement did not expressly accept the Director’s authority to act, the employer was permitted to challenge the Director’s authority.

Third, and most critical, the Third Circuit held that the ratification of the election by the Director (and by extension, then, the NLRB) was sufficient.  The court held that since the NLRB and the Director ratified their own respective conduct – not the conduct of the employer’s employees – the April 2014 election was properly ratified.  Therefore, the employer was required to enforce the election and collectively bargain with the union.  The NLRB and Director Walsh’s respective ratifications pass muster in the Third Circuit, whose jurisdiction includes Pennsylvania and New Jersey.

This decision is relevant because it retroactively validates NLRB rulings and orders within the jurisdiction of the Third Circuit made when the NLRB lacked a constitutional quorum.  An employer relying on the Noel Canning decision who believes that it is not obligated to follow an NLRB order issued between January 4, 2012, and August 5, 2013, will likely be unsuccessful.

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