Sixth Cir. Judges Conflicted on NLRB Remedies in Starbucks Case

Arguments by Starbucks Corp. that the National Labor Relations Board shouldn’t be able to order monetary compensation for the consequences of an employer’s unfair labor practices appeared to split judges on a federal appeals court panel.

The coffee giant urged the US Court of Appeals for the Sixth Circuit in oral arguments Thursday to vacate a 2023 board decision that found it had illegally fired a Michigan organizer and ordered the company to pay for “all direct or foreseeable pecuniary harms” stemming from the violation.

The court appearance presented another opportunity for Starbucks to take aim at the NLRB’s 2022 Thryv Inc. doctrine, which expanded the type of measures available to the board to remedy unfair labor practice charges. Thursday’s arguments largely revolved around remedies in the case, despite the fact that Starbucks isn’t contending any individual measures imposed upon it.

Last month, the company urged the Third Circuit to toss another NLRB ruling over its expanded remedies.

Sarah Harris, representing Starbucks, asserted that the potential remedies Thryv calls for stretch outside the scope of the NLRB’s authority.

“The board has never previously had a categorical rule, and this rule goes well beyond the ad hoc remedies that they’ve tried to do before this,” said Harris, a partner at Williams & Connolly LL.

But Judge Jane Branstetter Stranch, an Obama appointee, seemed skeptical, saying the board has had a “consistent thread” of these types of remedies.

“Case law shows that the board has been giving that type of remedy since the 1940s,” she said. “Is your position to this court that there is no precedent regarding the NLRA that shows there have been make-whole remedies since early on in the statutory history?”

Jarkesy

Section 10(c) of the National Labor Relations Act calls for back pay and reinstatement as primary remedies. The US Supreme Court established in the 1940 Republic Steel Corp. v. NLRB ruling that the labor board cannot seek punitive damages for unfair labor practices.

The high court’s recent ruling in SEC v. Jarkesy also established that administrative proceedings that involve legal damages should go before a jury.

“I think the board’s position is a real problem, because under their theory, you’re home free if you invoke a statutory right,” Harris said, comparing the NLRB to the SEC in Jarkesy. “The SEC too was trying to enforce a statutory right against securities fraud.”

Labor board attorney Eric Weitz pushed back on the assertion, arguing that Jarkesy didn’t touch the NLRB’s authority to issue remedies.

“Starbucks is implying that the public rights exception no longer exists or is limited to a tiny handful of categories,” he said. “It would be questionable as to whether the Supreme Court intended that because that would have drastic implications for the administrative state writ large.”

Drawing the Line

Stranch urged Harris to distinguish between types of remedies that should be permitted and those that shouldn’t. Starbucks isn’t arguing against relief that takes away gains made by an employer because of its illegal conduct, including back pay, Harris said.

“The distinction is defendants wrongful gain being disgorged,”Harris said.” That’s equity versus compensating the plaintiff for their losses. That’s classic money relief.”

But Weitz disagreed. “Back pay itself, the quintessential make whole remedy under the act, is not disgorgement,” he said. “You could characterize that as a form of damages for the lost wages that the employee did not receive. It is not an unlawful gain for the employer.”

Judge Chad Readler, a Trump appointee, peppered Weitz with questions.

“I think this begs the question of who is radically reinterpreting the act? This feels like a major departure and we can decide whether it’s consistent with the statute,” he said. “Would you put any limits on the board’s power to remedy wrongdoing?”

“Absolutely,” Weitz responded. “The board is now saying, in every case as part of the standard remedy, it’s going to include a particular form of relief that it has included, historically, on an ad hoc basis.”

Judge Alice Batchelder, a Bush appointee, also sat on the panel.

Starbucks is represented by attorneys from Williams & Connolly LLP and Littler Mendelson PC. Board attorneys represented the NLRB.

The case is NLRB v. Starbucks Corp., 6th Cir., No. 23-01767, Oral arguments 10/31/24.