Third Circuit Joins DC Circuit in Condemning NLRB Intrasession Recess Appointments; Casts Doubt on Validity of Other Recess Appointees' Decisions

Practical Law Legal Update 9-529-6365 (Approx. 9 pages)

Third Circuit Joins DC Circuit in Condemning NLRB Intrasession Recess Appointments; Casts Doubt on Validity of Other Recess Appointees' Decisions

by PLC Labor & Employment

Key Litigated Issues

In NLRB v. New Vista Nursing & Rehabilitation, the key litigated issue was whether President Obama's appointment of Member Craig Becker to the NLRB was constitutional under the President's recess appointment power and therefore whether the panel (Board) heading the NLRB's judicial functions delegated authority to a panel that could validly decide the case on August 26, 2011.

Background

On August 26, 2011, the Board held that New Vista, which operates a nursing and rehabilitative care center in Newark, New Jersey, committed an unfair labor practice (ULP) by refusing to bargain with a union. New Vista filed multiple motions for reconsideration, and then petitioned the US Court of Appeals for the Third Circuit for review of the Board's denial of those motions. The Board also filed an application with the Third Circuit for enforcement of its August 26 order, and the Third Circuit treated New Vista's petitions collectively as a cross petition opposing the Board's petition for enforcement.

In two of its reconsideration motions, New Vista argued that the Board panels that decided its first and second reconsideration motions were improperly constituted, as:

One of the panelists involved in ruling on the first motion was a recess appointee whose term concluded before the first reconsideration order was issued.
Two of the panelists involved in ruling on the second motion were invalidly appointed under the US Constitution's Recess Appointments Clause while the Senate was not in recess.

Outcome

On May 16, 2013, the Third Circuit issued an opinion in NLRB v. New Vista Nursing & Rehabilitation, vacating the Board's orders and holding the delegated Board panel lacked the required number of members to exercise its authority because one of the panel members involved in the underlying August 26 order was invalidly appointed during an intrasession break of the Senate.

The court initially noted that the US Court of Appeals for the District of Columbia Circuit's decision similarly holding recess appointments to the NLRB invalid in Noel Canning v. NLRB improperly conflated the Board's quorum requirement with its three-member-composition requirement for a panel under the NLRA. The Board may delegate its authority to a three-member "delegee group" or panel, as it did in this case. For the Board to act either for itself or as a panel, it must have a quorum, which is defined as having two out of three members present on the panel and three out of five members present in the Board.

However, under the US Supreme Court's decision in New Process Steel, L.P. v. NLRB, if there are fewer than three members on the Board, it is not a properly constituted body and cannot exercise the NLRB's powers. Although these requirements are related, the court noted this case turned on whether the three-member panel was properly constituted, not whether the Board had a quorum when it acted.

The Third Circuit first held that this three-member-composition requirement is jurisdictional, and must be met before the Board can exercise its power over a case. The NLRB argued that a claim that a federal officer was unconstitutionally appointed is not a jurisdictional challenge, relying on Freytag v. Commissioner of Internal Revenue, Intercollegiate Broadcast System, Inc. v. Copyright Royalty Board and Evans v. Stephens. However, the Third Circuit found that these cases were inapposite, as they addressed a separate point that challenges under the Appointments Clause of the US Constitution are nonjurisdictional when brought independently. The court stressed that it was only holding that the NLRA's three-member-composition requirement was jurisdictional, and as a jurisdictional issue, the question of whether the three-member panel in this case was properly formed can be raised at any point in the case.

Instead of addressing New Vista's claims that the panels deciding the first and second motions for reconsideration were invalid, the Third Circuit sua sponte considered whether the panel that issued the initial August 26 order was valid. One of that panel's three members, Member Becker, was appointed as a recess appointee on March 27, 2010, one day after the Senate adjourned for two weeks. If his appointment was invalid, the resulting two-member panel would lack jurisdiction to issue its August 26 order.

The Recess Appointments Clause of the US Constitution allows the President to fill vacancies during a Senate recess. The court noted three possible definitions of recess:

Intersession breaks, defined as the period between sessions of the Senate. The DC Circuit adopted this definition in Noel Canning.
Both intersession and intrasession breaks of a significant duration, which are breaks in Senate business during a session that historically last for ten days or more. The US Court of Appeals for the Eleventh Circuit adopted this definition of recess in Evans.
Times when the Senate is not open to conduct business, including pro forma Senate sessions, formal meetings of the Senate in which usually only one senator is present to convene the body briefly before adjourning until the next pro forma session. The NLRB argued in favor of adopting this definition.

Reaching the DC Circuit's general conclusion with slightly different analysis, the Third Circuit held that a Senate recess only means intersession breaks, finding:

The main purpose of the Recess Appointments Clause is not just to allow the President to fill vacancies, but to limit the President's unilateral power to do so. Defining recess as every time Senate members have no duty to attend, as the NLRB argued, would eviscerate the Appointment Clause's divided powers framework.
The Recess Appointments Clause provides that recess appointees' terms expire at the end of the Senate's next session, not the current session. By implication, then, recess appointments must be made between sessions of the Senate.
Historically, at least before 1867, recess appointments were made during intersession breaks.

(For a discussion of the DC Circuit's analysis, see Legal Update, DC Circuit Rules NLRB Recess Appointments Were Unconstitutional; Enforceability of All Recess Appointees' Decisions in Doubt.)

The Third Circuit held that Member Becker's intrasession appointment was therefore invalid, and the resulting three-member Board panel lacked jurisdiction when it issued its August 26 order finding New Vista committed a ULP. The Third Circuit vacated the Board's orders.

Circuit Judge Greenaway dissented, arguing in favor of adopting the Eleventh Circuit's definition of recess as including intrasession breaks lasting ten or more days, as the Senate can be unavailable to provide advice and consent on the President's proposed appointment during intrasession as well as intersession breaks. According to the dissent, limitations on the President's powers are already built into the Recess Appointments Clause without having to interpret recess so narrowly, as:

The Senate can curb the President's use of the appointment power by remaining available to provide advice and consent.
Recess appointments are of limited duration.
Recess appointments are a secondary means of appointment and cannot be used as a primary means of appointment while the Senate is available to provide advice and consent.

Practical Implications

By implication, all three-member Board decisions involving Member Becker that are appealable to the Third Circuit may be invalid for lack of jurisdiction as a result of this decision. Board decisions involving Member Becker as part of a four- or five-member panel, however, may still be valid. However, the enforceability of those decisions, or at least the substance of those decisions, remains uncertain because:

The NLRB may appeal this decision and prevail before the US Supreme Court.
The NLRB may successfully enforce other decisions in other Circuit Courts of Appeals if those courts do not reach the same conclusions as the Third and DC Circuits.

The US Solicitor General, on behalf of the NLRB, has already filed a petition for certiorari in Noel Canning, which is currently pending before the US Supreme Court, and any petition for certiorari to this decision would likely be consolidated with the Noel Canning petition.

Assuming Member Becker's recess appointment is found unconstitutional or the NLRB concedes that this is correct, the Board may decide to:

Unilaterally vacate all decisions made by the improperly constituted Board panels involving Member Becker.
Issue new decisions adopting the findings, conclusions and reasoning from the vacated decisions.

Although the ultimate outcome of this case and Noel Canning are not certain, employers may not be wise to assume that the NLRB will retreat from its agenda or abandon the Board's decisions. The NLRB has not suggested that:

The NLRB's Acting General Counsel will stop:
- issuing and prosecuting complaints based on theories the Board has approved of in three-member panel decisions involving Member Becker; or
- seeking enforcement of those decisions.
The NLRB's administrative law judges, hearing officers and regional directors might abandon Board precedent during this period when deciding pending cases.
The Board will stop issuing decisions relying on precedent handed down by:
- three-member Board panels that included Member Becker or other intrasession appointees; or
- Boards that would not have a quorum, under New Process Steel, without counting intrasession recess appointees.

In light of both New Vista and Noel Canning, employers that are subject to a decision by a Board panel that would not be properly constituted if intrasession recess appointees do not count towards the three-member-composition requirement should consider:

Moving that the Board reconsider that decision.
Petitioning the DC Circuit (or the Third Circuit, for employers in the Third Circuit) for review and opposing any cross-application for enforcement by the NLRB of that decision because the Board was not properly constituted or lacked jurisdiction when it issued it.
Informing any US Court of Appeals reviewing or deciding whether to enforce that decision about both New Vista and Noel Canning.

New Vista increases the likelihood that the US Supreme Court will grant certiorari in Noel Canning and evaluate what it means for the Senate to be in recess. The decision:

Adds to the burgeoning split among the circuit courts about the definition of a recess.
Reaches similar conclusions as the DC Circuit in Noel Canning but uses different reasoning to reach those conclusions, including by:
- focusing on the jurisdiction of a delegated panel that includes a recess appointee, rather than the jurisdiction of a Board that would not have a quorum if a recess appointee were not counted towards it;
- not addressing whether a vacancy must arise when the Senate is in recess for a recess appointment to fill that vacancy to be valid;
- not addressing whether the President may fill vacancies during a recess that existed before the recess; and
- disagreeing with the DC Circuit that "recess" is easy to understand.
Rejects an argument not addressed in Noel Canning that the definition of recess is a nonjusticiable interpretation left to the discretion of the President.

New Vista also erodes the NLRB's position that the DC Circuit's view on recess appointments is an outlier to which it owes little or no deference (for example, see Bloomingdales', Inc.).

Employers that are attempting to determine whether the Board's past decisions by invalid recess appointees are subject to challenge should recognize that under:

Noel Canning, the question is whether the Board satisfies three-member quorum requirements under New Process Steel on the date the decision is on the case is made. A chart about the historical composition of the Board is helpful.
New Vista, the question is whether the panel delegated by the Board to decide a case has fewer than three members after excluding any invalid recess appointees. New Vista could invalidate the same cases as Noel Canning:
- plus cases decided by delegated panels that have fewer than three members when invalid recess appointees are not counted; and
- minus cases involving employers outside of the Third Circuit (Delaware, New Jersey and Pennsylvania).

Third Circuit Joins DC Circuit in Condemning NLRB Intrasession Recess Appointments; Casts Doubt on Validity of Other Recess Appointees' Decisions | Practical Law