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Supreme Court Sets the Stage for Future Challenges with Pair of Labor-Related Rulings

Publications - Client Alert | July 1, 2014

With its term coming to a close, the Supreme Court has issued a pair of important opinions that set the stage for change in the labor and employment arena. The two cases – National Labor Relations Board v. Noel Canning, No. 12-1281, and Harris v. Quinn, No. 11-681 – have the potential to shake up labor relations in the years to come. Employers should remain vigilant as this precedent works through the NLRB and the courts and should be prepared to modify policies and procedures as necessary.

National Labor Relations Board v. Noel Canning 

On June 26, 2014, the Supreme Court issued its much-anticipated decision in the case of National Labor Relations Board v. Noel Canning, No. 12-1281. In a unanimous decision, the Court invalidated three of President Obama’s 2012 recess appointments to the NLRB, calling into question hundreds of NLRB decisions made between January 2012 and August 2013. The decision is significant for those employers that faced NLRB scrutiny during the disputed period and those employers that relied upon decisions made by the NLRB in formulating employment policies and procedures.

The case stems from a labor dispute. In 2012, the NLRB determined that Noel Canning unlawfully refused to reduce to writing and execute a collective-bargaining agreement that it had orally agreed to with a labor union. At the time of the NLRB’s decision, the Board was comprised of two members approved by the Senate and three members appointed by President Obama during a three-day Senate recess. Under the Supreme Court’s 2010 ruling in New Process Steel, L.P. v. National Labor Relations Board, 130 S. Ct. 2635 (2010), the NLRB must have three lawfully-appointed members to make a quorum and conduct business. Noel Canning challenged the authority of the Board to act, claiming that the President’s recess appointments were unlawful, and that without the disputed members, the NLRB lacked the necessary quorum to conduct business. The United States Court of Appeals for the District of Columbia Circuit agreed and invalidated the NLRB’s ruling. The NLRB appealed to the Supreme Court.

In a 9-0 victory for Noel Canning, the Supreme Court affirmed the Circuit Court’s decision, though the Justices split 5-4 on the rationale. Writing for the majority, Justice Stephen Breyer confirmed that the President has the authority to make both intra-session and inter-session recess appointments under the Constitution’s Recess Appointments Clause and that the President may fill any vacant position during a Senate recess, regardless of when that vacancy arises. As for the length of the Senate recess that will trigger the President’s appointment power, however, the Court stated, “When the appointments before us took place, the Senate was in the midst of a three-day recess. Three days is too short a time to bring a recess within the scope of the clause.” Because the three-day recess was not of sufficient length to trigger the President’s appointment power, the President lacked constitutional authority to fill the vacancies without Senate confirmation. As such, the President’s 2012 appointments were invalid, and the NLRB lacked the quorum necessary to conduct business with respect to Noel Canning.

For those employers that have faced NLRB scrutiny in recent years, Noel Canning offers the opportunity to revisit adverse decisions with hopes of convincing the NLRB to reverse course, though the probability of reversal is unknown and may be small. Importantly, the decision applies equally to actions taken by the General Counsel and Regional Directors, all of whom act with authority delegated by the Board. Employers that relied upon NLRB decisions in formulating new employment policies and practices in recent years should track ongoing challenges to the NLRB’s 2012 and 2013 decisions and remain prepared to modify policies as necessary. Finally, the Court’s decision in Noel Canning could invalidate recess appointments with respect to other federal agencies. Thus, employers should watch for potential challenges to other federal agency appointments based on the rationale offered in Noel Canning.

Harris v. Quinn 

On June 30, 2014, a divided Supreme Court held in Harris v. Quinn, No. 11-681, that quasi-public sector employees receiving public funding through Medicaid cannot be compelled to support unions they do not wish to join. Though the Court stopped short of declaring mandatory union dues unconstitutional for all public-sector employees – such as firefighters, teachers, and police officers – the ruling signals a willingness to revisit the constitutionality of such mandatory dues in the future. Additional challenges to mandatory union dues are sure to follow.

The case pitted Pamela Harris, a home-health worker in Illinois who takes care of her disabled son, against the Service Employees International Union. The union represents the interest of home health workers before state agencies in Illinois. Illinois is one of 26 states that require public-sector workers to pay partial dues to unions that negotiate their contracts and represent them in grievances, even if the employees do not wish to be members of the union. Harris challenged these so-called “fair-play fees” or “agency fees” as unconstitutional, claiming they violated her right to free speech.

In a 5-4 decision split down ideological lines, the Court declared that the First Amendment protects Harris and others who are not “full-fledged public employees” from being forced to pay union dues to a public-employee union whose speech they do not endorse. However, the Court stopped short of a sweeping declaration that all public-sector employees enjoy the same protections as quasi-public sector employees, leaving intact the Court's 1977 ruling in Abood v. Detroit Board of Education, 97 S. Ct. 1781 (1977), which held that unions could collect compulsory dues used for non-political activities under collective bargaining agreements. Keeping with its recent trend of narrow rulings, the Court recognized a new category of “partial-public employees” who cannot be compelled to pay dues. The home-health workers in Harris work directly for their customers, who control “all aspects of the employment relationship,” but they receive public funding through state-run programs such as Medicaid. Given that home-health workers operate in a setting where one employee works in a single house for only one or two individuals, the Court found that the most powerful justification for mandatory unionization – that it procures “labor peace” by reducing conflicts between workers – hardly applies.

While Harris only addresses a small group of “quasi-public” employees, the decision could signal the end of fair-play fees for public-sector employees in the future. The Court’s opinion indicates that compulsory union membership is a restraint on employees’ First Amendment rights to free speech and free association regardless of the employees’ public-private status. The majority opinion reinforces the Court’s deep skepticism of forcing public employees to contribute money to organizations whose activities they do not endorse. The opinion telegraphs the majority’s willingness to revisit the Court’s decision in Abood if presented with the opportunity. While in the short run the decision is fairly limited, employers should take note of the Court’s skepticism of compulsory union membership as a possible indication of the Justices’ thought process in addressing union activities in future decisions.

Additional Information

For more information about these decisions, please contact your Kutak Rock attorney or the authors of this alert, Scott Jackson or Ashley Welch Hudson.

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