Since January 2008, the National Labor Relations Board (NLRB) has operated with only two members. It’s supposed to have five. But rather than come to a complete standstill while awaiting new appointees, the two remaining members have been hearing and deciding cases, despite some uncertainty about whether they even have legal authority to do so.

That uncertainty has given parties unhappy with the outcome of a board hearing an interesting issue for appeal. Challenges to the authority of the two-member board have come before the 1st, 2nd, 7th, 8th and D.C. Circuit Courts. More than 300 NLRB decisions issued in the past year could be invalidated, depending on the outcome of those challenges.

The 1st Circuit’s March 13 decision in Northeastern Land Services v. NLRB was the first federal appellate ruling on the issue. It took some mind-bending logic to get there, but the 1st Circuit ultimately decided that the two-member board is authorized to issue decisions. Labor lawyers agree that practical expediency carried the day.

"The court bent over backward to keep the agency going," says Robert Battista, a Littler Mendelson shareholder who served as chairman of the NLRB for five years under President George W. Bush.

Structural Issue

The National Labor Relations Act provides that at the end of a board member’s five-year term, he immediately steps down, even if a replacement has not been named. This makes vacancies on the board common. Battista estimates that in his time on the NLRB, it operated with fewer than the full five members about 30 percent of the time.

However, the current situation—the board going more than a year with three vacancies—is somewhat uncommon, and has left many labor lawyers and companies that employ unionized workforces in limbo. First, there’s a tradition that the board does not decide significant, politicized issues when it is operating with fewer than its full five members. As a more practical matter, it’s unlikely that the two current members—pro-union Democrat Wilma Liebman and Republican Peter Schaumber—would be able to agree on some of the more charged issues.

But they were able to act on scores of more routine decisions, leading to the current court challenges. In making its decision, the 1st Circuit relied on the 1947 Taft-Hartley Act, which authorizes the board to delegate full decision-making powers to three-member panels, and provides that two members constitute a quorum of a three-member panel. The idea was to allow the board to operate similarly to federal appellate courts, which hear cases in three-member panels. The two-member quorum was intended to cover the rare situation where one member of the panel had to recuse him- or herself from consideration of a certain case. The 1st Circuit used that provision as one justification for allowing the two-member board to make decisions.

"It was never intended that two members would constitute a quorum," says Richard Greenberg, a partner at Jackson Lewis. "The practical problem is that if the two members can’t agree on an issue, they can’t make a decision. But the government needs to keep moving."

President Obama finally selected two new NLRB members in late April (see "The New Nominees"), but it could take some time before they are confirmed by the Senate and sworn in, so the important issues will continued to be deferred. But once they are seated, employers with union workforces should brace themselves for change.

Because the board is not bound by stare decisis and the president appoints a majority of the board’s members from his own political party, a change in the White House tends to yield major changes in the board’s rulings.

For example, the board will likely have an opportunity to reconsider its 2007 decision in Dana Corp., which held that employers who voluntarily recognize a union must provide employees with a 45-day window to petition the board to decertify the union. The decision was widely seen as favorable to employers and a possible impediment to union representation.

Other controversial issues the board may reconsider include whether unions have a right to display banners near companies that employ contractors with which the union has a dispute; whether graduate student teaching assistants can unionize; and the definition of a "supervisor" under the National Labor Relations Act.

"Employers need to be thinking ahead about how these changes could affect them and training supervisors now," says Charles Caulkins, a partner at Fisher & Phillips.

As for the hundreds of decisions Liebman and Schaumber have issued in the past year, they could come into question if the D.C. Circuit reaches a different conclusion about a two-member quorum than the 1st Circuit. At press time, labor lawyers were awaiting a decision in the closely watched case Laurel Baye Healthcare of Lake Lanier Inc. v. NLRB. Because the D.C. Circuit is specifically authorized to hear appeals from decisions of administrative agencies of the federal government, its pronouncement on this issue will be decisive.

"The D.C. Circuit Court seemed hostile to the position advocated by the board [that two members constitute a forum]," Battista points out. "The decision is taking longer than expected, perhaps because the panel is dealing with the decision of the 1st Circuit on this issue."