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Labor Board Seeks to Upscale Forum for Rulemaking Challenges

Sept. 8, 2020, 10:30 AM

The National Labor Relations Board is pushing to make federal appeals courts, not trial courts, the first stop for judicial review of its regulations, potentially accelerating challenges to its future rulemaking efforts.

The NLRB asked a Washington federal court to send a pending case involving the AFL-CIO’s challenge to one of the board’s union election-related rules to the U.S. Court of Appeals for the District of Columbia Circuit. The labor federation on Sept. 1 told Chief U.S. District Judge Beryl Howell it opposes the transfer.

A different federal judge previously rejected the NLRB’s request to shift a separate AFL-CIO lawsuit over a different election procedure regulation. The agency is appealing that ruling at the D.C. Circuit.

As a general rule, U.S. district courts have original jurisdiction over federal regulatory challenges, administrative law professors say, noting there are statutory exceptions providing for direct appellate court review. The NLRB asserts the National Labor Relations Act requires rulemaking lawsuits to be filed at the circuit tier, while the AFL-CIO says the board’s interpretation is wrong.

Which layer of federal court gets first crack at NLRB rule challenges takes on added importance in light of the Republican-controlled board’s relatively vigorous regulatory activity. The board has finalized three new rules since December. If its current membership finalizes its two published proposals, then its output would exceed the number of substantive regulations the agency issued during the previous 84 years of its history.

The presidential election carries with it the potential for a change in which party controls the board next year and the ability to retain or reverse those measures.

Prior Recommendation

With its quest to have judicial review of its regulations start at the appellate level, the board is essentially seeking what the Administrative Conference of the United States, a nonpartisan agency focused on improving the government’s processes and procedures, recommended decades ago.

“District court review was viewed as a roadblock to NLRB rulemaking,” said Jeffrey Lubbers, an administrative law professor at American University and former ACUS research director.

Starting at the circuit court is more efficient and economical for litigants and the judicial system, according to a conference recommendation from 1975.

The administrative record that supports a rulemaking obviates the need to build an evidentiary record in trial court, ACUS said. It specifically recommended in 1991 that Congress amend the federal labor law to add a provision establishing direct U.S. court of appeals review for NLRB regulations.

Another drawback to litigating in district court for the NLRB is that it gives the opponents of a rule the opportunity to shop around for a plaintiff and file in the court they believe is most friendly to their arguments, Lubbers said.

For example, industry associations opposed to the Obama-era Labor Department’s rule expanding overtime eligibility won a nationwide order from a federal judge in Sherman, Texas, blocking its enforcement.

Appellate Tier Preferable

Some former Democratic NLRB members said that direct appellate-level review of board regulations would be preferable.

“It would expedite the proceeding and cut out that extra layer of review,” said William Gould, a Stanford University law professor who led the NLRB during the Clinton administration.

Ex-NLRB Member Wilma Liebman recognized the added efficiency of circuit review, but also suggested the current board may be seeking that forum change for faster adjudication in light of the presidential election in November.

If President Donald Trump loses, Republican control of the board could end after August 2021, when William Emanuel’s term on the board expires. Trump’s Democratic successor could appoint Emanuel’s replacement and, along with an appointee to fill a long-vacant Democratic seat, flip the panel’s balance of power.

“They’re trying to nail down an appellate decision that would make it more difficult and more complicated for a future board to undue the rule,” Liebman said.

The Obama administration’s overtime rule is again instructive. Once the Trump administration took over, the Justice Department abandoned its defense of the rule, which let the district court’s decision blocking the measure stand.

When asked about the NLRB’s motivations and objectives for seeking the change, agency spokesman Ed Egee said its “reasons include the central role of circuit courts in enforcing the NLRA, the peripheral role of district courts, and the wasted resources associated with litigating the same administrative record before two different courts.”

NLRB ‘Late to the Party’

Although direct federal appellate review is appropriate for NLRB rules, trying to achieve that goal through litigation isn’t, said Mark Grunewald, an emeritus law professor at Washington and Lee University. Grunewald wrote the report underlying ACUS’s 1991 recommendation on NLRB rulemaking.

The NLRB “shunned” rulemaking for most of its history and now it wants the courts to make an “ad hoc change” from what most agencies have had to deal with for decades, Grunewald said. The NLRB is pushing for the change without showing that it’s suffered any harm from district court review, he added.

“It’s like the NLRB is late to the party and wants to change its access to the punch bowl,” Grunewald said.

Still, the jurisdiction for judicial review of other agencies’ rulemaking has been the subject of litigation. A fight over what court should hear challenges to an Environmental Protection Agency rule related to protecting U.S. waterways went all the way to the Supreme Court, with the justices unanimously ruling in 2018 that they belong in district court.

The Meaning of ‘Orders’

The NLRA’s judicial review provision calls for the circuit tier to hear appeals of orders that involve unfair labor practices. The NLRB’s argument now turns on what’s meant by “orders” in that judicial review provision, which the board said it long assumed not to include rulemakings.

The term is ambiguous, the NLRB said in court filings. The law doesn’t say whether it extends to rulemakings or otherwise define it, the section outlining the board’s rulemaking power provides no guidance on jurisdiction of judicial review, and it’s not addressed in the legislative history, the board said.

D.C. Circuit precedent says that the term “order” within a judicial review provision encompasses rulemaking, according to the NLRB. That means the ambiguous “order” in the NLRA’s judicial review provision requires direct review of agency regulations to start in circuit court, the board said.

U.S. District Judge Ketanji Brown Jackson in Washington rejected that argument in the AFL-CIO’s challenge to the board’s December rule that amended a broad array of union election procedures. “Order” in the judicial review provision refers to unfair labor practice cases, she ruled in May. Jackson also struck down several sections of the rule.

Ignore or Distinguish

In addition to appealing Jackson’s ruling in the D.C. Circuit, the NLRB is pressing its argument in the AFL-CIO’s challenge to the board’s March rule that changed three election-related policies, including the “blocking charge” policy, before the trial court’s chief judge, Howell.

The NLRB said Jackson’s decision is wrong, while adding that it’s also distinguishable from the case before Howell. The rule at issue in Howell’s courtroom relates to unfair labor practices, impacting either the way they’re litigated or the issues that can be raised in such cases, it said.

But courts have consistently held that only appeals of NLRB decisions resolving alleged violations of federal labor law start in circuit court, the AFL-CIO said in a court filing last week.

The NLRB’s continued insistence that direct review belongs in appellate court is “a little bizarre,” said Maneesh Sharma, the AFL-CIO’s associate general counsel.

“The language of the statute doesn’t support their position. The structure of the statute doesn’t support their position. The precedent doesn’t support their position,” Sharma said. “They really have no legs to stand on to make this argument in the same district court that already rejected it.”

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com