In Starbucks case, US judges 'flummoxed' over NLRB's enforcement powers
By Daniel Wiessner
Sept 18 (Reuters) -A panel of U.S. appeals court judges on Wednesday seemed to struggle to pinpoint the outer limits of the National Labor Relations Board's powers to remedy illegal labor practices, grappling with the issue in a case involving Starbucks.
A three-judge 3rd U.S. Circuit Court of Appeals panel during oral arguments in Philadelphia expressed confusion, and at times frustration, with lawyers on both sides in Starbucks' appeal of an NLRB ruling that said the coffee chain illegally fired two pro-union baristas at stores in the city.
The case is one of dozens to accuse Starbucks of unlawful labor practices amid a nationwide campaign to unionize its stores, and part of a growing series of challenges claiming the board's in-house proceedings and enforcement powers are unconstitutional by companies including Amazon, SpaceX and Trader Joe's. Wednesday's case is the first involving broader challenges to the NLRB to be argued at an appeals court.
The judges focused almost exclusively on Starbucks' claim that the NLRB lacks the power to order employers to reimburse workers for any direct or foreseeable expenses stemming from being unlawfully fired.
The board had for decades ordered reinstatement, backpay and lost benefits in such cases, but in a 2022 decision said workers who are wrongfully fired should also be paid back for other financial harms that stem from their firing such as credit card debt and out-of-pocket medical expenses. Starbucks has been accused of firing hundreds of workers for organizing or supporting unions, which it has denied.
Circuit Judges Kent Jordan, Theodore McKee, and Thomas Ambro repeatedly pressed Sarah Harris, who argued for Starbucks, and NLRB lawyer Eric Weitz on whether a June U.S. Supreme Court ruling in Jarkesy v. U.S. Securities and Exchange Commission applies to the labor board and forecloses those novel awards.
The court in Jarkesy said the SEC's practice of imposing civil penalties in administrative cases rather than seeking them in court was unconstitutional.
The 3rd Circuit judges said they were not sure whether the expanded remedies sought by the board were "legal remedies" traditionally imposed by courts, like the ones at issue in Jarkesy, or "equitable remedies" designed to make workers whole but not punish employers like Starbucks.
Jordan said he was "flummoxed" by the distinction, and did not seem satisfied with the lawyers' attempts to address the issue.
“If you can’t tell us where the line is, then just say ‘I don’t know,’” Jordan, an appointee of Republican former President George W. Bush, said to Harris. “But if it’s something beyond backpay, then give us the line.”
Harris said NLRB remedies are only valid "if you're clawing something back from the defendant that the defendant should not have kept," such as backpay and benefits. Weitz argued that the distinction between legal and equitable remedies did not matter, because Congress granted the NLRB broad authority to decide what kinds of remedies would make workers whole.
McKee seemed to be leaning toward concluding that NLRB remedies are equitable and not covered by Jarkesy. But the judge was surprised when Weitz began arguing that some board remedies may be legal in nature but that the agency still had the power to impose them.
"The purpose here ... is purely one which has historically been labeled as equitable,” McKee said. “You start calling it legal and you’re in a hole you can’t dig yourself out of.”
McKee and Ambro are an appointees of Democratic former President Bill Clinton.
Starbucks is backed by the U.S. Chamber of Commerce, the nation's biggest business lobby, and other business groups that filed a brief last year echoing the company's claims about the limits on the board's remedial powers.
Michael Kenneally of Morgan, Lewis & Bockius, who represents the groups, was permitted to make brief arguments on Wednesday. He told the panel that allowing money damages beyond backpay to be imposed in an administrative NLRB case would violate employers' constitutional right to a jury at trial.
Kenneally also represents SpaceX in a pair of lawsuits the rocket maker has filed challenging the board's structure.
The case is Starbucks Corp v. NLRB, 3rd U.S. Circuit Court of Appeals, No. 23-2241.
For Starbucks: Sarah Harris of Williams & Connolly; Maurice Baskin of Littler Mendelson
For the NLRB: Eric Weitz
For the business groups: Michael Kenneally of Morgan, Lewis & Bockius
Read more:
US Supreme Court backs Starbucks over fired pro-union workers
NLRB judge says courts must decide Starbucks' challenge to agency's structure
Amazon challenges US labor board's structure in lawsuit over union election
NLRB ruling that expanded money damages for workers rejected by 5th Circuit
US Supreme Court faults SEC's use of in-house judges in latest curbs on agency powers
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