As the D.C. District Court’s long-awaited decision in Noel Canning v. NLRB, invalidating President Obama’s January 2012 "recess" appointments, likely heads to the United States Supreme Court, here’s what employers need to know in the interim about the impact of that decision.

The Background

As we explained in our post, President Obama’s Move to Sidestep the Senate with Recess Appointments, when the National Labor Relations Board’s ("NLRB") normal five-person membership fell to two in late 2011 when Craig Becker’s (who had also been an Obama recess appointee) appointment expired and the agency, therefore, lost its statutory authority to issue rulings, President Obama made three appointments in early 2012 as the Senate was scheduled to leave on holiday break, which sparked a host of controversy.

The controversial appointments included the appointment of Democrat Sharon Black, a Labor Department Official; Democrat Richard Griffin, General Counsel for the International Union of Operating Engineers; and Republican Terrance Flynn, an NLRB attorney.

Setting the Stage for a One-To-Watch Decision

So why the controversy? Well, President Obama made the appointments while the Republican Senate was holding pro forma sessions over the holiday to technically avoid going into recess. While this tactic was certainly not a new one, as it had been used by other Congresses to avoid triggering the president’s recess appointment power, President Obama’s move was particularly aggressive because the Senate was meeting every three days with the specific purposes of staying in session and denying him the chance to make recess appointments. With the standoff, President Obama called the Senate’s bluff and seated all NLRB nominees.

The recess appointment issue is the focus of over a dozen lawsuits, many of which remain pending, but the lead case — the one to watch — has always been Noel Canning v NLRB pending in the D.C. District Court, which we first introduced you to back in March 2012 in A New Challenge to President Obama’s Recess Appointments in Federal Court Means a Decision on the Constitutionality of the Appointments is Getting Closer. The attention certainly is warranted, but not because of the underlying facts, which concern a run-of-the-mill, routine labor dispute. Where it gets interesting is that the decision was decided by three of the five NLRB members, two of whom were "recess" appointees. The case was appealed to the D.C. District Court and the issue to be decided was whether the three-person decision had the necessary quorum of at least three members to be valid. Because the three temporary appointees, were arguably, not legally appointed, the decision was subject to nullification.

The challenge was based on the United States Supreme Court’s 2010 case New Process Steel, L.P. v. NLRB where it held that the five-member NLRB could not delegate its authority to fewer than three members. Thus, a two-person board is not a quorum and is powerless to render decisions. Since Wilma Leibman’s term expired in August 2011, the NLRB had been functioning as a three-member unit. The NLRB lost that three-person quorum when Becker’s term expired at the end of 2011. When President Obama made the three "recess" appointments, the NLRB only had two members. Therefore, if the President’s three "recess" appointments were unconstitutional, arguably every decision made by the NLRB with the recess appointments sitting as quorum effectively would be moot.

The D.C. District Court’s Decision

The D.C. District Court issued a two-part decision and held that President Obama’s "recess" appointments in January 2012 were constitutionally impermissible.

Part One: The appointments were "made when the Senate was not in Recess" because the President’s recess appointment power does not apply to "intrasession" appointments, only "intersession" appointments.

The first part of the court’s ruling was unanimous and answered the question: "How long must the Senate be away to technically be on ‘recess’"? Article II, Section 2 of the Constitution gives the President the "[p]ower to fill up all vacancies that may happen during the recess of the Senate," and these recess appointments do not have to be filled by the Senate. The Constitution does not specify how long the Senate had to be in recess to trigger the President’s appointment power so the court answered it, and held that the constitutional authority to fill a vacancy can only be used when one Congress has ended and before a new Congress comes to town, and not during a break between two sessions of the same Congress. Therefore, the President’s recess appointment powers do not apply to "intrasession" appointments i.e., those made when Congress has left town for a few days or weeks.

The court’s opinion affirmed the "original meaning" mode of interpreting the Constitution, meaning the judges reviewed the constitutional issue by looking at what the framers meant by the words when they originally wrote them. The D.C. District Court reviewed the history of the Recess Appointment Clause, and concluded that "Recess" referred to intersession recesses and not the generally shorter intrasession ones and found:

We hold that "the Recess" is limited to intersession recesses. The Board conceded at oral argument that the appointments at issue were not made during the intersession recess: the President made his three appointments to the Board on January 4, 2012, after Congress began a new session on January 3 and while that new session continued. Considering the test, history and structure of the Constitution, these appointments were invalid from their inceptions. Because the Board lacked a quorum of three members when it issued its decision in this case on February 8, 2012, its decision must be vacated.

The court found that to interpret "the Recess" to include other breaks in Senate business would give the President "free rein" to make appointments "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." Thus, the judges made a bright-line decision in holding that the Senate only recesses, for purposes of the President’s recess appointment power, at the end of the year.

Part Two: The president may only use the recess appointment power to fill "vacancies" that occur during the recess, not those that just happen to exist during the recess.

Two of the three judges went on to address the second issue raised, whether the vacancies filled by the appointments occurred during the Recess. (Judge Thomas B. Griffith determined it was unnecessary to decide the second issue and did not join the opinion.) The employer argued that in order for the President to be able to use the recess appointment power to fill a vacancy, the vacancy must have occurred during an intersession recess. On the other hand, the NLRB argued that the President could fill vacancies that "happen to exist" during the recess, not merely those that arise during the Recess. There was no dispute that the appointments in question did not arise during an intersession recess, and the court invalided them.

Again, the court took a close look at the words used in the Recess Appointments Clause, particularly the phrase "happen to exist" and sided with the employer:

The power of a written constitution lies in its words. It is those words that were adopted by the people. When those words speak clearly, it is not up to us to depart from their meaning in favor of our own concept of efficiency, convenience, or facilitation of the functions of government. In light of the extensive evidence that the original public meaning of "happen" was "arise," we hold that the President may only make recess appointments to fill vacancies that arise during the recess.

The Impact and Your Most Pressing Questions Answered

Noel Canning is likely to go up to the Supreme Court because it concerns the balance of power between the president and the Senate, and therefore far-reaching constitutional implications of authority between the legislative and executive branches, that stretch far beyond just the NLRB. It also speaks to the President’s recess appointment power and extends to all federal agencies whose offices are nominated by the President and require Senate approval. This includes federal judges and former Ohio Attorney General Richard Cordray’s appointment as head of the Consumer Financial Protection Bureau, which was made the same day as other "recess" appointments to the NLRB.

What Does This Mean For the NLRB Decisions Issued in 2012? Since the various appeals courts are not bound to adopt each other’s opinions, the impact will depend on where the NLRB’s decisions are being challenged and how those courts rule. The thing to keep in mind about the D.C. District Court is that it is the one jurisdiction where NLRB decisions can always be appealed, regardless of where the case originated. This is why Noel Canning was the one, out of the dozens case filed, to watch. As such, a party looking to challenge an NLRB decision will likely file it in the D.C. District Court where Noel Canning is binding. Because the decision came out of the D.C. Distrcit Court, the Justice Department has little choice but to seek further review either by filing a petition for en banc review and/or by seeking U.S. Supreme Court review. This course seems likely given the statement NLRB Chairman Mark Gaston Pearce issued after the decision that indicates that the NLRB will seek review: 

The Board respectfully disagrees with today’s decision and believes that the President’s position in the matter will ultimately be upheld. It should be noted that this order applies to only one specific case, Noel Canning, and that similar questions have been raised in more than a dozen cases pending in other courts of appeals.

If the case goes to the Supreme Court, the ruling would determine the validity of all NLRB decisions since Obama made his appointments in January 2012. During the time in question, the NLRB has issued just over 200 Published Orders, which is significantly fewer than during the non-quorum period of 2008-2010 that New Process Steel invalidated. On the other hand, most of the Board’s decisions during this period have been decided against employers and some have been very high profile, including Costco Wholesale Corp. where the NLRB struck down the employer’s social media policies, and Banner Health System, where the NLRB held that by asking an employee who was the subject of an internal investigation to refrain from discussing the matter while the employer conducted the investigation violated the National Labor Relations Act.

What Does This Mean While We Wait? Subject to the outcome of a possible en banc review and/or a review by the United States Supreme Court, the impact could be quite extensive. The three-seat NLRB is essentially powerless because it cannot function without a quorum. The NLRB currently has only three members, Chairman Pearce and members Block and Griffin, who were among the now-nullified "recess" appointments. The D.C. District Court already has begun issuing orders holding in abeyance the other cases pending there that raise the recess appointment issue. The other dozen or so cases that were appealed in other circuits likely will go through decision in those circuits, which might create a split. Decisions issued by the nullified NLRB that have not yet been appealed, will likely be filed in the D.C. District Court to take advantage of Noel Canning — though, any new appeal will likely be held in abeyance like the court’s current appeals.

For those cases that are in compliance with a NLRB decision and that did not appeal the NLRB decision, it is unclear. A party might stop the compliance process and either seek to appeal or wait on the NLRB to try to enforce compliance and rely on Canning to bar enforcement. Cases that have completed compliance and have been closed will be difficult to resurrect.

What If the Supreme Court Affirms? For the answer to this question, we go back to 2010 and New Process Steel. If the Supreme Court affirms Noel Canning, it would mean all the NLRB’s decision since January 4, 2012 are invalid, they will be nullified for lack of quorum, and every court will have to recognize the ruling. This will likely mean that the NLRB’s decisions since that date will have to be recalled and re-decided by the NLRB.

While the NLRB recovered from New Process Steel fairly easily, given the current political climate, it may not be so easy for the NLRB if Noel Canning is upheld. After New Process Steel, the NLRB obtained a quorum rather easily and rubber-stamped many of the disputed Orders quickly and with the same results. Given the judicial gridlock now, Chairman Pearce would be the only legitimate NLRB member should the "recess" appointments be invalidated by the Supreme Court. His term, however, ends August 27, 2013, well before the Supreme Court will have an opportunity to decide the issue. Because the NLRB will not likely be able to obtain a quick quorum to remand cases, like it did in New Process Steel, and because Congress will not likely "recess" any time soon, it is unlikely that the President will be able to make recess appointments to the NLRB, meaning the agency has little ability to act.

The ruling may also have a deeper impact because those decisions and rules involving Becker, who also was an intrasession recess appointment by President Obama, may be deemed invalid. If Noel Canning remains intact, arguably any decision in which Becker was one of the three members may be subject to challenge as well, because the NLRB may have lost its quorum when former Chair Leibman left on August 27, 2011.

The opposite effect would occur if the Supreme Court overturns Noel Canning: The NLRB’s decisions would stand and the members appointed during the Senate break could continue to serve.

I won’t go so far to say that this is the most anticipated and far-reaching case of 2013, but I will say that the Supreme Court’s opinion on this case will be. Stay tuned.

Sara Hutchins Jodka