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District court strikes down NLRB notice-posting rule as “useful” but not “necessary” and contrary to Board’s “reactive role”

A federal district court in South Carolina has invalidated the NLRB’s rule requiring employers to post notice in the workplace informing employees of their NLRA rights (Chamber of Commerce of the United States v NLRB, April 13, 2012, Norton, D). “For over seventy-five years, the NLRB has been nearly unique among federal labor agencies in not requiring employers to post a general notice of employee rights in the workplace,” the court noted. However, when the Board changed course last year and “decided to flex its newly discovered rulemaking muscles,” the agency exceeded its authority. Thus, the court granted summary judgment to the U.S. Chamber of Commerce in its legal challenge to the rule, scheduled to take effect April 30.

The final NLRB rule was first published in August 2011. The notice-posting provision, set forth in Subpart A, requires all employers subject to the NLRA to “post notices to employees, in conspicuous places, informing them of their NLRA rights, together with Board contact information and information concerning basic enforcement procedures.”

Last month, a federal district court in the District of Columbia upheld the notice-posting requirement, finding no evidence that Congress intended to preclude the board from promulgating such a rule. While leaving Subpart A intact, however, that court struck its enforcement provisions that made failure to post the notice an unfair labor practice under the Act, and tolling the statute of limitations in unfair labor practice actions against employers that did not post the required notice. The plaintiffs in that case filed an appeal that remains pending in the DC Circuit (along with a request to stay enforcement, which was denied in the court below). The most recent district court ruling leaves the fate of the controversial board rule even murkier.

A reactive role. The NLRA does not require employers to post general notices of employee rights under the Act, the court noted at the outset — in contrast to the numerous other federal labor statutes in which Congress expressly required employers to post notice of employees’ statutory rights. Further, undertaking a Chevron analysis, the court found Congress did not delegate authority to the board to regulate employers in this manner. It did not empower the NLRB to “proactively dictate” employer conduct prior to the filing of a petition or charge — having no authority to initiate proceedings — but merely intended the agency to serve a reactive role. And the board has traditionally functioned as such, merely issuing representation certifications and unfair labor practice orders.

“The Board may not promulgate rules that enlarge its authority beyond the scope intended by Congress,” the court wrote. “By promulgating a rule that proactively imposes an obligation on employers prior to the filing of a ULP charge or representation petition, in the absence of express statutory authority, the Board has contravened the statutory scheme established by Congress.”

In enacting the rule, the Board asserted it was merely taking “a modest step” that was “necessary to carry out the provisions of the Act” and to fill a statutory gap left by Congress. But the court disagreed on both counts.

Useful, but not “necessary.” While the statutory grant of authority under Sec. 6 gave the Board wide discretion to enact rules and regulations, it also tailored that authority to rules and regulations that “are necessary to carry out other provisions of the Act.” Noting that interpretation of Sec. 6 is “terra incognita” (the Board having rarely exercised its rulemaking authority), the court held that the notice-posting rule did not meet this standard.

The rule was not necessary to carry out other provisions of the Act but was “simply useful” to that end. In this regard, the disputed rule was distinguishable from the rulemaking upheld by the Supreme Court in American Hospital Assoc v NLRB. The challenged rule in that case, defining proper bargaining units in acute care hospitals, was necessary to carry out the NLRB’s congressionally delegated duties under Sec. 9(b) to make bargaining unit determinations.

“Neither Section 6 nor any other section of the NLRA even mentions the issue of notice posting,” the court pointed out, showing that the rule was not “necessary” to carry out any provision of the Act. The statute “places no affirmative obligation on employers to post notices of employee rights or inform employees of those rights,” so the rule cannot be necessary to carry out a nonexistent provision.

No statutory gap. Nor did Congress leave a statutory gap on this issue that the NLRB was left to fill. In fact, legislative history, coupled with Congress’ willingness to legislatively impose a notice requirement in other employment statutes, suggested that Congress affirmatively chose to exclude such a requirement under the NLRA. “Congress clearly knows how to include a notice-posting requirement in a federal labor statute when it so desires,” the court observed, having inserted at least eight additional notice requirements in federal labor laws since 1934. As to the NLRA, it remained silent. Congress made extensive revisions to the NLRA in 1947, 1959, and 1974, yet never found the need to include a notice-posting provision.

Not only did Congress not impose a notice-posting requirement on employers under the Act, it did not commit this area of regulation to the board. Agency regulation is warranted only when Congress has left a gap for the agency to fill pursuant to an express or implied delegation of authority to the agency. Congress left no such gap here. “There is not a single trace of statutory text that indicates Congress intended for the Board to proactively regulate employers in this manner,” wrote the court.

Conflicting rulings. The court’s decision leaves employers and the NLRB to grapple with two irreconcilable judicial edicts — and to argue over which of the courts had the better argument. Chris Bourgeacq, in-house labor and HR counsel for AT&T Services and member of the Employment Law Daily advisory board, gave the edge to the South Carolina court.

“Judge Norton engaged in a much deeper Chevron analysis than (District of Columbia) Judge Berman on the threshold question of whether Congress in fact delegated to the Board any authority to require a posting of union rights,” he observed. “Judge Norton’s analysis examined not only the statutory and historical bases in which the Board has required posting — i.e., pursuant to its express duties of conducting elections and adjudicating unfair labor practices — but also found significant the fact that the NLRA conspicuously omitted any affirmative duty to post employee rights unlike scores of other federal labor laws.”

“Also interesting was Judge Norton’s rather terse rhetorical question of why, in 75 years of its existence, the Board suddenly discovered the urgency of having to post this notice,” Bourgeacq added.

“Two courts, looking at essentially the same arguments, yet reaching rather different outcomes.” That’s how Brooke Duncan III, labor and employment partner in the New Orleans firm Adams and Reese, characterized the rulings. (Duncan also is an Employment Law Daily advisory board member). “The South Carolina federal court, in gutting the poster rule completely, sent a strong signal to the Board that it will not tolerate an end run around Congress. If Congress wants to legislate a poster requirement — as it has with numerous other statutes and agencies — it can do so, but it hasn’t.”

In contrast, “the DC court basically upheld the Board in all important respects,” Duncan noted. “Even in denying the portion of the Board’s position that failure to post would be an unfair labor practice, the court did say that all the Board would have to do is make a specific finding that failure to post interfered with an employee’s exercise of rights. This court said that the Board is at the ‘heart’ of labor-management relations, that no tortured reading of the law or mental gymnastics (the court’s phrases) were necessary to find that dissemination of employee rights is within the Board’s bailiwick.”

“The South Carolina court got it right: to allow today’s Labor Board latitude to legislate under the guise of filling ‘statutory gaps’ would give the Board unbridled discretion to advance its own agenda,” Duncan argued. “Silence on Congress’ part is not delegation of authority.”

What now? Of course, the “puzzling question of the day,” Bourgeacq noted, is where Friday’s ruling leaves the status of the NLRB rule. He expects the Chamber of Commerce will file a motion to stay enforcement of the rule anywhere, given that the Board has suggested it is not yet bound by the court’s ruling anywhere outside of South Carolina. “Given the uncertainty a Balkanized enforcement approach would produce, I would be surprised if the rule were not totally enjoined across the country or the Board extended the posting requirement yet again.”

Bourgeacq declined to issue a prediction on how the DC Circuit will rule on the district court ruling upholding the rule in part, noting much will depend on the circuit panel that the plaintiffs draw. “However, I think if we put aside our pro-management vs. pro-labor biases and just look at the merits of the Chevron analysis as the court did in the South Carolina case, NAM [the plaintiff National Association of Manufacturers] wins on its appeal of the DC case.”

Meanwhile, the NLRB will “definitely” appeal last week’s ruling, according to Bourgeacq, noting that the board has already suggested it will appeal that part of the decision it lost in the D.C. case. And the stakes here are much higher: “the South Carolina case guts the posting requirement completely. The Board has to appeal or risk piecemeal enforcement across the country as other challenges surface.”

Bourgeacq said he continues to review this latest court ruling, adding that AT&T has not yet decided where or how to proceed. He is also anticipating more definitive guidance from the NLRB some time during the next few weeks before the April 30 posting deadline.

For his part, Duncan agreed that both decisions will “no doubt” be appealed. “Unfortunately,” he added, “because the Board goes its own way in any jurisdiction that hasn’t told it to stop, I’m telling my clients outside of South Carolina to prepare to post the notice on April 30.”