According to Court of Appeals for D.C. Circuit Earlier today, the Court of Appeals for the District of Columbia Circuit ruled that the National Labor Relations Board, which has functioned with only two of its five members since January 1, 2008, is “not properly constituted” and has no decision-making authority. Laurel Baye Healthcare of Lake Lanier, Inc. v. N.L.R.B., No. 08-1162 (D.C. Cir., 5/1/09). At the same time, in another unfair labor practice case raising the identical issue, the Seventh Circuit agreed to enforce a Board Decision and Order issued by the two-member Board. New Process Steel L.P. v. N.L.R.B., No. 08-3517, et al. (7th Cir., 5/1/09).

As a result of term expirations and the election-year failure to make appointments to fill the three vacancies on the Board, an NLRB reduced to two members — Chairman Wilma Liebman and Member Peter Schaumber — has issued hundreds of decisions over the course of the last 16 months in both unfair labor practice and representation cases. Today’s ruling by the District of Columbia Circuit calls the validity of those decisions into question.

Originally a three-member body, the National Labor Relations Act was amended in 1947 to increase the NLRB to five members. Section 3(b) of the Act provides that the Board may delegate its authority to any three or more members. However, it also provides that “three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any [three-member delegee] group.”

On December 20, 2007, following the expiration of Chairman Robert Battista’s term, the four remaining members voted unanimously to delegate all the Board’s power to a three-member group consisting of Members Liebman, Schaumber and Peter Kirsanow. The action was taken in anticipation of the fact that with recess appointments of Members Kirsanow and Dennis Walsh expiring on December 31, 2007, the Board would be down to fewer than three members. It was intended to permit the two remaining members to constitute a quorum of the three-member group.

In Laurel Baye Healthcare, the employer petitioned for review of the Board’s Decision and Order finding that it had engaged in an unlawful refusal to bargain, urging that the two-member Board did not have the authority to find that it had engaged in any unfair labor practices. More specifically, it argued that even if the Board could make the initial delegation to a three- member group, “that delegation could not survive the loss of a quorum on the Board itself.” The Court of Appeals for the D.C. Circuit agreed, holding that:

The Board quorum requirement . . . must still be satisfied, regardless of whether the Board’s authority is delegated to a group of its members. Reading the two quorum provisions harmoniously, the result is clear: a three-member Board may delegate its powers to a three-member group, and this delegee group may act with two members so long as the Board quorum requirement is, “at all times,” satisfied. . . . But the Board cannot by delegating its authority circumvent the statutory Board quorum requirement, because this requirement must always be satisfied.

Just as the D.C. Circuit was ruling-against the Board in Laurel Baye Healthcare, the Court of Appeals for the Seventh Circuit ruled in the Agency’s favor, enforcing an NLRB Decision and Order issued in New Process Steel v. N.L.R.B. The Seventh Circuit, following the First Circuit’s lead earlier this year in Northeastern Land Services, Ltd. v. N.L.R.B., 560 F.3d 36 (2009), ruled that the two-member Board did have the authority to act, and that the plain meaning of Section 3(b) “supports the Board’s delegation procedure.”

Given the split in the Circuits, and the fact that the vast majority of NLRB rulings are reviewed in the D.C. Circuit, the prospect of Supreme Court review appears significant.

The Laurel Baye Healthcare decision is also likely to accelerate the approval process of any nominees to the Board. As we recently reported, just last week the President announced his intention to nominate Craig Becker and Mark Pearce — both Democrats and attorneys actively practicing on behalf of some of the country’s strongest labor organizations — to fill two of the three current vacancies on the Board.

We will be following this issue very closely and will report on developments as they unfold.

Proskauer’s nearly 175 Labor and Employment lawyers are capable of addressing the most complex and challenging labor and employment law issues faced by employers.

If you have any questions or concerns regarding this new law or related issues, please contact one of the attorneys listed below:

                Peter D. Conrad
                212.969.3020 –
                Michael J. Lebowich
                212.969.3217 –

                Allan H. Weitzman
                561.995.4760 –

                Mark W. Batten
                617.526.9850 –

                 Mark Theodore
                 310.284.5640 –

                 Marvin M. Goldstein
                 973.274.3210 –

                 Howard Shapiro
                 504.310.4085 –

                 Lawrence Z. Lorber
                 202.416.6891 –