SpaceX’s Bid to Upend NLRB Follows Signals From Supreme Court

SpaceX opened up another front in the legal war against the regulatory state when it launched a broad set of challenges to the structure of the National Labor Relations Board and the ways that the agency administers federal labor law.

Perhaps the most expansive and novel part of the Elon Musk-owned aerospace company’s multi-pronged lawsuit filed last week is a claim alleging the NLRB violates constitutional separation of powers and due process protections by wielding different types of authority in the same case.

Those allegations center on the NLRB’s process for obtaining temporary court orders against employers that are accused of committing unfair labor practices. Before the agency can go to federal court, the NLRB must approve the general counsel’s petition to seek 10(j) injunctions, which are named after the section of the National Labor Relations Act that allows the agency to request them.

“That’s not just an argument about the board, it’s an argument about the administrative state,” said Alexander MacDonald, a partner at Littler Mendelson PC who’s written about the constitutional implications of the NLRB’s design. “To say this structure itself violates the Constitution would be saying a large swath of the federal government is unconstitutional.”

Like the NLRB, several other federal agencies perform quasi-judicial and quasi-legislative functions in the course of executing their responsibilities under the law, MacDonald said.

SpaceX’s lawsuit against the NLRB comes amid growing signals that the US Supreme Court is willing to reconsider some of the basic assumptions underlying regulatory agencies’ authority to administer the law.

The court’s conservative majority has developed the “major questions doctrine” to roll back agency power. The justices currently are weighing cases that challenge judicial deference to agency interpretation of ambiguous laws, the Security and Exchange Commission’s in-house adjudication of securities laws, and the Consumer Financial Protection Bureau’s funding structure.

SpaceX filed its lawsuit against the NLRB the day after agency prosecutors accused the company of violating the National Labor Relations Act by firing eight employees over an internal letter that criticized Musk.

“What SpaceX is doing here is exactly what companies did when the NLRA was first enacted and their corporate lawyers told them it’s unconstitutional and they didn’t need to comply with it,” said Catherine Fisk, a workplace law professor at the University of California at Berkeley. “For two years they flouted the law, and for two years they got away with it.”

The Supreme Court upheld the NLRA in the landmark 5-4 ruling in 1937’s NLRB v. Jones & Laughlin Steel Corp.

“But now that there are six rock-solid conservatives on the court, high-paid lawyers are making another run at it,” Fisk said.

SpaceX’s attorneys at Morgan, Lewis & Bockius LLP and an NLRB spokesperson didn’t respond to requests for comment.

Structural Arguments

The complaint against the NLRB isn’t the first time SpaceX responded to an agency’s enforcement action by challenging a fundamental aspect of how that agency functions.

The spacecraft manufacturer won a court order in November 2023 blocking the US Justice Department from pursuing allegations that SpaceX illegally discouraged people granted asylum or refugee status from applying for jobs and refusing to consider those who applied.

SpaceX argued that the DOJ’s proceedings against it are unconstitutional because the administrative judge overseeing the complaint wasn’t appointed by the US president and isn’t under supervision by an executive branch official. The administrative process would also deprive SpaceX of its right to a jury trial in a federal court, the company said.

The company’s lawsuit against the NLRB similarly argues that the agency’s administrative law judges are unconstitutionally insulated against removal by the president.

SpaceX also alleges that the board’s in-house adjudication of unfair labor practice allegations violates the Constitution’s right to a jury trial.

Those arguments mirror some of the US Court of Appeals for the Fifth Circuit ruling against SEC enforcement of securities laws in Jarkesy v. SEC. The Supreme Court heard oral arguments in its review of that decision in November.

The justices largely ignored the issue about the ability to remove ALJs and focused on the jury trial right challenge, signaling a potentially narrow decision focused on that right attaching for securities fraud claims.

SpaceX raised a third argument against the NLRB’s structure, asserting that the board members’ protections from removal also run afoul of the Constitution. That allegation echoes a prior lawsuit that the National Right to Work Legal Defense Foundation brought on behalf of a Starbucks Corp. worker whose union decertification petition was dismissed.

‘Copycat Cases’ Possible

The company is challenging settled precedent dating back 90 years and relitigating the basic compromises and innovations that came out of the New Deal, said Matthew Bodie, a labor law professor at the University of Minnesota and a former NLRB attorney.

In its lawsuit, SpaceX said board approval of 10(j) petitions conflicts with the constitutional right to due process, in part because of the “risk that such NLRB members will be psychologically wedded to the position when they adjudicate the administrative complaint.”

And the NLRB violates the separation of powers because it can use quasi-prosecutorial authority to bless a 10(j) petition in the same case that it uses quasi-judicial power to rule and quasi-legislative force to issue new interpretations of the law in a precedential decision, according to the suit.

SpaceX’s due-process and separation-of-powers arguments are “completely contrary to how administrative law works,” said Anne Marie Lofaso, a labor law professor at the West Virginia University and former NLRB attorney.

“While these arguments are frivolous in terms of what the law is now, they’re not frivolous knowing this Supreme Court is interested in potentially dismantling parts of the administrative state,” she said.

But a court would likely focus narrowly on the 10(j) process rather than tear down the NLRB’s entire structure, said David Pryzbylski, a partner at Barnes & Thornburg LLP.

Still, he said a win for SpaceX means “copycat cases” will pop up with the intention of stalling NLRB litigation or challenging the agency’s power.

“For a lot of employers, this would be a costly and time intensive endeavor,” Pryzbylski said. “But I also think a lot of employers might start raising these types of defenses, even in administrative proceedings with the NLRB. So even if they’re not filing lawsuits and going through the time and expense of doing it, they might want to try to piggyback on this case if it’s successful.”

The case is Space Exploration Techs. Corp. v. NLRB, S.D. Tex., No. 1:24-cv-00001.