Several of our recent posts have addressed the sharp criticism directed towards President Obama in response to his recent recess appointments to the NLRB. A new case filed in the Eastern District of New York may result in one of the first court rulings involving a challenge to the President’s authority to have made the appointments. In Paulsen v. Renaissance Equity Holdings, LLC, No. 1:12-cv-00350-BMC, a case in which the NLRB is seeking a federal court injunction to declare an end to an employer lockout, the Defendant is contesting the action on the grounds that because three of the Board’s five members have not been validly appointed, the Board has no authority to act.
Paulsen v. Renaissance Equity Holdings, LLC
In Paulsen, the Board filed a petition for a Section 10(j) injunction seeking to end a lockout imposed by Renaissance Equity Holdings (which does business as Flatbush Gardens) after failing to reach a collective bargaining agreement with the union representing its employees. Renaissance responded to the Board’s petition by filing a Motion to Dismiss for lack of subject matter jurisdiction and failure to state a claim. Its primary argument is that the Board lacked the statutorily required quorum of three members necessary to authorize the filing of the petition in the first place. To support its position, Renaissance cites to the Supreme Court’s recent decision in New Process Steel, L.P. v. NLRB, 130 S.Ct. 2635 (2010), in which the Court held that the Board is not empowered to act without a three member quorum. Drawing on this principle, Renaissance contends that the Board lacked the quorum required to act here because President Obama’s “recess appointment” of three of the Board’s current members did not occur while the Senate was actually in recess and therefore the appointments were invalid. Typically, members of the Board are appointed by the President “with the advice and the consent of the Senate.” 29 U.S.C. § 153(a). However, the President may appoint members without Senate approval if the Senate is in recess.
On January 4, 2012, acting without Senate confirmation, President Obama announced that he would be appointing three members to the Board. These members were sworn into office on January 9, 2012. The legality of these appointments turns on whether the Senate was in recess at this time. Early on, the Department of Justice issued a memorandum supporting the appointments stating that a president can make recess appointments when lawmakers hold pro forma sessions without conducting business.
In the Paulsen case, Renaissance argues that the Senate agreed to continue its 111th Session from December 20, 2011 through January 3, 2012 and begin its 112th Session on January 3, 2012 and therefore was in session at the time of the appointments. Additionally, as evidence that the Senate was in session, Flatbush Gardens notes that the Constitution prohibits the Senate from adjourning for more than three days without the consent of the House of Representatives and the House of Representatives never consented to the Senate’s adjournment. Finally, Flatbush Gardens argues that the Senate’s sessions were not simply formalism because it conducted business during these sessions, passing the Temporary Payroll Tax Cut Continuation Act of 2011 by unanimous consent.
How to Respond to Action by the Board
If the President’s appointments ultimately are ruled to be invalid, the Board may indeed lack a quorum. In that instance, Board decisions and actions taken in the interim (such as pursuing an injunction to end an employer lockout) may be rendered invalid. Thus, until the Board’s authority is clarified, employers are stuck between a rock and a hard place. So what should an employer do when faced with Board action in the interim? It is probably not advisable as a general matter to refuse to comply with Board decisions based solely on the premise that the President’s appointments may turn out to be invalid; such action would risk additional violations of the NLRA. That said, compliance with some Board orders could have irreversible consequences notwithstanding any later decision that the order was void as a result of the invalid appointments. While each situation will likely require its own strategic response, employers facing Board action may at least consider raising a challenge such as the one asserted in the Paulsen case. We will continue to closely monitor all legal challenges to the President’s new Board appointments and to assist those of our clients facing imminent Board action to develop appropriate responses based on the unique circumstances of each situation.