Dylan Gyauch-Lewis reviews the Supreme Court’s recent spate of rulings redefining administrative law and how they threaten the National Labor Relations Board’s authority.
The 2023-2024 Supreme Court term transformed the administrative state and its ability to regulate everything from the environment and taxation to banks and the stock market. Now, the ability of regulators like the Federal Communications Commission and Federal Trade Commission to issue and enforce rules has come under question. One issue that has largely stayed off the public radar is just how much more precarious the rights of workers are and how much more uncertainty now exists around the authority of the National Labor Relations Board (NLRB), the constitutionality of which corporations had already frequently challenged.
Shortly after the conclusion of this last Supreme Court term, SpaceX was granted a preliminary injunction—based on the Fifth Circuit ruling that administrative law judges are unconstitutional, which the Supreme Court let stand— by the United States Court for the Western District of Texas to block the NLRB from investigating it for two unfair labor practice charges (ULPs). The first alleged the company had coercive workplace rules or policies that constrained employees’ ability to engage in protected organizing activity and the other alleged retaliatory disciplinary practices and retaliatory termination. This injunction is in addition to another preliminary injunction in the Southern District of Texas. Both injunctions are part of an ongoing challenge to the NLRB’s very existence based on the premise that its basic structure is unconstitutional. The end goal? To enable corporate titans like Elon Musk to elude federal enforcement of workers’ rights. SpaceX is not the only company against the NLRB’s constitutionality, but it introduced the tactic first and was then copied by Amazon, Starbucks, and Trader Joe’s.
As I’ve written previously for ProMarket, there are several different arguments the companies are making for why the NLRB is unconstitutional, all of them centered on the role of administrative law judges (ALJs), which are independent, in-house arbiters who have long been employed by many federal agencies such as the NLRB and FTC. My previous article lays out the constitutional questions in more detail, but they basically boil down to the following (not all of which are being made by all of the aforementioned companies in their respective lawsuits):
- The NLRB violates Article I of the Constitution because Congress isn’t allowed to deputize anyone else (i.e. agency bureaucrats) with the power to make significant decisions that are within its purview.
- The NLRB violates Article II because ALJs have protection from presidential removal.
- The NLRB violates Article III because it gives judicial powers to executive branch officials.
- Employers’ right to a trial by jury for a criminal charge, guaranteed by the Fifth Amendment, is violated by an ALJ overseeing an NLRB case.
- Employers’ right to a jury trial for a suit at common law with a dispute worth at least $20, as laid out in the Seventh Amendment, is violated by an ALJ overseeing the case. (The $20 threshold was laid out in the Bill of Rights and hasn’t been revisited since.)
As I argued, none of these are particularly strong arguments. The first misunderstands how the government has always worked and would create a standard where every tiny detail of everything has to be determined in legislation. The Fifth and Seventh Amendment arguments contradict one another; one would require ULPs to be considered criminal charges while the other requires them to be common law suits. In reality ULPs are neither, they are a finding that rights under the National Labor Relations Act were infringed and a cause for imposing remedies. Both also go against long-standing case law.
The Article III claim misunderstands what ALJs do—they are part of executing the law by imposing penalties, more akin to a traffic cop writing a ticket than a judge ruling on a criminal charge. A cop doesn’t need to ask a judge for permission to write a parking ticket, but the person who gets a ticket can go to court and argue it. Similarly, the NLRB doesn’t have to go to a court to impose a remedy, but the subject of the order can go to court over it. (Or they can ignore it and necessitate the NLRB to take them to court, since it has no internal mechanism to enforce its own rulings.)
At least that’s how it worked until the Supreme Court issued its rulings for the 2023-2024 term. Now the waters are muddier. To start, the Court mandated (functionally unanimously) in Starbucks v. McKinney that federal district judges apply a stricter standard for a preliminary injunction to be granted to the NLRB for it to start an investigation. This is important because, without an injunction, there is nothing to stop an employer from retaliating against workers who assist the investigation; it would be illegal, but the NLRB would have to take them to court, further delaying the investigation.
By itself, this is not a radical shift, but it coincides with a flood of other rulings that undermine the NLRB’s power. It creates an additional lift to start investigating, which could potentially deter some investigations from being started, but the larger issue is how it exacerbates the other legal battles the NLRB is fighting. While Starbucks was the only case dealing directly with the NLRB, there were a number of other decisions that could impact the agency, including several that relate to the constitutional questions above.
| Case | Summary | Relevance to NLRB |
| Corner Post v. Board of Governors of the Federal Reserve System | As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Federal Reserve Board (Fed) in 2011 promulgated a rule capping transaction or “swipe” fees charged to retailers by debit card issuers when a customer completes a purchase via debit card. In response to the rulemaking, several businesses and trade groups representing convenience stores and restaurants sued the Fed in 2014 arguing that the rule was insufficiently restrictive and, thus, did not meet the requirement set forth in Dodd-Frank. That effort was rejected by the DC Appeals Circuit and the Supreme Court declined to hear an appeal. In 2021, the North Dakota Retail Association and North Dakota Petroleum Marketers Association sued again on the same grounds. The Fed moved to dismiss on the grounds that the lawsuit was outside the six year statute of limitations for federal regulations governed by the Administrative Procedures Act. Following that motion to dismiss, plaintiffs added Corner Post, a truck stop, to the case and argued that, since it had not existed until 2018, the statute of limitations should be interpreted as six years from when the plaintiff encounters a harm, rather than six years from the rule’s issuance. The Supreme Court agreed. | As a result of Corner Post, anyone can sue any government agency over any decision regardless of how long it has been in place. The Supreme Court allows a newly incorporated corporation to sue over any regulation regardless of how long it has been in place. |
| Loper Bright v. Raimondo AND Relentless v. Department of Commerce | Plaintiffs sued over a technocratic fishing regulation about collecting data for fishery management. The arguments centered on whether courts should defer to executive agency experts on technical details, an established precedent called “Chevron deference.” The Court said no, the judiciary gets to make the calls. | The decision in these cases (they were bundled together because they were about the same thing) gives judges across the country permission—or maybe encouragement—to override technical subject matter decisions made by agencies. The NLRB is staffed by labor law experts and people who understand very niche issues like union election drives and case law around ULPs. |
| SEC v. Jarkesy | Plaintiff argued that a fine given by the Securities and Exchange Commission was invalid because relying on an ALJ is unconstitutional. The Court agreed, saying that to impose a penalty, the SEC needs to win in a jury trial and that going through an ALJ violates the Seventh Amendment. | This ruling grants credence to the challenges to the NLRB’s structure. In Jarkesy, the Court held that administrative penalties cannot be enforced without a jury trial. It also notably did not weigh in on the Fifth Circuit’s ruling that ALJs themselves are unconstitutional under Article II. |
| Starbucks v. McKinney | Starbucks argued that the standard district court judges used to grant the NLRB a preliminary injunction was too low a burden. The Court said it was and raised the bar for investigations from “substantial” to “likely will succeed on the merits.” | This ruling directly makes it harder for the NLRB to get preliminary injunctions it needs to properly start investigations into alleged ULPs. |
The ruling in Loper Bright and Relentless has gotten the most attention and could present a significant threat to the structure of the NLRB by empowering judges to reject agency experts. However, courts have long deferred to the NLRB on technical questions, even before the Chevron doctrine went into effect in 1984. (And, on the flip side, conservative jurists have long been comfortable overriding the NLRB in order to favor employers in cases like Yeshiva (1980) and Lechmere (1992.)) Furthermore, not long after the Supreme Court ended Chevron deference, the Court of Appeals for the D.C. Circuit held that courts still must defer to the NLRB. The appellate court argued that unlike other federal regulators, the NLRB’s main role is to interpret existing federal statute, which is different from creating rules to fill in gaps in legislation. The ruling in Loper Bright and Relentless erred, but it will probably hurt the NLRB less than many other agencies and doesn’t fundamentally change how courts have dealt with the subject matter historically.
That said, the decisions in Corner Post and Jarkesy pose a more dangerous threat to the NLRB’s authority. In Jarkesy, the Supreme Court affirmed that ALJs cannot issue fines, invalidating a core part of the NLRB’s structure and ability to enforce the NLRA. Despite the Seventh Amendment question vis a vis the NLRB having already been settled in Jones and Laughlin Steel (1937) where the Supreme Court held that the NLRB’s remedial actions did not require a jury trial, the prospect of Jarkesy strengthening a case against the agency’s constitutionality has been widely discussed as potential fallout from the decision.
However, there are some key differences between the NLRB and the SEC (the main target in the Jarkesy ruling) that provide reason for optimism. The text of the Seventh Amendment establishes a right to a jury trial in “suits at common law.” Despite common law and civil law sometimes being conflated, there is a key difference. Common law is rooted in judicial precedent, traceable to the English legal tradition. While “civil law” is used as a broad term to describe most non-criminal legal issues. In this sense, all common law issues are civil, but not all civil disputes are common law (only those predicated largely on judicial precedents).
This can all seem incredibly pedantic, but the Jarkesy ruling hinges on a majority of the Supreme Court agreeing that the fine in question, which was for securities fraud, fell under common law. They reached that assessment by tying it to the longstanding common law around fraud. Even some detractors of the NLRB’s current structure don’t think the agency runs afoul of this particular issue. Some have also argued that the NLRB could potentially avoid some of the trouble here by distinguishing “remedies” from “penalties” and try to argue that corrective actions are not punishment per se.
Additionally, in Jarkesy the justices did not weigh in on the part of the Fifth Circuit’s ruling that found ALJs to be in violation of Article II of the constitution—another of the specific arguments being directed at the NLRB’s existence. As a result, ALJs are now unconstitutional by default in the entire Fifth Circuit, which is how SpaceX won its new injunction. This argument, at least, does not have the Supreme Court’s blessing, but they didn’t take it off the table either.
Meanwhile, Corner Post simply opens the NLRB (and all other agencies) to nearly limitless litigation by removing the protection of the statute of limitations for all of its longstanding rules and regulations. The reason that Corner Post was able to sue, as described by the Court, is that it obviously wasn’t aware of the regulation before it existed. As such, the statute of limitations should start from when they are affected by it. But remember, Corner Post isn’t a person. This is a corporation, whose founders should have been familiar with regulations relevant to its business beforehand. This creates an enormous loophole; just start a corporation and the statute of limitations will reset. This obviously isn’t specific to the NLRB but is a huge threat nonetheless. There’s little to stop anyone from creating a bunch of new corporations that are “harmed” by particular regulations and flooding the courts to overwhelm agencies and siphon off precious resources from actual enforcement.
In conjunction with Loper Bright, Corner Post also creates the possibility of new corporations being able to sue over regulations irrespective of whether they have been upheld in court, even in the Supreme Court. Now in a post-Chevron legal system, according to David Reiser of Zuckerman Spaeder LLP, it is possible that, “in combination with Loper-Bright, Corner Post may invite trade associations to recruit or create new entrants with fresh rights to challenge even the most settled regulations…”
In sum, the NLRB finds itself facing challenges to its very existence, boosted by a spate of Supreme Court rulings. Already, because the Court did not touch the Fifth Circuit’s holding that ALJs violate Article II in its Jarkesy ruling, ALJs are now firmly considered unconstitutional in Texas, Louisiana, and Mississippi. To top it all off, the NLRB’s litigation risks have ballooned and they have to meet a higher burden to start an investigation. The 2023-2024 Supreme Court term has left the NLRB in a vulnerable position, but not an impossible one. At least not yet.
Author Disclosure: the author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
