Court Skepticism Over NLRB Labor Policy Power Set to Spread

More federal appeals courts are primed to threaten the National Labor Relations Board’s power to establish labor policy through individual case decisions, potentially disrupting the way the agency has operated for more than 90 years.

The US Court of Appeals for the Sixth Circuit rocked the NLRB with a recent ruling that the board overstepped its authority by creating a new framework aimed at better policing union elections in Cemex Construction Materials Pacific LLC. The board’s decision was a rulemaking in disguise, the court held.

The Sixth Circuit’s reasoning—consistent with the type of enhanced judicial skepticism toward the administrative state found in major US Supreme Court decisions over the past few years—could find purchase in other federal appeals courts.

“The likelihood of that decision being an outlier is slim to none,” said Mark Gaston Pearce, former NLRB chair during the Obama administration. “Once the Sixth Circuit decision is disseminated, the Fifth Circuit or the Eleventh Circuit would do the same thing.”

Wider adoption of the Sixth Circuit’s hard look at the NLRB’s adjudicatory authority would complicate board efforts to develop federal labor law and call into question longstanding precedents.

“If this is where things are going and other courts adopt this idea that the board should not be making broad policy changes by adjudication, it’s going to be a huge shift,” said Marvin Kaplan, former NLRB chair during the second Trump administration. “Parties could argue previous standards shouldn’t have been set by adjudication, and courts could unseat many of those standards.”

For the time being, the ruling makes the Sixth Circuit a favorable venue for challenging the NLRB.

“Good luck to the board if it has to defend a broad policy change issued through adjudication in the Sixth Circuit,” said Kaplan, an attorney at Jackson Lewis PC.

Not a ‘One-Way Ratchet’

The Sixth Circuit set forth two ways that the Cemex framework overstepped the NLRB’s adjudicatory authority: it wasn’t derived from case-specific facts; and it wasn’t created to resolve the dispute in the case.

That test seems to threaten precedents chiefly built on broad policy considerations over the distinct facts of the cases at hand. Decisions that created legal frameworks for analyzing independent contractor status and employee handbooks could fall into that category.

The Sixth Circuit’s requirement that a precedential ruling resolves the disputes in the case may endanger those that set standards that would only be applied in future cases, such as the ban on captive audience meetings and the test for unlawful threats about the impact of unionization.

The NLRB has rarely used the regulatory process to create labor law policy, making a pivot away from case adjudication difficult. Recent forays into rulemaking show that the NLRB isn’t well-suited for it, Republican NLRB member James Murphy said at a labor law conference earlier this month.

The Sixth Circuit decision interferes with NLRB attempts to change precedents regardless if the board wants to go in a more employer- or union-friendly direction, labor law observers said.

“This isn’t a one-way ratchet,” said Robert Nagle, co-chair of management-side firm Fox Rothschild LLP’s labor-management practice. “It goes both ways.”

But it will likely take more courts adopting the Sixth Circuit’s view before the NLRB alters its approach.

Under its policy of non-acquiescence, the NLRB generally doesn’t change course in response to adverse circuit court rulings outside of the case at hand. That position stems from the board’s stance that it’s responsible for national labor policy, although it does conform to Supreme Court decisions.

Meanwhile, the Sixth Circuit’s ruling appears to be the first time in nearly 60 years that a circuit court rejected the application of an NLRB precedent because it changed policy via case adjudication rather than rulemaking. The First Circuit in 1968 refused to enforce an order for an employer to turn over an employee list based on the requirements of Excelsior Underwear Inc., although the Supreme Court later reversed.

“It’s a striking insertion of the judiciary into the operations of an executive branch agency,” said Brian Petruska, a lawyer who represents unions at Mooney, Green, Saindon, Murphy & Welch PC.

The NLRB is reviewing the case and considering next steps, an agency spokesperson said.

Sixth Circuit’s Football Logic

A divided Sixth Circuit panel took its shot at the NLRB’s primary method for setting labor law policy in its March 6 decision nixing a Cemex order requiring Brown-Forman Corp., which does business as Woodford Reserve Distillery, to bargain with an International Brotherhood of Teamsters affiliate that lost a representation election.

The two judges in the majority, both appointed by President George W. Bush, upheld the NLRB’s finding that Brown-Forman committed a series of labor law violations that triggered the bargaining order. But they deemed Cemex itself an invalid overreach of the board’s power.

The majority got there by reinterpreting the Supreme Court’s 1974 decision in NLRB v. Bell Aerospace Co., which gives “great weight” to the board’s choice to use adjudication to set policy. They applied the justices’ 2024 ruling in Loper Bright Enterprises v. Raimondo, which instructs courts to use their “independent judgment” to determine whether agencies acted with their authority.

“The Sixth Circuit essentially overturned that aspect of Bell Aerospace,” said Anne Lofaso, a labor law professor at the University of Cincinnati. “It’s ridiculous, but I could see the Supreme Court agreeing.”

The majority explained its view of Bell Aerospace through an extended football metaphor, likening the NLRB having a choice between adjudication and rulemaking to a team electing to run or pass the ball.

“But once the Board chooses a run play, it cannot throw the ball downfield after crossing the line of scrimmage; the Board cannot exercise its rulemaking power through the adjudication process,” Judge David McKeague wrote.

McKeague and Judge Richard Griffin said that they—unlike Judge Andre Mathis, a Biden appointee who found Cemex was valid under Bell Aerospace—did “not swallow our whistles once the play starts.”