A South Carolina federal court has ruled that the National Labor Relations Board lacked the authority to promulgate its notice-posting rule, which is scheduled to take effect on April 30, 2012. This rule mandates that all private sector employers subject to the National Labor Relations Act (NLRA) post a notice informing employees of their rights under the NLRA in a "conspicuous place" readily seen by employees. The rule includes a number of enforcement provisions that have been highly contested. Among other remedies for a posting rule violation, the Board would be permitted to toll the six month statute of limitations for an employee who files an unfair labor practice (ULP) charge. This provision would extend the statute of limitations for all unfair labor practice actions against the employer, not just those ULPs arising from the failure to post the notice. The rule would also deem an employer’s “knowing and willful refusal to comply with the requirement to post the employee notice as evidence of unlawful motive in a case in which motive is an issue,” as well as render a failure to post the required notice a ULP in its own right. Last month, the U.S. District Court for the District of Columbia struck down the enforcement provisions of the rule, but upheld the Board’s authority to issue the rule in the first instance.

In the latest case, Chamber of Commerce v. NLRB, (pdf) plaintiffs argued that the notice posting rule is unlawful because: (a) the Board lacked the authority to promulgate the rule; (b) the Board exceeded its authority by creating a new ULP and by authorizing tolling of the statutorily-mandated six-month statute of limitations for filing a ULP charge; and (c) the rule violates an employer’s free speech rights. In its decision, the U.S. District Court for the District of South Carolina determined that based on the plain language and structure of the NLRA, the Board lacked the authority to promulgate the rule in the first place. The court, therefore, did not reach the second two arguments questioning the rule’s legitimacy.

The Board’s position was that it had broad authority under Section 6 of the NLRA to issue the rule. Section 6 provides that “[t]he Board shall have authority from time to time to make, amend, and rescind, in the manner prescribed by the Administrative Procedure Act, such rules and regulations as may be necessary to carry out the provisions of [the NLRA].” The South Carolina court disagreed, stating that “the plain language and structure of the Act compel a finding that the Board lacks authority under Section 6 to promulgate the rule.”

The court first explained that the plain language of Section 6 requires that rules issued by the Board be “necessary to carry out” other provisions of the Act. According to the court: 

Defendants argue that the rule is “necessary to carry out” Sections 1 and 7 of the Act, but confuse a “necessary” rule with one that is simply useful. It can be said that the notice-posting rule “aids” or “furthers” the aspirational goals of Section 1 by notifying employees of their rights under Section 7, but defendants have not shown that the rule is “necessary” to carry out any other provision of the Act.

The opinion states that nowhere does the NLRA require employers to post general notices of employee rights under the Act. In contrast, the opinion emphasizes, Congress has enacted or amended several other federal labor statutes “to expressly require employers to post notices of employees’ statutory rights.”

In addition to looking at the plain language of the NLRA, the court discussed the context of the law. According to the court, “it is clear from the structure of the Act that Congress intended the Board’s authority over employers to be triggered by an outside party’s filing of a representation petition or ULP charge.” The notice-posting rule, however, “proactively dictates employer conduct prior to the filing of any petition or charge, and such a rule is inconsistent with the Board’s reactive role under the Act.”

The court was similarly unpersuaded by the Board’s argument that it properly exercised its rulemaking authority by filling a statutory “gap” in the law. According to this theory, because the NLRA is silent with respect to notice posting, the court can consider factors other than the law’s plain language. The court found, however, that

Based on the statutory scheme, legislative history, history of evolving congressional regulation in the area, and a consideration of other federal labor statutes, the court finds that Congress did not intend to impose a notice-posting obligation on employers, nor did it explicitly or implicitly delegate authority to the Board to regulate employers in this manner.

This new decision has clearly dealt a set back to the NLRB in its efforts to require employers to post this notice. However, it is also unclear how employers should reconcile the two federal court decisions, since the decision out of the District of Columbia court upheld the Board’s authority to issue the rule. No doubt, this matter will ultimately be resolved in the appellate courts. There remains a lack of clarity about what an employer should do given the conflicting opinions. For the time being, it would appear that the April 30 deadline for posting is no longer effective, and, in at least one jurisdiction, if not everywhere, employers may not have to post. We would expect the NLRB to provide some guidance in connection with this decision in the coming weeks. We will continue to monitor this rapidly evolving situation and inform you of developments as we learn of them.

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