Western District of Texas Says NLRB Structure Unconstitutional, Issues Injunction Preventing SpaceX Unfair Labor Practice Hearing from Proceeding

In an action brought by Space Exploration Technologies Corporation, commonly known as SpaceX, a U.S. District Court Judge in the Western District of Texas, Waco Division, has declared that the structure of the National Labor Relations Board (“NLRB” or the “Board”) is unconstitutional.

The determination is the basis for an Order granting SpaceX’s motion for a preliminary injunction and enjoining the NLRB General Counsel, as well as the presidentially appointed, Senate-confirmed Board Members and NLRB staff, from proceeding with a scheduled unfair labor practice hearing against SpaceX, which is accused of violating employees’ rights under the National Labor Relations Act.

About the Decision

In its lawsuit, SpaceX argues that the NLRB’s structure is unconstitutional because NLRB Board Members and Administrative Law Judges (ALJ) are not removable by the President of the United States, in violation of Article II of the U.S. Constitution. U.S. District Court Judge Alan Albright issued the injunction, finding that SpaceX was likely to succeed on the merits of its argument that the NLRB’s structure violates the Constitution, relying, in part, on the holding by the U.S. Court of Appeals for the Fifth Circuit in Jarkesy et al. v. SEC. In that matter, the Fifth Circuit found that Security and Exchange Commission (SEC) ALJs are unconstitutional because of statutory removal restrictions. (The Supreme Court of the United States’ recent decision reviewing Jarkesy did not opine on the status of the SEC ALJs and left that specific issue for another day.) In the SpaceX matter, Judge Albright held that the NLRB had failed to argue that SEC ALJs and NLRB ALJs are different and reasoned that, because the law of the Fifth Circuit holds SEC ALJs unconstitutional, there is a likelihood that SpaceX will succeed in establishing that NLRB ALJs are likewise unconstitutional.

In addition, Judge Albright found that Board Members are unconstitutional for the same reason—that their insulation from removal by the President violates Article II of the U.S. Constitution. Specifically, Judge Albright held that, because the Board Members “wield substantial executive power,” the inability of the President to remove Board Members is an impermissible limitation by Congress on the President’s executive power under Article II “to take care that laws be faithfully executed.”

No Broad Impact – Yet

The scope of Judge Albright’s Order is limited to precluding the NLRB from proceeding with a pending administrative case against SpaceX and is not a nationwide injunction against the Board’s ability to operate, so the lights will stay on at the NLRB for now. However, appeals will surely follow, and an avalanche of petitions for injunctive relief filed in the Waco Division of the Western District of Texas is likely to result, with employers doing business there seeking the benefits, however temporary, of Judge Albright’s decision.