As we previously discussed earlier this month, District Court Judge Ketanji Brown Jackson issued an Order in American Federation of Labor and Congress of Industrial Organizations v. National Labor Relations Board, Civil Case No. 2020-0675, invalidating five of the National Labor Relations Board’s (NLRB or Board) soon-to-be implemented new elections rules (2019 rules).  Issued in haste on May 30 to head off the Board’s May 31 implementation of the new rules, Judge Jackson’s Order offered little explanation for her decision except to say that she found each of the challenged new election procedure rules unlawful and set them aside because they were “not procedural rules” exempted from the Administrative Procedure Act’s (APA) notice-and-comment rulemaking requirements.

Given that the Board’s new rules appeared (to the lay reader) to be designed to alter the procedures that the Agency would follow in the processing of future election cases, it was difficult to grasp the Order’s characterization of them as anything other than “procedural”.  However, on June 7, Judge Jackson issued a 52-page Memorandum Opinion explaining the underlying basis for her earlier “not procedural” finding.  Her decision in this important case will likely be appealed to the D.C. Circuit.  But in the meantime, if what she says in it is good law, her June 7 Memorandum speaks volumes as to the Board’s rulemaking authority and any rule change the NLRB may care to make in the future.  Here’s why.

The National Labor Relation Act (NLRA or Act) Section 6 grants to the NLRB “authority from time to time to make, amend and rescind, in the manner prescribed by the Administrative Procedure Act (APA), such rules and regulations as may be necessary to carry out the provisions of the Act.”  Until recently, the Board has rarely used this rulemaking authority, choosing, instead, to establish and announce its substantive or doctrinal shifts in the law on a case by case decisional basis.  Accordingly, as long as its decisions comported with the plain wording and limitations of the statute, supported by substantial evidence and subject to judicial review by the appellate courts, what substantive policy the Board elected to put in place by one decision, it could later rethink and reverse by simply issuing a new decision altering the Act’s substantive law – without any prior public notice or comment.

The APA, on the other hand, separates legislative or substantive agency rules, which have the force and effect of law (and by which both the agency and the public are legally bound until changed), from procedural rules that do not.  Indeed, it is because legislative rules have the effect of law that the APA requires an administrative agency to adhere to those rules until changed and bars the agency from deviating from or making changes to them without first publishing a Notice of Proposed Rulemaking, soliciting public comment on substantive changes, and considering that public input before implementation of a new or changed substantive rule.  However, procedural rules are considered neither substantive nor legislative; they do not have the force and effect of law.  Accordingly, the APA authorizes an agency wishing to make changes to its procedural rules to do so without going through the notice-and-comment process.  It is on the difference between what qualifies as a substantive/legislative rule and what is a procedural rule within the meaning of the APA that Judge Jackson’s decision turned.

The purpose behind the Board’s new election rules (2019 rules) was to rescind and correct certain aspects of the “quickie” election procedures that the Board adopted in 2014 (2014 rules) which the current Board considered to be seriously flawed.  Before promulgating the 2019 rules, the Board did request public input as to the efficacy of the 2014 rules and received nearly 7,000 responses from the public.  However, believing that the 2014 rules (which resulted following a formal notice and comment process) and the 2019 rule changes it wished to make were procedural, the Board elected to dispense with the formality of a Notice of Proposed Rulemaking and never sought formal public comment on the 2019 changes.  Included in new election rules changes, the Board wished to make were the following:

1. A rule allowing employers to raise and litigate questions of individual eligibility and unit exclusion, i.e., supervisory issues, prior to an election;

2. A rule prohibiting the holding of an election for twenty days following the issuance of a direction of election so the Board could consider and rule on a request for review of that direction;

3. A rule prohibiting the issuance of a certification of election results until after the Board ruled on a request for review or time for the filing of a request for Board review expired;

4. A rule extending the time for an employer to provide a voter eligibility list from two business days following the direction of an election to five business days; and

5. A rule providing that a party select as its election observers either a current member of the voting unit or a current nonsupervisory employee.

Though certainly looking and sounding like election procedures, Judge Jackson found that these rule changes not to be agency “procedures” within the meaning of the APA because the new rules were not mere housekeeping measures, i.e., those aimed at changing the Board’s internal processes and operations, but, instead, directed at reversing the Board’s 2014 rules.  Based on that finding, combined with the fact that the 2019 rule changes could materially affect labor’s substantive rights under the Act, she concluded that “each of the provisions . . . that the AFL-CIO challenge[d] as a notice-and-comment violation reach[ed] far outside the Board’s internal operations, and the NLRB has failed to show that each provision . . . fit[ted] within the narrow scope of the procedural rule exception.”  Indeed, Judge Jackson even conceded that “to be sure, these rules can be characterized as procedural at a certain level of abstraction, because they generally [relate] to the procedures that must be followed to conduct representation elections.  But [they] . . . do not bear meaningfully on the agency’s internal processes and yet . . . have a significant impact on . . . employees’ ability to mount a successful campaign for unionization”.  Accordingly, she concluded that each of the five new rules “transcend[ed] the narrow scope of the APA’s procedural rule exception” exempted from the APA’s notice-and-comment requirements.

But Judge Jackson did not stop there.  Taking a “belt and suspenders” approach to her decision-making, she continued on to find and explain why each of the five new rules were sufficiently “substantive” rules within the meaning of the APA as to require a notice-and-comment process.  Noting that the 2019 rules not only addressed the Agency’s internal housekeeping, merely set timetables for asserting substantive rights, or simply altered the manner in which a party would present themselves or their positions before the Board, Judge Jackson concluded the new rules granted certain new rights, imposed new obligations and could have a significant effect on private interests, opining that the new rules “qualify as substantive for the purpose of the APA’s notice-and-comment prescriptions.”

IMPORTANT TAKEAWAYS:

The Board’s 2019 rules contained many other changes that Judge Jackson did not invalidate.  The Board implemented those other changes on June 1.  The Board has also announced that it will appeal her decision to the D.C. Circuit.  This is an extremely close legal issue with compelling arguments on both sides.  So, it is difficult to predict the case’s ultimate outcome.

The standards that Judge Jackson applied to invalidate the Board’s five 2019 rules are not bright lines; they are ones of degree that are difficult to apply in the real world with any real certainty, making almost all seemingly procedural rules implemented without a corresponding notice-and-comment process vulnerable to challenge and judicial second guessing.

If Judge Jackson’s decision is not overturned, then the five 2014 rules left intact by the invalidation of the 2019 rules and that remainder of the Board’s 2014 quickie election procedure rules left unaffected by the new rules implemented by the Board on June 1 may not be subject to change unless and until they are the subject to a formal notice-and-comment process.