Potentially invalidating hundreds of National Labor Relations Board (NLRB or “Board”) decisions, the U.S. Supreme Court has held that the National Labor Relations Act (NLRA) requires that the NLRB must operate with at least three members in order to exercise its full authority. In New Process Steel v. NLRB, (pdf) the Court rejected the argument that the NLRA’s delegation and quorum clauses enable the Board to act with only two members, which it had done from January 2008 through March of this year when President Obama used the recess appointment process to add members Craig Becker and Mark Pearce to the two-member panel.

Section 3(b) of the NLRA provides that “three members of the Board shall, at all times, constitute a quorum of the Board.” It also provides that the “Board is authorized to delegate to any group of three or more members any or all of the powers which it may itself exercise.” The quorum provision, however, stipulates that “two members shall constitute a quorum” of any delegate group. The Board – anticipating that it would be left with only two members when two other members’ terms expired on December 31, 2007, while a fifth seat remained vacant – delegated powers to a three-member group to ensure that the remaining two members whose terms had not yet expired would be able to operate – when they could reach a quorum – as a fully-functioning Board. Since then, nearly 600 opinions have been issued by the two-member Board.

The question raised by a number of appellate courts was whether two members constitute a valid quorum in this instance, or whether three members were still required to give the Board full authority to issue decisions. The Seventh Circuit in New Process Steel upheld the authority of the two-member Board. The Supreme Court in today’s 5-4 opinion reverses and remands that decision, reasoning that “reading the delegation clause to require that the Board’s delegated power be vested continuously in a group of three members is the only way to harmonize and give meaningful effect to all of the provisions in §3(b).” Allowing only two members to act as the Board “dramatically undercuts the significance of the Board quorum requirement by allowing its permanent circumvention. That reading also makes the three-member requirement in the delegation clause of vanishing significance, because it allows a de facto delegation to a two-member group . . .” The Court further explained that if Congress had intended to allow two members alone to act as a fully-functioning Board on an ongoing basis, “it could have said so in straightforward language.”

The Court emphasized that its reading of the delegation clause permits the Board to act in panels of three members, while the quorum provision allows a two-member panel to issue a decision if the third is disqualified. In a press release, (pdf) Board Chairman Wilma Liebman responded to the Court’s decision:

In proceeding to issue decisions in nearly 600 cases where we were able to reach agreement, we brought finality to labor disputes and remedies to individuals whose rights under our statute may have been violated. We believed that our position was legally correct and that it served the public interest in preventing a Board shut-down. We are of course disappointed with the outcome, but we will now do our best to rectify the situation in accordance with the Supreme Court’s decision.

For more information on this decision and its implications, see Littler's ASAP:  U.S. Supreme Court Potentially Invalidates Hundreds of NLRB Decisions by Adam Wit.