SpaceX Wins Fifth Circuit Victory; Big Implications for NLRB

In an August 19, 2025 decision in SpaceX v. NLRB, the Fifth Circuit ruled that the structure of the National Labor Relations Board (NLRB) is likely unconstitutional and upheld three preliminary injunctions preventing the NLRB from pursuing unfair labor practice charges against the employers who raised the issue. According to the employers, the removal protections for NLRB Members and its Administrative Law Judges (ALJs) are so onerous that they prevent the President from exercising Article II powers to ensure that the “laws be faithfully executed.” See U.S. Const. Art. II, § 3. The Fifth Circuit agreed, putting its stake in the ground as the first Circuit Court of Appeals to issue such a ruling, generating a closely watched issue that is likely to reach the Supreme Court.

Background

Employees have certain rights under the National Labor Relations Act to engage in protected concerted activity and union activity. The NLRB was created in 1935 to investigate, adjudicate and remedy “unfair labor practices” that infringe on those rights. The NLRB has a vast adjudicatory apparatus, which includes ALJs who conduct hearings regarding unfair labor practice charges. Upon completion of a hearing, the ALJ issues a recommended decision and order, which either party may appeal by filing “exceptions” to the five-member NLRB for review. The NLRB then can adopt the ALJ’s decision or issue one of its own. Since earlier this year, the NLRB has been unable to review or issue decisions because it does not have sufficient members for a quorum as the result of recent removals by the President. A party may also seek an appeal of an NLRB decision with the appropriate federal court and ultimately the Supreme Court.

Currently, ALJs may only be removed if the Merit Systems Protection Board (“MSPB”) determines that there is “good cause” and the ALJ has had an opportunity for a hearing. See 5 U.S.C. § 7521(a). The MSPB is its own independent agency, and MSPB Members themselves can only be removed for cause, meaning that NLRB ALJs are insulated through two layers of for-cause removal protections.

The statutory standard for removing an NLRB Member also places restrictions on the President’s discretion. An NLRB Member may only be removed by the President “for neglect of duty or malfeasance in office, but for no other cause.” See 29 U.S.C. § 153(a).

The Fifth Circuit’s Decision

The Fifth Circuit held that the removal structure of NLRB Members and ALJs was likely unconstitutional, citing as support another Fifth Circuit case, Jarkesy v. Sec. & Exch. Comm’n, which similarly held that the two-layer removal protections for ALJs employed by the Securities and Exchange Commission were unconstitutional.¹ In the SpaceX case, the Employers argued before the Fifth Circuit that the NLRB’s structure violates the separation of powers doctrine because NLRB Members and ALJs are impermissibly shielded from removal. The Fifth Circuit found that Plaintiffs were likely to succeed on the merits of this issue and affirmed the district court’s grant of a preliminary injunction. Regarding the NLRB Members themselves, the Fifth Circuit applied similar reasoning: “That [NLRB Members] may be removed only ‘for neglect of duty or malfeasance in office, but for no other cause,’” which the Court stated, “renders the removal provision constitutionally suspect under modern separation-of-powers doctrine.”

Finally, the Fifth Circuit distinguished Humphrey’s Executor v. United States, a 1935 Supreme Court decision that upheld restrictions on the President’s ability to remove members of the Federal Trade Commission (FTC), and which has long been relied upon as binding authority. While Humphrey’s Executor has not been explicitly overruled by the Supreme Court, its reasoning has been highly criticized by conservative members of the Court in recent years. The Fifth Circuit, while acknowledging that Humphrey’s Executor has not been overruled, emphasized that its holding was fact-specific and not applicable to the NLRB. In particular, the Court noted that the NLRB’s work is already “widely acknowledged as politically charged,” and unlike the FTC, the NLRB does not have any party-balancing requirements. According to the Court, the reasoning in Humphrey’s Executor was largely premised on the independence of the FTC which does not apply in the same way to the NLRB in light of these issues.   

The Impact

This decision could have potentially massive implications for the NLRB and other similar federal administrative agencies. If this case reaches the Supreme Court – which appears likely – the Supreme Court may agree with the Fifth Circuit and thereby invalidate an administrative process that has been in place for over 90 years and has long governed the adjudication of unfair labor practices and the regulation of labor relations in the private sector. In the meantime, employers in the Fifth Circuit’s jurisdiction – which covers Louisiana, Mississippi, and Texas – are likely to be able to block NLRB proceedings to which they are subject by filing similar constitutional challenges. And if the Supreme Court ultimately decides that the structure of the NLRB is unconstitutional, it will likely direct that the allegedly unconstitutional portion of the National Labor Relations Act (the “Act”) be severed while the rest of the Act remains intact.

However, the outcome of this issue is anything but decided. As acknowledged in Judge Wiener’s concurrence, there is disagreement among the circuits, at least as it relates to the ability of allegedly affected parties to seek a preliminary injunction in light of the alleged unconstitutionality of the NLRB.

It is likely that these issues will continue to be fleshed out in the courts for the foreseeable future. In the meantime, any employer that is the subject of NLRB proceedings should consider taking all steps necessary to preserve potential constitutional defenses to ongoing NLRB enforcement activity. 

Our team will be keeping a close eye on further developments. Please reach out to your Franczek attorney if you have any questions about how these changes may impact your organization.

¹Jarkesy v. Sec. & Exch. Comm’n, 34 F.4th 446, 463 (5th Cir. 2022), aff’d and remanded, 603 U.S. 109 (2024), and adhered to, No. 20-61007, 2024 WL 5496969 (5th Cir. Nov. 12, 2024).