On March 21, 2017, the United States Supreme Court ruled that the National Labor Relations Board’s former Acting General Counsel Lafe Solomon served in violation of the Federal Vacancies Reform Act, 5 U.S.C. §§ 3345, et seq. (“FVRA”) when he continued in that position after President Barack Obama nominated him for a full term as General Counsel.

By a 6 to 2 vote, the Justices affirmed an August 2015 decision by the D.C. Circuit, which found that Solomon improperly served as Acting General Counsel during the almost three-year period between January 2011 and late 2013 while his nomination for confirmation as  the Board’s General Counsel languished in the Republican-controlled Senate.  Ultimately, Obama withdrew Solomon’s nomination and put forward Richard F. Griffin, Jr., who was eventually confirmed on October 29, 2013.

Background

As we explained in our prior post, the position of NLRB General Counsel is just one of approximately 1,200 senior level positions within the federal government (including Cabinet secretaries and deputies, heads of most independent agencies, and ambassadors) that may only be filled by an individual nominated by the President and confirmed by the Senate (so-called “PAS” positions).  The FVRA, enacted in 1998, gives the President authority to appoint acting officers to serve in these positions until the President’s nominee completes the sometimes lengthy Senate confirmation process.

Pursuant to the FVRA, therefore, when former NLRB General Counsel Ronald Meisburg vacated that position on June 20, 2010, Obama appointed Solomon, then a 10-year agency veteran who was serving as Director of the NLRB’s Office of Representation Appeals, to become the agency’s Acting General Counsel.  Six months later, Obama sent Solomon’s name to the Senate, when he nominated Solomon to fill the General Counsel position.  The Senate, however, did not take action on Solomon’s nomination and returned it to the President at the expiration of the Congressional term.  Although Obama resubmitted Solomon’s nomination in May 2013, he later withdrew it and nominated Richard F. Griffin, Jr., whom the Senate confirmed as General Counsel in November 2013.

After one of the Board’s Regional Directors, acting as an agent of the General Counsel, issued as  a complaint alleging Southwest General had committed unfair labor practices, the company argued that Solomon lacked authority to issue and litigate that complaint because his service as Acting General Counsel during the pendency of his nomination to the General Counsel position violated the FVRA.  While the Administrative Law Judge who heard the case and the Board, when it reviewed the ALJ’s decision, rejected that argument, the D.C. Circuit agreed with the employer, and interpreted the FVRA to prohibit any individual (subject to certain limited statutory exceptions that did not apply to Solomon) from serving as an acting officer for a PAS position while he or she was also a nominee to fill that same position for a full term.

The Supreme Court’s Decision

Writing for the majority in NLRB v. SW General, Inc., Chief Justice Roberts wrote “[a]pplying the FVRA to this case is straightforward,” and concluded that once Obama submitted Solomon’s nomination to fill the General Counsel position for a full term, the FVRA prohibited Solomon from continuing in the Acting General Counsel role.  Chief Justice Roberts noted that Obama could have appointed any one of the approximately 250 senior NLRB employees or hundreds of other individuals in PAS positions throughout the federal government to serve as Acting General Counsel during the pendency of Solomon’s nomination.  Because the President did not do so, and Solomon continued to serve as Acting General Counsel, Chief Justice Roberts concluded, Solomon’s continued service as Acting General Counsel after his nomination was submitted to the Senate violated the FVRA.

Chief Justice Roberts also rejected the Board’s argument that, in the past, three different presidents have submitted the nominations of 112 persons for Senate confirmation while they simultaneously served as acting officers under FVRA.  As Chief Justice Roberts pointed out, the FVRA was enacted in 1998, and those 112 nominations made up a small percentage of the total number of nominations for PAS positions that the Senate considered during that time.

Impact of the Court’s Decision

The Court’s ruling will most certainly have an impact on the administration of President Donald Trump, who faces the daunting task of filling the multitude of PAS positions that are either already vacant or will become vacant shortly, as Obama’s appointees transition out.  The decision in SW General will likely have a more limited impact on employers.  When the D.C. Circuit issued SW General, it made clear that it considered the holding to be a narrow one:  Acting General Counsel Solomon served in violation of the FVRA as of the date the President nominated him to be General Counsel.  Moreover, the D.C. Circuit held that any FVRA defect in Acting General Counsel Solomon’s authority to take action could be readily cured if a subsequent, properly-serving General Counsel were to ratify his actions.  Finally, the Circuit made clear that it addressed the FVRA issue only because the employer in Southwest General had timely preserved and raised that objection early in the proceedings.  The Court did not expand the effects of the D.C. Circuit’s ruling with this decision.  The real benefit from the ruling to employers, unions, and others with business before the NLRB may become apparent after Griffin’s four-year term expires in November 2017, when President Trump or any other future President will not be able to designate his or her choice to fill a future vacancy in the position of General Counsel (or in any other PAS position) to serve in such role on an acting basis while their nomination works its way through the Senate confirmation process.

On August 7, in SW General Inc. v. NLRB 2015 US App LEXIS 13812, a federal appellate court ruled that the January 5, 2011 appointment of Lafe Solomon as Acting General Counsel to the NLRB violated the Federal Vacancies Reform Act 5 U.S.C. Sections 3345 et. seq. (FVRA) (PDF). For that reasons it held that his authorizations to issue an unfair labor practice (“ULP”) complaint in the case was invalid and the NLRB’s decision finding the employer guilty of ULPs must be vacated. Since Solomon served as Acting General Counsel until November 4, 2013, the Court’s decision renders potentially suspect any and all NLRB ULP  decisions based upon complaints issued during that period.

Noel Canning

In NLRB v. Noel Canning 134 S. Ct. 2550 (2014) the Supreme Court invalidated a plethora of NLRB decisions based on its finding that the appointments of Board members who had participated in the decisions  were  invalid recess appointments because the Court found that the Senate was not in fact in recess at the time the appointments were made. In the wake of Noel Canning, the Board, then composed of members whose appointments had been properly confirmed by the Senate reconsidered and reissued most of those decisions.  SW General  seems to be another decision invalidating a scheme by the Administration to get around Senate roadblocks to appointments which has been invalidated by the Courts.

The Impact of SW General

But the Court in SW General made clear that its holding in that case would actually be much narrower in its impact.  That is because it held that if an employer had  not timely raised the issue of the General Counsel’s appointment,  the defense was waived:

We hold that the former Acting General Counsel of the NLRB, Lafe Solomon, served in violation of the FVRA from January 5, 2011 to November 4, 2013. But this case is not Son of Noel Canning and we do not expect it to retroactively undermine a host of NLRB decisions. We address the FVRA objection in this case because the petitioner raised the issue in its exceptions to the ALJ decision as a defense to an ongoing enforcement proceeding. We doubt that an employer that failed to timely raise an FVRA objection—regardless whether enforcement proceedings are ongoing or concluded—will enjoy the same success. See 29 U.S.C. § 160(e); Andrade, 729 F.2d at 1499.

In SW General, the defense was raised in exceptions to the Administrative Law Judge’s decision. Whether it can be raised after the decision by the NLRB is questionable.  29 U.S.C. Sec 160 (e) specifically provides: No objection that has not been urged before the Board, its member, agent, or agency, shall be considered by the court, unless the failure or neglect to urge such objection shall be excused because of extraordinary circumstances In Andrade v. Lauer, 729 F2d 1475 (D.C. Cir. 1984), the DC Circuit set forth the requirements needed to attack decisions by an invalidly appointed official:

 The core purposes of the doctrine are served if a plaintiff challenging government action on the ground that the officials taking that action improperly hold office meets two requirements. First, the plaintiff must bring this action at or around the time that the challenged government action is taken. Second, the plaintiff must show that the agency or department involved has had reasonable notice under all the circumstances of the claimed defect in the official’s title to office. This does not require that the plaintiff perform any particular rituals before bringing suit, nor does it mandate that the agency’s knowledge of the alleged defect must come from the plaintiff. It does, however, require that the agency or department involved actually knows of the claimed defect.

What This Means for Employers

Thus, employers found to have committed unfair labor practices in proceedings between January 5, 2011 and November 4, 2013, during Lafe Solomon’s  tenure as  Acting General Counsel should review the status of the proceedings against them and determine whether they are still able  to raise this issue as quickly as possible in any proceeding which has not yet been decided by the NLRB.

By Adam C. Abrahms, Steven M. Swirsky, and D. Martin Stanberry

On Tuesday, August 20th, in an opinion that follows in the wake of Noel Canning, United States District Judge Benjamin H. Settle dismissed an injunction petition filed by Ronald Hooks, a Regional Director  of the National Labor Relations Board, on the grounds that he was “without power” to issue the underlying unfair labor practice complaint.

The Regional Director had initially filed the petition with the District Court in June in an effort to obtain a temporary injunction that would, among other things, have prevented Kitsap Tenant Support Services, a home healthcare provider, from disciplining or terminating employees pending the resolution of complaint alleging a host of unfair labor practices.

The Court however, dismissed the Regional Director’s petition, ruling that the NLRB had no legal power to issue the underlying complaint alleging violations of the NLRA.  Not only did the Judge follow Noel Canning and its progeny by ruling the Board (as constituted at the time) lacked a properly constituted quorum but Judge Settle went even further by ruling the Board lacked a properly authorized General Counsel.

In a ruling which could potentially paralyze the NLRB, Judge Settle held that Acting General Counsel Lafe Solomon’s appointment to the post had been invalid, and consequently, that he could not have lawfully delegated the authority to request a temporary injunction to the Regional Director.  Specifically, Solomon was never confirmed by the Senate but was serving in the “Acting” capacity pursuant to President Obama’s appointment under the Federal Vacancies Reform Act (FVRA).  The Judge ruled, however, that this appointment was invalid because Solomon failed to meet the very specific requirements which would permit an appointment under the FVRA – namely he was not a first assistant to the departing General Counsel.

The decision is an exciting one because it raises interesting procedural questions affecting the operations of the Board. It remains to be seen what the administrative law judge tasked with adjudicating the dispute will do. Will he or she acknowledge that Regional Director Hooks lacked authority to issue the Complaint as dismiss it on such grounds? Or will the adjudication proceed as though Judge Settle’s decision does not affect agency operations? This issue is further complicated by the fact that the Board had already denied a motion to dismiss filed by Kitsap earlier this year on grounds similar to those relied upon by Judge Settle. If the administrative law judge refuses to proceed however, then it would seem that he or she would have no choice but to refuse to hear any complaints issued by the Regional Director during the period in which the Board lacked a valid quorum let alone all complaints issued under the authority of Solomon who has served as the Acting General Counsel since June 2010.

Beyond this case, the theory advanced in Kitsap could have wide-ranging implications that render the recent compromise to confirm a five member Board virtually meaningless.  Without a properly appointed General Counsel can the Agency continue to issue complaints?  Are the complaints issued under Solomon all invalid?  What about appeals authorized or being responded to under the direction of Solomon?  What about the appointment of Regional Directors – were those appointed under Solomon invalid and are the actions of such Regional Director’s similarly without authority?

Likewise, where does these leave the General Counsel’s office?  As noted here the President has appointed Robert Griffin to replace Solomon but Griffin likely would face stiff opposition in the Senate.  The prior conventional wisdom was Obama could use the FVRA to make Griffin the Acting General Counsel but under Kitsap Griffin also would not be qualified for such an interim appointment.  This could leave the Agency without “authority to act” until the Senate confirms a new General Counsel or the President appoints an Acting General Counsel that meets the FVRA criteria.

Certainly, this groundbreaking decision leaves many more questions than it provides answers.

And lest we forget, like every other decision which has relied upon Noel Canning, the impact of Judge Settle’s ruling may hang in the balance until the Supreme Court hears Noel Canning next term. Until that time however, rest assured that attorneys will be citing Kitsap at Board hearings and in court rooms across the country.

Management Missives

  • Employers facing unfair labor practice charges should consider preserving the issue that the NLRB is without authority to issue a complaint (seek an injunction or take other action which requires the General Counsel’s approval).
  • Stay tuned!

On August 1st President Obama made a bold statement by appointing Richard Griffin to serve as the NLRB’s General Counsel only three days after the former union lawyer vacated his unconstitutional recess appointment as a NLRB Board Member. The President statement by appointment made at least two things clear –

  1. The President wants an aggressive pro-labor General Counsel and NLRB, and
  2. The President values advancing the labor agenda over cooperation with the US Senate.

As we discussed here on July 30th the Senate confirmed a full Board for the first time in a decade as a result of a “deal” in which Senate Republicans capitulated to a threat from Senate Democrats to change the rules on filibusters. We noted last week that this deal was likely not a good deal at all for employers as it resulted in three former union lawyers appointed as the controlling majority of the Board.

For employers, one of the only concessions of the “deal” was that it resulted in the withdrawal of the pending nominations of Griffin and Sharon Block to the Board. Griffin and Block of course had served as unconstitutionally appointed recess appointments since January 2012. During their period on the Board they issued a number of controversial pro-labor decisions and were generally viewed as activist Board members. To the chagrin of employers and Congressional Republicans they also continued to issue decisions even after multiple Courts of Appeals ruled they were unconstitutionally appointed and had no authority to act. In May Senator Lamar Alexander (R-Tenn.) encapsulated the view of many noting:

My problem is that they continued to decide cases after the federal appellate court unanimously decided they were unconstitutionally appointed. Not only has the President shown a lack of respect for the Constitutional role of the separation of powers… but I believe [Griffin and Block] have as well.

The President’s withdrawal of their nominations was a symbolic, if not substantive victory.

By nominating Griffin to serve as the agency’s top lawyer and prosecutor, the President has both symbolically and substantively thumbed his nose at the Senate Republicans and employers.

In fact, rather than removing Griffin’s influence from the Board by the deal, it seems that the President may have actually enhanced that influence. As the General Counsel Griffin will serve an important policy role in deciding where the prosecutorial direction of the Board. The General Counsel has the final say in whether the Board pursues cases which reverse existing Board precedent, continue recent expansions of Section 7 rights or create entire new theories of employer liability. The recent Boeing controversy as well as the assault on “at-will” agreements, social media policies and similar common sense employer policies are all the result of an aggressive NLRB General Counsel flexing his muscles.

With Griffin’s appointment to such an important position, employers have reason for concern. As if not borne out by the decisions of the Board since he was appointed, Griffin has a long history as a union advocate. For nearly twenty years prior to his 2012 recess appointment to Griffin was employed by the International Union of Operating Engineers as its counsel, rising to serve as the union’s General Counsel and to serve as on the board of directors of the AFL-CIO Lawyers Coordinating Committee. Griffin will now serve as the top prosecutor bringing cases before a Board, the majority of which is comprised of his former union lawyer colleagues.

While Griffin technically needs to be confirmed by the Senate to be General Counsel, in the absence of a confirmation, the Act permits the President to appoint Griffin as Acting General Counsel at any time, and to serve in that role the full powers of a confirmed General Counsel. In fact, Lafe Solomon, the current Acting General Counsel, has been serving in that capacity sine June 2010 without confirmation. So in essence, as soon as the President wants Solomon to pass the baton to Griffin, Griffin will start serving in his new role.

Management Missives

  • Employers should not expect a reversal of course for the Office of the General Counsel as Griffin is likely to continue, if not expand the efforts of Solomon to broaden the Board’s role in non-union workplaces.
  • Union-free employers should dust off their union avoidance programs and redouble their efforts.
  • Unionized employers should be prepared for more strident and aggressive unions.
  • All employers should review their policies and procedures to ensure they are not susceptible to challenge under the Board’s recent pronouncements.

Steve M. SwirskyOn Friday, November 16, I participated in a free 75-minute webinar discussion with Lafe E. Solomon, Acting General Counsel of the National Labor Relations Board.  The webinar was moderated by Terence H. McGuire of the Practical Law Company.  We discussed:

  • Factors that the NLRB considers when deciding whether to prosecute unfair labor practices based on these employment practices.
  • Legal considerations surrounding these employment practices besides compliance with the National Labor Relations Act.
  • The NLRB’s stance on what is and is not a lawful at will disclaimer.
  • Social Media and communications policies.
  • The NLRB’s position on employer requirements for confidentiality in connection with workplace investigations.
  • Waivers of the right to pursue claims in class actions.
  • What’s next on the NLRB’s prosecutorial agenda and how employers can prepare.

Click here to view this complimentary webinar, “Employment Practices Facing NLRB Scrutiny.”

It is Employment Law 101 employment in the United States is generally at-will.  Equally elementary to HR professionals and employment counsel is the use of a good, strong at-will policy and/or agreement.  So common is the use of at-will policies and agreements that you would be hard pressed to find an employment handbook or an employer that does not make some use of them.

Notwithstanding this universal use, the National Labor Relations Board is poised to target non-union employers which maintain at-will policies or agreements.  Although the NLRB has taken several steps to ease the ability for unions to organize non-union employers and the Board itself has aggressively targeted the actions of non-union employers, the challenge to at-will policies could be the most dramatic and foundational yet; potentially impacting almost every employer. Though no binding NLRB decision has yet been issued, the Agency has already successfully prosecuted at least two employers with these very common policies.

In February, the NLRB General Counsel’s Office was successful in its prosecution of the for its employee handbook acknowledgment which provided “I further agree that the at-will employment relationship cannot be amended, modified or altered in any way.”  The Administrative Law Judge accepted the General Counsel’s argument that “the signing of the acknowledgment form is essentially a waiver in which an employee agrees that his/her at-will status cannot change, thereby relinquishing his/her right to advocate concertedly, whether represented by a union or not, to change his/her at-will status.”  In other words, asking employees to agree that their at-will status cannot change effectively violates their rights to try to change it through unionization.

While the language in the American Red Cross Arizona acknowledgment may arguably be a little more restrictive than others, the next prosecution contained language eerily similar and common to that of other employers.  In Hyatt Hotels Corporation the General Counsel’s Office issued an unfair labor practice complaint asserting that the following provisions of the employee handbook acknowledgment violated the Act:

  • “I understand my employment is ‘at-will.’”
  • “I acknowledge that no oral or written statements or representations regarding my employment can alter my at-will employment status, except for a written statement signed by me and either Hyatt’s Executive Vice President/Chief Operating Officer or Hyatt’s President.”

Although the case recently settled, the issuance of the complaint and the very generic nature of the challenged language was strong evidence that the NLRB was in fact targeting non-union employers’ use of at-will provisions.

Earlier this summer NLRB Acting General Counsel Lafe Solomon further confirmed the NLRB’s apparent new found concern with the allegedly over-broad and unlawful nature of at-will provisions.  Speaking to the Connecticut Bar Association, Mr. Solomon reiterated the theory advanced in the two earlier cases and asserted that an at-will policy/agreement would violate the Act if an employee could reasonably believe that it could not be changed through union organizing or a collective bargaining agreement.

Management Missive

  • Management should be on the lookout for a full decision from the Board providing further guidance on the extent to which at-will policies may be deemed unlawful and ways to save them.
  • Management should recognize that their at-will policies (as well as many other policies) may be attacked by unions seeking to organize their employees.
  • Management may want to consider revising policies to provide potentially saving caveats (i.e. replacing authorizing language limited to only one executive with language that says the policy may be amended only by a valid agreement signed by authorized representatives and a single executive).