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South Carolina Federal District Court Overturns NLRB Notice Posting Rule; Creates Split Among Federal District Courts and Questions for Employers

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April 14, 2012

By Chris Johlie

Yesterday, the U.S. District Court for the District of South Carolina issued a ruling on the U.S. Chamber of Commerce’s challenge to the National Labor Relations Board’s (NLRB) notice posting rule that is scheduled to take effect on April 30. In a detailed 31-page rebuke, District Judge David C. Norton broadly ruled that the NLRB simply did not have the statutory authority to require employers to post a notice of employee rights under the National Labor Relations Act (NLRA).

The Rule

In August 2011 the NLRB adopted a final administrative rule that requires covered employers to post a “notice to employees” regarding their rights under the NLRA. The notice describes the NLRA and informs employees of their rights under the NLRA, including but not limited to their right to organize a union, and to negotiate with their employer about their wages, hours and other terms and conditions of employment.  

The NLRB’s rule also would have established several penalties for non-compliance. Under the original rule, the NLRB could have found that an employer committed an unfair labor practice if it failed or refused to post the notice and tolled the NLRA’s six-month statute of limitations for filing unfair labor practice charges if employers fail to post the notice. As we reported in an alert last month, a district court judge in Washington D.C. considering a challenge by the National Association of Manufacturers invalidated those portions of the rule, but determined the NLRB had the statutory authority to require employers to post a notice of employee rights.

The Chamber of Commerce’s Lawsuit

The Chamber of Commerce’s parallel lawsuit in the South Carolina court alleged that the NLRB’s final “notice posting” rule violated the NLRA, the Administrative Procedure Act (APA), and other laws and Constitutional provisions. Specifically, the Chamber argued that the NLRA did not grant the NLRB the authority to coerce employers to post the required notice.  The Chamber also contended that the NLRB had arbitrarily and capriciously excluded from the notice a description of the fundamental rights of employees to be free of compulsory union membership and compulsory union dues in violation of the APA.

The District Court’s Opinion

Judge Norton agreed with the Chamber’s arguments, finding that the NLRB did not have “limitless power to write new law” under Section 6 of the NLRA. Instead, the court held that “[t]he plain language and structure of the Act compel a finding that the Board lacks authority under Section 6 to promulgate the rule.” While Section 6 allows the NLRB to promulgate rules that are “necessary to carry out” provisions of the NLRA, the court found that the Board had “confuse[d] a ‘necessary’ rule with one that is simply useful.” The court acknowledged that the NLRB had articulated a satisfactory explanation for its promulgation of the rule, and even that it had presented evidence that the rule may have aided or furthered the NLRA’s aspirational goals.  The court found, however, that none of this evidence demonstrated that the rule was “necessary” as the NLRA requires.

The court also rejected the Board’s argument that its notice posting rule filled a statutory “gap” left by Congress in the NLRA. Looking at the statutory structure of the Act, the court held that the imposition of an obligation on employers prior to the filing of an unfair labor practice charge or a representation petition impermissibly enlarged the NLRB’s authority beyond the statutory scheme established by Congress. Furthermore, Judge Norton noted that on “at least eight” other occasions, Congress had inserted notice requirements in other federal labor laws, while remaining silent throughout numerous significant revisions to the NLRA. He ruled broadly that “not a single trace of statutory text . . . indicates Congress intended for the Board to proactively regulate employers in this manner.”

What Happens Now?

The two district court decisions directly conflict with each other on the fundamental question of the NLRB’s authority to promulgate a notice posting requirement. The Washington, D.C. case is already on appeal, and we suspect the NLRB will appeal Judge Nelson’s decision. Thus, the question of the NLRB’s authority is far from resolved at this point.

As for the notice posting rule itself, the NLRB has not yet commented on the impact of Judge Nelson’s ruling or the conflict between the two district court rulings. The NLRB has pushed back the effective date of the rule twice already, and a third delay pending the outcome of further legal proceedings would not be a surprise. It may take a few days or weeks before the dust settles and an employer’s duty to post (or not) becomes clear. We will continue to monitor developments in these cases as they move to the appellate stage and will monitor the NLRB’s position on this issue and provide further guidance as appropriate.

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