Labor & Employment Law Daily D.C. District Court strikes NLRB election rule in part
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Thursday, June 11, 2020

D.C. District Court strikes NLRB election rule in part

By Lisa Milam, J.D.

On May 30, the court put on hold portions of the NLRB’s 2019 election rule slated to take effect May 31. On June 7, the court issued its written opinion on the decision.

A federal district court judge in the District of Columbia enjoined certain provisions of the NLRB’s 2019 representation election rule because they were promulgated without notice-and-comment, as the Administrative Procedure Act (APA) requires. Offering a detailed explanation for its May 30 decision tabling certain portions of the new election rule, the court rejected the Board’s contention that no notice and comment was required because the rules in question were merely procedural. In the court’s view, “no fair assessment of the regulatory provisions leads to the conclusion that the challenged parts of the 2019 Election Rule are mere procedural rules,” so the Board could not forego notice and comment. However, the court refused to strike the election rule in its entirety, as the AFL-CIO had urged; only those specific provisions challenged in this litigation would be set aside, and the court, in deference to the agency, remanded the matter to the Board (AFL-CIO v. National Labor Relations Board, June 7, 2020, Jackson, K.).

NLRB turns to rulemaking. Rulemaking was not the norm at the NLRB, which has long relied on Board common law to interpret the NLRA. However, in the last decade, the NLRB, first during the Obama administration, turned to rulemaking to regulate and revise procedures for union representation elections. In 2011, the NLRB issued a final rule that addressed certain election practices, promulgated through notice-and-comment rulemaking. A proposed election rule announced in 2014 was almost identical to the 2011 regulation. The Board submitted the rule to notice-and-comment rulemaking, and eventually promulgated the rules over the dissent of two Board members. That rule survived a legal challenge and was put into effect in 2015. It implemented about 25 changes to election procedures (five of which are at issue here).

Enter the Trump administration. In December of 2017, the new Republican majority at the NLRB issued a request for information on how the 2014 election rule was working, posing several general questions about whether it should be retained, revised (and if so, how), or rescinded outright. Two years later, a divided Board promulgated the rule at issue here. The direct final rule was issued without notice and comment (despite that the Board undertook notice and comment rulemaking when it issued its 2014 election rule). Looking back, the Board now said that in 2014, it had emphasized that, although it was undertaking notice and comment, it was not required to do so. Also, the Board said that it would have implemented the changes regardless of its request for public input.

The AFL-CIO filed suit arguing that certain of the election rule changes were not merely procedural rules, and should have been subject to notice and comment. Specifically, it challenged provisions that:

(1) gave parties the right to litigate most voter eligibility and inclusion issues prior to the election (Section 102.64(a));
(2) instructed that the Regional Director normally will not schedule an election before the 20th business day after the date of the direction of election (Section 102.67(b));
(3) mandated that employers furnish the required voter list to the Regional Director and other parties within five business days (rather than the two business days under the 2014 Rules) following the issuance of a direction of election (Section 102.67(l));
(4) limited a party’s selection of election observers to individuals who are current members of the voting unit whenever possible (Section 102.69(a)(5)); and
(5) instructed that the Regional Director will no longer issue certifications following elections if a request for review is pending or before the time has passed during which a request for review could be filed (Section 102.69(b) and (c)).

Procedural-rule exception. Notice and comment is the default, with few exceptions. Here, the Board staked its case on the procedural-rule exception set forth under section 553(b) of the APA—the “housekeeping statute,” as the Supreme Court has called it—which applies when a rule is about the agency’s own internal organization, procedure, or practice. A rule is procedural if it is geared simply toward “improving the efficient and effective operations of an agency,” even where it may have an incidental effect on regulated parties. Rules modifying deadlines for regulated entities in agency actions, or changes to internal steps an agency will take to process petitions from the regulated community, are good examples.

District court has jurisdiction. Addressing a threshold issue, the district court first rejected the Board’s argument that the court lacked subject matter jurisdiction because of NLRA, section 160(f), which channels review of certain NLRB actions directly to a circuit court of appeals. This provision is narrow—it applies only to final Board “orders” granting or denying some form of relief to an entity seeking relief before it, the court said. Without delving into whether a final rule would be a Board order within the meaning of section 160(f), it was enough to note that the provision expressly mandates direct appellate review only in unfair labor practice cases. At any rate, the Board’s “unprecedented” argument that “orders” presumptively includes rules did not persuade the court, which denied the NLRB’s motion to transfer the case to the D.C. Circuit.

Not procedural rules. Turning to the merits, the district court concluded that the parts of the election rule challenged here were not procedural. The Board argued that its new rules merely govern the “content and timing of case filings” and alter the timing of when an election-related dispute will be presented to, or decided by, the Board. In the court’s view, however, “no fair assessment of the regulatory provisions leads to the conclusion that the challenged parts of the 2019 election rule are mere procedural rules.” Each of the provisions challenged by the AFL-CIO “reaches far outside the Board’s internal operations” and exceeds the narrow scope of the procedural rule exemption.

“Boiled to bare essence,” the Board seems to suggest that “any rule that merely relates to procedures as opposed to substantive rights [is] a procedural rule for the purpose of the APA—a misconception that appears to be fueled, first and foremost, by a misunderstanding of the intended scope of the APA procedural-rule exception,” said the court. Although the Board claimed its rule change was procedural in that it had, at most, an incidental impact on other parties, this “ignores the actual impact of the challenged provisions of this rule on parties other than the agency itself.” As the court observed: “its own Federal Register notice belies its understanding that these rule changes will significantly impact representation-election processes, which appears to be the very reason why the NLRB adopted these reforms.”

Each of the challenged rule provisions goes beyond internal agency procedures, to directly regulate how representation elections are to be conducted, impacting the substantive rights of the parties, the court held.

Is the rule substantive? The D.C. Circuit has advised that in evaluating whether a particular agency rulemaking requires notice-and-comment, a court also must ask whether the challenged provision is not “substantive.” But even framing the question in this alternative manner would not save the challenged provisions. As just one example, a rule change which requires regional directors to hold off on certifying a union pending a Board decision on an employer’s request for review “delays employees’ procurement of significant statutory rights that depend on the NLRB’s certification,” the court explained. Each of the other challenged election rule changes “could conceivably” have a significant effect on private parties; these, too, are substantive, and demand notice and comment before they are promulgated.

Conclusion. The court rejected the AFL-CIO’s bid to overrule the election rule in its entirety, noting that the APA “clearly contemplates a circumstance in which a court will find that part of an agency rule is unlawful, and nothing in the text of the APA suggests that a court has to proceed to invalidate the entire rule.” Therefore, only the specific parts of the rule found unlawful here would be invalidated. The court remanded to the Board “to decide what happens next in any event,” including “whether it intends to enforce the parts of the rule that have not been invalidated” or to cure the notice and comment defect.

For its part, the NLRB already indicated, in a June 1 release, that it will implement in full those election rule provisions unaffected by the district court’s decision, and appeal the district court’s ruling.

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