New Process Steel v. NLRB (08-1457)

Appealed from the United States Court of Appeals for the Seventh Circuit (May 1, 2009)

Oral argument: Mar. 23, 2010

NATIONAL LABOR RELATIONS ACT, NLRB, QUORUM, UNION, COLLECTIVE BARGAINING

Under 29 U.S.C. §153(b), the “[National Labor Relations] Board is authorized to delegate to any group of three or more members any or all of the powers which it may itself exercise. . . . A vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board, and three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to [delegation].” New Process Steel argues that the National Labor Relations Board (“NLRB”) is prohibited by statute from deciding issues when it acts with only two sitting members on a five-member Board. The NLRB contends that it has the authority to issue decisions, even with only two current members on a five-member Board. The NLRB claims that its previous delegation of authority to a three-member Board allows the Board to continue operating with a two-member quorum. This case will decide how to interpret the 29 U.S.C. §153(b), and whether the current two-member quorum meets the minimum statutory requirement. This case will also affect how the Board handles pending or future cases when there are vacancies on the Board.

Question presented

Does the National Labor Relations Board have authority to decide cases with only two sitting members, where 29 U.S.C. §153(b) provides that “three members of the Board shall, at all times, constitute a quorum of the Board”?

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Issue

Whether the National Labor Relations Board may decide cases with only two sitting members.

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Facts

New Process Steel operates steel processing facilities in the United States and Mexico. See New Process Steel, L.P. v. N.L.R.B., 564 F.3d 840, 842 (7th Cir. 2009). In September 2006, New Process Steel began collective bargaining negotiations with the International Association of Machinists and Aerospace Workers (“IAM”). See id. After about one year of negotiations, the parties reached a tentative contract which was to be ratified by the union. See id. at 843. On August 12, 2007, the union informed New Process Steel that the contract had been ratified, and New Process Steel then executed the agreement. See id. at 843–44. New Process Steel then began receiving several employee complaints regarding the ratification process. See id. at 844. New Process Steel sent a letter to the union saying they were resuming negotiations. See id. New Process Steel also repudiated the agreement between them and the IAM because a majority of IAM’s employees did not ratify the contract. See id. New Process Steel also stated that it had received a decertification petition from New Process Steel employees and was withdrawing its recognition of the union. See id.

The IAM then filed an unfair labor practice charge with the National Labor Relations Board (“NLRB”). See New Process Steel, 564 F.3d at 844. The NLRB then issued a complaint. See id. The NLRB alleged that New Process Steel improperly repudiated the collective bargaining agreement and withdrew recognition from the union. See id. New Process Steel denied the allegations. See id. An administrative law judge ruled that New Process Steel lacked standing to raise complaints about the union’s ratification process. See id. New Process Steel appealed to the NLRB. See id. The NLRB upheld the ALJ’s ruling and found that New Process Steel had enacted a valid collective bargaining agreement. See id. The NLRB then ordered New Process Steel to adhere to the contractual provisions and stop refusing to deal with the union. See id. New Process Steel sought review of the Board’s decision in the Court of Appeals for the Seventh Circuit, and the NLRB petitioned the court to enforce its judgment. See id. New Process Steel argued that the NLRB lacked authority to give an order, since there were only two sitting members on the Board in violation of 29 U.S.C. § 153(b). See id. at 845. The NLRB argued that the plain language of the statute and its legislative history gave the Board the authority to operate a three-member group with a two-member quorum. See id. at 845–46.

The Court of Appeals agreed with the NLRB’s decision, finding that the two-member board had authority to hear the labor dispute and issue orders. See New Process Steel, 564 F.3d at 848. The Supreme Court granted certiorari on November 2, 2009.

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Discussion

Both parties disagree on the proper interpretation of the National Labor Relations Act, 29 U.S.C. § 153(b). New Process Steel argues the statutory language requires three Board members at all times. See Brief for Petitioner at 22. New Process Steel contends that, therefore, the NLRB has no authority to render decisions as an entirely two-member Board. See id. New Process Steel claims that this lack of authority would not overturn the hundreds of already final decisions by the two-member board as, in those cases, the objection would have been waived. See id. at 40. New Process Steel maintains that the decisions of the two-member Board have interfered with sound labor policy, since unanimity between the two members requires avoidance of dissent. See id. at 40. However, the NLRB contends that its decisions should be given deference, even where it has delegated authority to a three-member Board that only has a two-member quorum. See Brief for Respondent at 33.

New Process Steel contends that the NLRB has refused to follow the quorum requirement set forth by Congress. See Brief for Petitioner at 32. New Process Steel also argues that having a majority rule requires an odd number of members, but serves an important purpose in defining the law and allows for dissenting opinions to be heard. See id. at 26. Also, New Process Steel notes that having three members on the Board promotes varying viewpoints and engages discussion. See id. at 34. New Process Steel alleges that the current two Board members have acknowledged that they do not engage in full deliberation during their decision-making process. See id. at 35. New Process Steel argues the Board members vote the same for “institutional reasons” or merely for the sake of avoiding a deadlock. See id.

The Michigan Regional Council of Carpenters (“MRCC”) and the Chamber of Commerce agree with New Process Steel, arguing that deference to rulings issued by a two-member board could distort the NLRB’s decision-making process. See Brief of Amicus Curiae Michigan Regional Council of Carpenters in Support of Petitioner at 17; Brief of Amicus Curiae Chamber of Commerce of the United States of America in Support of Petitioner at 18–19. Both amici contend that the current Board votes together on cases simply to avoid a stalemate and the need for a third tie-breaking vote. See id. The Chamber of Commerce argues that such a two-member Board results in unfair and inconsistent labor law practices. See Brief for Amicus Curiae Chamber of Commerce of the United States of America in Support of Petitioner at 2. The MRCC notes that reversal of precedent traditionally requires a three-member majority vote. See Brief of Amicus Curiae the Michigan Regional Council of Carpenters in Support of Petitioner at 17. Since the Board is missing the requisite three members, that limits the Board’s ability to adapt. See id. The MRCC also contends that any of the cases could have been delayed until a proper three-member quorum was available to discuss all the relevant issues, instead of having the current members compromise their views to issue decisions. See Brief of Michigan Regional Council of Carpenters at 19.

The NLRB maintains that it was for Congress to establish agency rules, and Congress has specifically allowed the Board to delegate its authority to a three-member group, and authorized that group to act if it has a quorum of two members. See Brief for Respondent at 30. The NLRB argues that even, where a Board member has applied existing precedent in spite of their personal views, that does not constitute illegitimate action. The NLRB contends that simply because they applied precedent with a Board of two sitting members, does not mean they would have reached a different outcome even with a third member. See id. at 39. The NLRB further argues that when they disagree over new issues, the Board has delayed making decisions, which preserves the issues for a larger Board to fully consider. See id. at 40.

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Analysis

Quorum in the National Labor Relations Board

The National Labor Relations Board (“NLRB”) is a government agency created by statute and consisting of five members. See 29 U.S.C. § 153. The President appoints these members with the advice and consent of the Senate for staggered five-year terms. See id. Generally, the National Labor Relations Act (“NLRA”) requires the NLRB to make decisions with a quorum of at least three members. See id. The NLRA allows the NLRB to delegate the power of the entire board to a three-member panel. See id. For delegated three-member panels, however, the NLRA specifies that a smaller quorum of two members is sufficient. See id. In addition, the NLRA also specifies that a vacancy on the board does not impair the authority of the other board members. See id. In the present case, a four-member NLRB (one seat was already vacant) delegated all its authority to a panel of three. See New Process Steel, L.P. v. NLRB, 564 F.3d 840, 845 (7th Cir. 2009). Subsequently, two members’ terms were over, reducing both the NLRB and the panel membership to two. See id. The Supreme Court must now decide whether a panel of three can make decisions if the full NLRB, usually consisting of five members, would require three members for a decision. To decide, the Court will also have to determine if the NLRA is ambiguous (and thus leaves this decision to the NLRB) or if Congress has made a clear choice to prevent or permit NLRB decisions if there are only two members on the board. See Wex: Statutory Construction; Wex: Chevron Deference.

Does a three-member panel have authority to act if there are only two NLRB members?

Petitioner New Process Steel asserts that the NLRA does not permit two-member NLRB panels to decide cases and act with the authority of the NLRB. See Brief for Petitioner, New Process Steel, L.P. at 16. New Process Steel claims that a natural reading of NLRA Section 3(a) leads to the conclusion that, when the NLRB has only two members, a panel originally consisting of three members does not have the authority to act. See id.; see also 29 U.S.C. § 153. In this sense, New Process Steel urges the Supreme Court to adopt the interpretation of the D.C. Circuit and hold that Congress never intended only two members of the NLRB to make decisions absent at least a third member. See id. at 17. New Process Steel argues that the vacancy clause, establishing that no vacancy shall impair the exercise of the power of the board, can only apply to the full five-member NLRB. See id. at 19. New Process Steel argues that permitting a two-member board would render the language requiring a three-member board at all times meaningless. See id. at 19–22. According to New Process Steel, the plain meaning of the statute is that as long as there are three members on the NLRB, the board and individual panels can make decisions, but when the quorum of three for the NLRB is no longer met, then neither the NLRB nor panels can act. See id. at 21–22. New Process Steel insists that a NLRB that does not meet the quorum-of-three requirement cannot circumvent the restriction by delegating power to a smaller panel. See id. It furthermore believes that no NLRB decision can be made with less than three members on the NLRB. See id. Additionally, New Process Steel cites the D.C. Circuit’s analysis that Congress intended an odd number of decision makers to decide cases because an even number would require a supermajority. See id. at 25–26. Finally, New Process Steel insists that deferring this question to the NLRB would be improper as there is no ambiguity in the statute. See id. at 28.

On the other hand, respondent National Labor Relations Board (“NRLB”) claims that the NLRA makes it clear that a two-member panel can function here. See Brief for Respondent, National Labor Relations Board at 14. The NLRB argues that, if it may delegate its powers to a three-member panel and the two-member quorum is met, then two members of the panel should be able to make decisions regardless if there are only two members on the entire NLRB. See id. at 13–14. For the NLRB, the natural reading of the NLRA is that usually a quorum of three board members is required except for a panel of three, where a two-member quorum is sufficient. See id. at 14–15. Additionally, the NLRB reads the NLRA to say that a vacancy cannot change the board’s or a panel’s power to act, even if there are only two NLRB members left. See id. In this respect, the NLRB insists that when the power has been properly delegated to a panel of three, it is irrelevant whether or not one of the three seats is vacant as long as the statutory quorum of two is met. See id. at 16–17. It therefore also does not matter if a quorum of three for the full NLRB board exists because the NLRB has already delegated all of its power to the smaller panel with a smaller quorum that is met. See id. at 17. Furthermore, the NLRB believes that New Process Steel misinterprets the word quorum. See id. at 19. The NLRB suggests that New Process Steel’s interpretation of quorum makes it a “membership floor,” while the word itself is a “participation floor.” See id. As a participation floor, a quorum is silent about membership. See id. at 19–20. In any event two members would have to vote in favor of a solution, no matter if that makes them two out of three or a unanimous vote because there are only two members on the panel. See id. at 19–21. The NLRB also points out that in case one member of a three-member panel cannot participate in a decision because of a conflict, the decision is still valid, and the situation does not differ significantly from having a vacancy on the panel. See id. at 19–21.

Does the vacancy language apply only to the full NLRB or also to smaller panels?

The NLRA reads, “[a] vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board . . . .” See 29 U.S.C. § 153(b). New Process Steel argues that there is a difference between the full NLRB and smaller panels and it is a mistake to equate them. See Brief for Petitioner at 13, 19–20, 27. As a result, New Process Steel claims that the vacancy on a panel may impair the right of panel members to exercise the powers of the board. See id. The NLRB in turn rejects this argument and claims that the members of the smaller groups are still members of the full NLRB and therefore the vacancy language must also apply to them. See Brief for Respondent at 22–23. According to the NLRB, neither the power of panel nor board members is therefore ever affected by a vacancy. See id.

Does the history of the Taft-Hartley Act or other agencies provide a clear solution?

New Process Steel claims that, after looking at agency law and other agencies, the NLRB should not be able to make decisions if it does not consist of at least three members. See Brief for Petitioner at 23–32. New Process Steel supports this contention by arguing that since, the Taft-Hartley Act was passed, only panels consisting of at least three members have rendered decisions (except once when a member resigned the day the decision was announced). See id. at 32. New Process Steel also stresses that the Taft-Hartley Act enlarged the NLRB from three members to five members to allow for panels and make the board more efficient, but did not abolish the requirement of at least three decision makers. See id. at 32–36. In this respect, New Process Steel insists on the three-person NLRB quorum and emphasizes that no other agency has acted without a quorum. See id.

In contrast, the NLRB claims that, while the original board consisted of three members there was only a two-member quorum. See Brief for Respondent at 23­–24. History furthermore shows that the NLRB has acted before with only two sitting board members. See id. The NLRB claims that, when the Taft-Hartley Act expanded the board to five members, the added possibility of having smaller panels with a two-member quorum served to make the NLRB more efficient but did not change the original concept of two members being able to render decisions. See id. at 23–26. The NLRB furthermore insists that what other agencies do and what other laws say is irrelevant and cannot influence Congress’ decision to permit a two-person quorum in NRLB panels. See id. at 27–32.

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Conclusion

In this case the Supreme Court will decide whether three-person panels of the National Labor Relations Board (“NLRB”) may act if the number of NLRB members drops below three. Specifically, the issue is whether a panel with a quorum of two is barred from acting when the NLRB has less than three sitting members and thus the full board’s quorum of three is not met. Petitioner New Process Steel argues that all decisions of the NLRB always require at least three NLRB members in office, even if a panel with a two-person quorum makes the decision. It claims that when the number of board members dropped to two, there was no chance of ever having a third person on the panel and thus the panel should be unable to render decisions. Respondent NLRB counters that the two quorums, three persons for the full board and two for panels, are separate requirements. Because they are separate, the NLRB claims that as long as the full board properly delegates its power to the panel and the panel’s quorum of two is met, all decisions rendered by the panel are valid. New Process Steel points out the requiring three NLRB members to hold office at all times when decisions are made does not pose a problem to the administration of labor laws. The NLRB on the other hand insists that two-member panels are authorized and permits the NLRB’s functioning when the membership of the board drops below the full three-member quorum. The NLRB has so far decided over 300 cases with such a panel and the efficiency of the NRLB may be greatly affected by this decision. It may also implicate the ability of other agencies to act with a limited number of board members.

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Authors

Prepared by: Frederick Wu and Oliver Reimers

Edited by: James McConnell

Additional Sources

·      LawMemo: Is the NLRB authorized to act when only two of its five positions are filled?

·      Washington, D.C. Employment Law Update: Supreme Court Will Decide Legitimacy of Decisions Issued by Two-Member NLRB

·      Workplace Prof Blog: Cert Petition Challenging Two-Member NLRB Decisions

·      Workplace Prof Blog: Supreme Court Grants Cert in Two-Member NLRB Case

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