Beyond Canning V. NLRB—What the D.C. Circuit’s Ruling On Obama’s Recess Appointments Means Going Forward: LXBN Roundtable

By | LXBN | February 6, 2013

When President Barack Obama turned to a provision in the Constitution known as the “Recess Appointments Clause” to circumvent the Senate’s role in offering advice and consent for Presidential nominees, the stage was set for an eventual challenge.  So after the District of Columbia Court of Appeals ruled that three members of the National Labor Relations Board had been appointed by unconstitutional means—thus creating a circuit court split—it became a question of when, not if, Canning v. NLRB would make an appearance on the desks of the Supreme Court’s Justices.

Canning took on the constitutional question of President Obama’s appointments after an employer, Noel Canning, challenged a ruling by the NLRB that held Canning was in violation of the National Labor Relations Act.  For more insight, we turn to Gibbons attorney James La Rocca, who penned one of the more thorough analyses of the case on the LexBlog Network:

“In Noel Canning, 358 NLRB No. 4 (Feb. 8, 2012), the Board had ruled that the employer violated the National Labor Relations Act by failing to draft and execute a collective bargaining agreement that the union alleged the parties had reached during their last bargaining session. On appeal, the employer challenged the NLRB’s decision on both statutory and constitutional grounds. Although the Court of Appeals rejected the employer’s arguments that the Board’s decision was not supported by the evidence and ran afoul of contract law principles, the Court agreed with the employer that the Board lacked the authority to issue its decision in the first place, because only two NLRB members were validly appointed. Absent a quorum of at least three Board members, the Board has no power to act, as the Supreme Court has recently made clear.”

As Leland Beck makes clear in his post on the Federal Regulations Advisor, the court’s decision was based on the grounds that the administration’s interpretation of recess, and “the Recess” as laid out in the Recess Appointments Clause were not the same:

“The court went on to find that “the Recess” referred to the inter-sessional recess between the First and Second Sessions of Congress or at the end of the Second Session.  The Court rejected interpretations offered by the Board and the Department of Justice, concluding that “Allowing the President to define the scope of his own appointments power would eviscerate the Constitution’s separation of powers.”  Whether Congress – or more particularly the Senate – may define its sessions for Constitutional purposes was not answered, but the court found that the pro-forma sessions every three days were not “the Recess” under the recess appointments clause.”

The case itself is fascinating (and I urge you to read both La Rocca’s and Beck’s posts, as well as another in-depth review written by Sara Hutchins Jodka), but  it’s the implications of what could happen if the NLRB’s appointments are void that has captured the imaginations of lawyers and legal/political scholars.  As Beck mentioned in his piece, a year of decisions by the NLRB, rules from the Consumer Financial Protection Bureau (CFPB), as well as the definition of what constitutes a “recess” are all at stake.

One pressing issue is how the NLRB will continue to function in the face of this ruling. Ryan Parsons reports on Labor & Employment Law Perspectives, that the White House is claiming it’s business as usual – even in the event of Canning standing as ruled, it’s “one court, one case, one company.”  But questions persist:

“Despite the aggressive posture from the executive branch, it is not clear how the Board can continue operating in the face of this ruling. The Board persists in functioning with the same members whose appointments the D.C. Circuit just invalidated. Additionally, Board decisions are not self-enforcing, meaning that employers (and unions) are required to comply with them only if a court “enforces,” or approves, the Board’s decision. By law, employers can appeal any Board decision to the D.C. Circuit, which just found the Board to be acting outside of constitutional bounds. Therefore, we think it is highly likely that the D.C. Circuit will continue to rule that the appointments were unconstitutional and refuse to enforce any order from the Board.”

But Congress isn’t waiting for the judiciary to make up its mind.  As the NLRB evaluates its next move, the House and Senate have introduced bills to limit the Board’s authority and retroactively halt enforcement of rules passed during the contested period of time.  Ilyse Schuman has more on this in her post on the Washington DC Employment Law Update:

The NLRB Freeze Act of 2013 (S. 180) introduced by Sen. John Barrasso (R-WY) would prevent the Board from enforcing rules, regulations and decisions issued since January 2012. Similarly, the Advice and Consent Restoration Act (S. 188) introduced by Sen. Roy Blunt (R-MO) would prevent the NLRB recess appointees from receiving salaries, as well as block the Board from taking any action until the appointees are legally confirmed.

While the Senate’s bill focuses on the NLRB, the House took one step further and targeted the CFPB, where Director Richard Cordray was appointed using the same intra-session recess method.  Again, more from Schuman:

Sens. Mike Johanns (R-NE), Lamar Alexander (R-TN) and John Cornyn (R-TX) introduced the Restoring the Constitutional Balance of Power Act of 2013 (S. 190), a bill that would prohibit the NLRB as well as the Consumer Financial Protection Bureau (CFPB) from enforcing or implementing decisions and regulations without a constitutionally confirmed Board or Director. Like the three contested NLRB members, the director of the CFPB was a January 4, 2012 recess appointee.

That Congress is full steam ahead in its efforts to derail the NLRB and CFPB appointments is almost a given.  In September of last year, Seth Borden reported on an amicus brief challenging the recess appointments filed by 42 GOP Senators.

The impact that Canning could have on the authority of CFPB Director Cordray adds another wrinkle to this ongoing case, and one covered extensively by members of LXBN.  Shortly after the D.C. Court of Appeals ruled, Barbara Mishkin penned a post aptly titled “Let the Political Posturing Begin!”  In her post, Mishkin highlights just a few of the efforts taken by Congressmen immediately after the Canning decision to cast doubt on Director Cordray’s authority:

“Nebraska Senator Mike Johanns, a Republican, on January 25 (the same day the Canning decision was issued) sent a letter to Mr. Cordray asking him to resign.  He also sent a letter on January 25 to the Government Accountability Office asking the GAO to examine what CFPB actions would be implicated by the decision and, for all affected actions, provide an estimate of the associated negative economic impacts.”

As is evident, the reach of Canning will be long, whether the Obama administration wants it to be or not.  If the NLRB appointments are held to be unconstitutional, the reasoning used will almost certainly be applied to State National Bank of Big Spring v. Geithner – the case challenging (among other things) Director Cordray’s appointment.  However, as Katten partner Jeffrey Werthan points out, there are a few differences between the NLRB and CFPB in how any fallout that occurs will play out:

“Even if the Cordray appointment is ultimately held to have been unlawful (which is by no means certain), due to the particular language of the Dodd-Frank Wall Street Reform and Consumer Protection Act pursuant to which the CFPB was created, it appears that certain powers to promulgate rules, regulate, and examine financial institutions may still exist, though those powers may be in the hands of the Secretary of the Treasury (Secretary).

…..

Finally, there is some conjecture that even if Director Cordray’s appointment is held to be invalid, a reviewing court may nonetheless hold that all actions taken by the CFPB will be considered valid because the director was acting under a cloak of apparent authority.”

To wrap things up, I’d like to turn to Daniel Schwartz, who has positioned himself as the voice of reason admist a sea of NLRB posts emanating from the Employment & Labor section on LXBN.  Schwartz, who has commented on the futility of covering every bit of legal minutiae disseminated by the NLRB, provided some context for readers and interested parties in his latest post on the Connecticut Employment Law Blog.  While Canning v. NLRB is a headline grabber, and there are certainly some hefty consequences should the appointments be struck down, there are more important questions for many employers:

“Ultimately, unions and the NLRB are going through a time of transition.  What will be the role for unions over the next decade? Will debated changes to election rules stop the declining membership rolls of unions? How will the economy shape the role of unions going forward? Will right-to-work rules (adopted in a growing number of states) ever make their way to Connecticut?

All of these questions are more important, in my view, than the D.C. Circuit court’s opinion.  Unions are down and their influence is waning, but the future of unions lies not with one agency, but with how unions adapt to the challenges they currently face.

And that story is still being written.”