Could the NLRB Be Unconstitutional?

Sean P. Redmond
Vice President, Labor Policy, U.S. Chamber of Commerce

Published

February 28, 2024

The National Labor Relations Board (NLRB or Board) has been on a tear lately, issuing new regulations and case decisions that are reverting labor policy to the bad old days of the Obama administration—and then some. From its dubious effort to promote so-called “card check” recognition by fiat to its war on commonplace workplace policies, the current majority at the Board has taken its campaign against employers to new heights.

While employers have generally understood that there will be policy vacillations from one administration to the next, those with the means to do so have launched legal challenges to some NLRB actions when they go too far. However, they had refrained from challenging the very structure of the NLRB itself. That has now changed, and a handful of employers are asking the courts whether the agency is unconstitutional.

Back in January, the first of four employers (so far), SpaceX, filed a lawsuit in the U.S. District Court for the Southern District of Texas, asking that the court declare that the policies restricting the removal of NLRB administrative law judges (ALJs) and members of the NLRB are unconstitutional. The federal judge in Texas on February 15 granted an NLRB motion to transfer the case to California, where the company has its headquarters, though SpaceX asked an appeals court to reconsider that decision. On February 26, that court issued a temporary stay of the judge’s order to move the case from Texas.

SpaceX is also seeking a declaration that the proceedings before the NLRB violate the company’s constitutional right to trial by jury. Finally, the company argues that members of the NLRB who participate in the decision to issue an injunction against the company must recuse themselves from further proceedings in the case. Within weeks, Trader Joe’s, Amazon, and Starbucks have raised defenses in Board proceedings, arguing that the NLRB’s structure is unconstitutional.

While these challenges put forward heretofore seldom considered arguments, there is reason to think that courts will take them seriously. The litigants may get a taste of how the courts will act based on the outcome of a pending Supreme Court case involving the Securities and Exchange Commission (SEC).

The SEC case involves a similar challenge to the constitutionality of ALJs and other related issues involving enforcement by that agency. In 2022, the Fifth Circuit Court of Appeals ruled that the SEC’s adjudication of an enforcement proceeding seeking civil penalties violated the petitioner’s right to a jury trial, that Congress unconstitutionally delegated legislative power to the SEC in letting the agency choose without restriction whether to bring enforcement actions in court or in agency proceedings and that statutory removal restrictions on SEC ALJs violated the president’s constitutional authority over Executive Branch officers.

In response to that decision, the SEC filed a petition for a writ of certiorari—the legal term for asking the Supreme Court to review the case. The Court granted that petition and heard oral arguments on November 29, 2023, meaning that between now and the end of June, the Supreme Court will presumably determine the validity of these constitutional challenges.

Depending on what the Court decides with respect to the SEC, it could have massive ramifications for the NLRB. Lawyers for the four employers that have raised constitutional challenges appear to be anticipating a decision that may favor their argument that the NLRB is flawed not only in its legal logic but also in its fundamental structure.

This is not an argument employers would have made in the past. In the current environment, at least some businesses feel that the NLRB’s policies have become so extreme that they have no choice. The Board may have sought to take advantage of its majority to push the envelope on labor law. But in taking it too far, the NLRB may have fatally undermined itself.