News & Events

Unconstitutionality of Recess Appointments Has Far Reaching Repercussions on Labor and Financial Issues

Submitted By Firm: Michael Best & Friedrich LLP

Contact(s): Jose A. Olivieri, Scott C. Beightol

Author(s):

Date Published: 1/30/2013

Article Type: Legal Update

Share This:

Noel Invalidates Hundreds of NLRB Decisions and Rules

In the case of Noel Canning v. NLRB, No. 12-1115 (January 25, 2012), a three-judge panel for the United States Court of Appeals for the District of Columbia unanimously held that President Obama’s recess appointments of three members to the National Labor Relations Board (NLRB) were unconstitutional because the Senate was not actually in recess at the time the President made the appointments. The challenge to these appointments was made by an employer that claimed a decision issued against it by the NLRB last year was not valid because the NLRB did not have the three-member quorum required by the National Labor Relations Act (NLRA) to issue the decision.1

The Recess Appointments Clause of the United States Constitution provides, "… the President shall have the Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session." The Court of Appeals held that the Senate is not "in recess" unless it is not "in session." Only the period between one Congressional session and the next is a "recess" during which the President may make appointments without the Senate’s advice and consent. The Court concluded that there can be no constitutionally valid appointments under the Recess Appointments Clause where the Senate is in session but adjourned and only convening "pro forma," as it was on January 4, 2012, when the President made the appointments. The Court did not mince words. It held that "permit[ting] the President to decide when the Senate is in recess would demolish the checks and balances inherent in the advice-and-consent requirement," and would give the President "free rein to appoint his desired nominees at any time he pleases, whether that time be a weekend, lunch, or even when the Senate is in session and he is merely displeased with its inaction."

While finding the Senate was not "in Recess" is enough to find the President’s appointments unconstitutional, the Court also held that the vacancy to be filled by recess appointment must "happen" at the time the Senate is in recess. The Court relied on both originalist and strict constructionist principles in its interpretation of the U. S. Constitution. The Court’s decision dedicated over 15 pages to define the term "the Recess" and over 14 pages to define the phrase "Vacancies that may happen during the Recess."

The NLRB can now either seek en banc review by all judges comprising the Court of Appeals of the District of Columbia or proceed to the United States Supreme Court. We believe it is more likely that the NLRB will go to the Supreme Court, given that the Noel Canning decision marks a split with the Eleventh Circuit in the case of Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004), cert. denied, 544 U.S. 942 (2005), which construed the word "recess" more broadly. Also, the political makeup of the D. C. Circuit Court may give the Obama Administration pause and make the Supreme Court option better. The Obama Administration could also opt to not appeal. Time will tell.

The repercussions of Friday’s decision are significant and potentially far-reaching for employers. The decision casts a cloud of uncertainty over the NLRB and its recent activity. All of the NLRB’s rulemaking and the more than 200 decisions it issued from January of 2012 forward are now subject to challenge by employers. By the Noel Canning logic, all these rules and decisions are invalid, given that the NLRB was operating without the required three-member quorum. This includes decisions concerning an employer’s right to terminate employees complaining about the company on social media and whether employers are required to continue collecting union dues after a labor contract expires. The rules issued by the NLRB during this time period that may be invalid include rules allowing the certification of multiple "micro bargaining units," the Poster requirement, and the expedited union organizing election rules.

Commentators are also questioning whether NLRB decisions and rules going back further are now in doubt – to those involving the recess appointment of former Board Member Craig Becker. Mr. Becker was a "recess appointment" by the President under the same circumstances as the Noel Canning recess appointments. Thus, the NLRB may have lost its quorum back on August 27, 2011 (when former Chair Leibman left), and decisions or rules where Member Becker was one of three members voting may now be subject to challenge. To say that the NLRB’s jurisprudence and rulemaking since August 27, 2011 is legally suspect, is an understatement. There are currently several other cases which address the issues raised in Noel. It is possible that other courts will rule differently. The Chair of the NLRB noted as much.

Beyond Labor Policy, Recent Financial Regulations Are Also Suspect

The impact of the Noel Canning decision may also extend well beyond NLRB matters and into the President’s appointment of Richard Cordray as the interim Director of the Consumer Financial Protection Bureau (CFPB), made on the same day as the NLRB appointments invalidated by the decision. A challenge to both the constitutionality of Cordray’s recess appointment and the CFPB itself is currently pending before the D.C. District Court2. The CFPB’s authority to promulgate new regulations is conditioned upon having a Director. Therefore, current rulemaking regarding certain non-bank consumer finance markets, including debt collection and prepaid cards, may be put on hold until Cordray’s recess appointment is confirmed by the Senate. Noel Canning may also have a detrimental impact on CFPB enforcement actions. The CFPB recently reached settlement agreements with several credit card companies regarding allegedly deceptive marketing practices. These settlements may be subject to challenge if Cordray’s appointment is invalidated.

However, Friday’s decision is unlikely to nullify every action undertaken by the CFPB to date, even if found to apply to Cordray’s appointment. The CFPB’s authority to regulate large banks and many non-bank consumer financial companies under Dodd-Frank was largely transferred from other agencies, so CFPB enforcement of laws that pre-dated Cordray’s appointment will likely go unchallenged. Moreover, even if Cordray’s appointment were found unconstitutional, CFPB legislation and enforcement actions that occurred during his tenure may be upheld under the "de facto officer doctrine," which states that the actions taken by the head of an agency may stand even if the appointment is found to be illegal.

Michael Best will continue to monitor these issues and will provide updates of further developments including challenges to NLRB decisions and rulemaking on the same grounds as Noel Canning and impacts on the financial markets given the CFPB’s status.

______________________________

1 See New Process Steel, L.P. v. NLRB, 130 S.Ct. 2635 (2010)

2 See State National Bank of Big Spring v. Geithner, Case Number 12-CV-01032

 

 

Find an Employment Lawyer

In all 50 U.S. states, every Canadian province, and over 135 countries. View or print a complete ELA member list by clicking here.

Find an Immigration Lawyer

Facilitate employee transfers around the globe. View or print a complete ELA member list by clicking here.

Global Business Immigration Law Handbook

Your free resource for obtaining key business immigration law information worldwide.

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel  

Loading...