Federal Courts Have Now Blocked NLRB Proceedings as Unconstitutional

In a case in Texas brought by SpaceX, a federal judge on July 10, 2024, explained his order blocking a case against SpaceX from proceeding before the NLRB. 

He reasoned that the NLRB members and administrative law judges are unconstitutionally shielded from Presidential removal, relying on precedent from the Fifth Circuit and the U.S. Supreme Court.  Space Exploration Technologies Corp. v. NLRB, 6:24-cv-00203 (W.D. Tex. 2024). 

In another case, also in Texas, SpaceX failed to get an injunction granted before the date of the NLRB hearing, and the denial of that injunction was reversed and the administrative case was blocked pending the company's challenge to a lower court's "effective denial" of its request for an injunction.  A coalition of business groups supported SpaceX in the Fifth Circuit, including the U.S. Chamber of Commerce and Associated Builders and Contractors.  This coalition, called the Coalition for a Democratic Workplace, is also arguing a different issue, that being the Agency unconstitutionally denies jury trial rights. 

The Supreme Court has recently affirmed on other grounds a ruling that the U.S. Securities and Exchange Commission's in-house court system is unconstitutional because of the protections from removal by the President.  The case before the Fifth Circuit is Space Exploration Technologies Corp. v. NLRB, Case No. 474-40315(5/2/24).  The Fifth Circuit in Jarkesy also held that the SEC proceedings violated the Seventh Amendment right to a jury trial. 

A second federal district court judge on July 29, 2024, issued a similar ruling blocking ongoing NLRB proceedings pending a final ruling on the Constitutionality of the Labor Act.  Energy Transfer, LP v. NLRB, No. 3:24-cv-198 (S.D. Tex. 2024).  Companies making similar Constitutional claims in defending litigation include Starbucks, Amazon, and Trader -Joe's.  It is also significant that the Ninth Circuit Court of Appeals on July 29 ordered the NLRB and the union, along with the company, to explain what, if any, impact the Supreme Court June ruling in SEC v. Jarkesy , No. 22-839, 603 U.S. ________ (2024) has on the NLRB's remedy in the case calling on Macy's to pay for the foreseeable economic consequences of its unfair labor practices.  The Justices focused in the Jarkesy decision on the Seventh Amendment issue, finding that defendants have a Constitutional right to make their case to a federal jury when the Security & Exchange Commission is seeking financial penalties.  Macy's v. NLRB, No. 23-124 (9th Cir., order for supplemental briefing 7/29/24.)

Editor's Note: The Constitutional challenges to the Labor Act are beginning to find some support in the case law, and so employers defending Labor Board charges would be wise to assert in their answers to any complaints, the Constitutional defenses.  If employers ultimately establish the unconstitutionality of the Labor Act, and the defenses are raised in ongoing proceedings, employers could take advantage of any favorable rulings that resolve the issue of the Constitutionality of the Labor Act.

This article is part of our September 2024 Newsletter. 

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