The ruling places in substantial doubt the validity of any NLRB decision or action since January 4, 2012, and calls into question the scope of the president's recess appointment power more generally.
On January 25, in Noel Canning v. National Labor Relations Board, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit unanimously ruled that President Barack Obama's three recess appointments to the National Labor Relations Board (NLRB or Board) in January 2012 were unconstitutional. This decision has potentially far-reaching effects as it calls into question the validity of NLRB decisions since the appointments, as well as the president's recess appointment power generally.
On January 4, 2012, President Obama made three controversial recess appointments to the NLRB. Those appointments were made one day after the expiration of Member Craig Becker's term, which left the five-seat Board with only two confirmed members—Mark Pearce and Brian Hayes—and a lack of quorum to issue decisions. In an effort to avoid effectively shuttering the agency during what likely would have been an extended Senate confirmation process for new appointees, President Obama appointed Sharon Block, Richard Griffin, and Terence Flynn to the Board. President Obama did so under the auspices of his recess appointment power contained in Article II, Section 2 of the U.S. Constitution, referred to as the Recess Appointments Clause.
The D.C. Circuit's decision in Noel Canning involved review of a Board decision against employer Noel Canning in a relatively routine unfair labor practice case. A three-member panel consisting of Members Hayes, Flynn, and Block issued the decision on February 8, 2012. In its petition for review of the Board's decision, Noel Canning argued to the D.C. Circuit that the Board at the time only had two validly appointed members. In effect, Noel Canning argued that the Board lacked a quorum to issue decisions and that the adverse decision against it was invalid. The D.C. Circuit agreed.
D.C. Circuit Opinion
In a lengthy opinion, the D.C. Circuit flatly rejected the Board's and the Obama administration's claims that the Senate was in recess on January 4, 2012, for purposes of the Recess Appointments Clause. The clause provides as follows:
The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.
The court first held that the term "the Recess" refers only to intersession breaks between formal sessions of Congress and that it does not refer to mere intrasession breaks or adjournments. The court explained that "[a]s a matter of cold, unadorned logic, it makes no sense to adopt the Board's proposition that when the Framers said 'the Recess,' what they really meant was 'a recess.'" This ruling effectively limits the president's recess appointment power to just two breaks—and, in some cases, one or no break at all—during each two-year period that a Congress holds power. As such, President Obama's appointments of Members Block, Griffin, and Flynn at a time other than an intersession break alone rendered the appointments invalid.
The court was not persuaded by the argument that President Obama's "recess" appointments were consistent with those of many presidents in recent history. The court chose instead to rely on interpretation and practice dating back to the Framers, noting that no president attempted to make an intrasession recess appointment in the first 80 years after the Constitution was ratified. The court also was not persuaded by the suggestion that the president might have the ability to decide if and when the Senate is "in recess." According to the court, this "would eviscerate the Constitution's separation of powers . . . [and it] would demolish the checks and balances inherent in the advice-and-consent requirement[.]" These three recess appointments to the NLRB were particularly controversial because, unlike recess appointments of other presidents, these were made at a time when the Senate itself was holding pro forma sessions every three days. Although this fact was not central to the court's decision, it provides important context to the separation of powers argument.
The court then went on to consider when a vacancy must "happen" for purposes of the Recess Appointments Clause. The court concluded that the clause only covers vacancies that actually arise during the recess, not to vacancies that "happen to exist" when the recess begins. This interpretation further restrains the president's recess appointment powers, as recess appointments only can be made during a period that may be rather short or nonexistent during some two-year congressional sessions. The court again explained that an alternative interpretation would allow the president to hold his nominations until a recess and then circumvent the formal confirmation process. The court held that President Obama's January 2012 Board appointments were invalid on this basis as well, given that none of the vacancies in question arose during an intersession recess.
In a statement issued shortly after the D.C. Circuit's ruling, NLRB Chairman Pearce indicated that the Board would continue to function and issue decisions. Chairman Pearce also expressed the current Board's disagreement with the decision and pointed out that the decision only applies to one specific case. The D.C. Circuit's decision nonetheless is far reaching and critically important. This is particularly true for those employers recently or currently involved in Board proceedings.
The Noel Canning decision provides a roadmap for challenging the validity of recent Board decisions in the D.C. Circuit. Unless the substantive law of the case is more favorable elsewhere, the D.C. Circuit will become the presumptive forum of choice for challenging Board decisions. This could include Board decisions during the recent term of Member Becker, who also was a recess appointee. In addition, the Noel Canning decision may provide another basis for challenging the NLRB election rules that were issued while Member Becker was on the Board. Those rules currently are being challenged on separate quorum-related grounds.
We expect the issue of the president's recess appointment power to make its way to the U.S. Supreme Court, either in the Noel Canning case or related litigation. This is particularly true given that the D.C. Circuit's decision has implications beyond the NLRB. President Obama also invoked his recess appointment power to appoint Richard Cordray to head the Consumer Financial Protection Bureau (CFPB) on January 4, 2012. As the CFPB's first director, Cordray was empowered by the Dodd-Frank Wall Street Reform and Consumer Protection Act to prescribe rules and issue orders and guidance necessary to carry out the purposes of the federal consumer financial laws. The agency has issued approximately 28 regulations since his appointment. Two of the regulations, both with January 2014 effective dates, are expected to dramatically affect the mortgage lending and mortgage servicing businesses. With the scope of the president's appointment power now unclear, however, CFPB regulations issued under Director Cordray almost certainly will be called into question.Copyright © 2013 by Morgan, Lewis & Bockius LLP. All Rights Reserved.