Fifth Circuit Finds NLRB’s Multilayer Removal Protections for Board Members and Administrative Law Judges Are Likely Unconstitutional
On August 19, the U.S. Court of Appeals for the Fifth Circuit affirmed federal district court preliminary injunctions halting Unfair Labor Practice (ULP) proceedings before the National Labor Relations Board (NLRB). In Space Exploration Technologies Corp. v. National Labor Relations Board, No. 24-50627 (5th Cir. 2025), the court found that the structure of the NLRB, specifically the constraints it places on the president’s ability to remove board members and administrative law judges (ALJs), is likely unconstitutional. The pivotal decision has the potential to trigger significant changes to the NLRB’s structure, and in the interim, impact the way employers navigate proceedings before the NLRB.
The NLRB and Its Structure
The NLRB was created in 1935 by Congress to administer and enforce the National Labor Relations Act (NLRA), which recognizes and protects the rights of employees to engage in collective bargaining through representation of their own choosing, and further establishes mechanisms for addressing unfair labor practices. Ultimately, the NLRA seeks to foster a more equitable workplace, enforcement and administration of which, is overseen by the NLRB.
The NLRB is an independent federal agency tasked with investigating, adjudicating, and remedying unfair labor practices that infringe the rights afforded to most private-sector employees under the NLRA. Specifically, the NLRB works to resolve “industrial disputes arising out of differences as to wages, hours, or other working conditions.” It has both an investigative/prosecutorial component as well as an adjudicatory body, which is comprised of a five-member Board, appointed by the president, with members serving five-year staggered terms. Board members may only be removed by the president “for neglect of duty or malfeasance in office.”
The Board is tasked with reviewing the decisions of ALJs regarding ULP charges. ALJs are appointed by the five-member Board. To remove an ALJ, the president, acting through the Board, must first bring an action before the Merit Systems Protection Board (MSRP), which must determine whether good cause exists for removal. Like ALJs, MSRP members also enjoy for-cause removal protections. The multilayer removal protections shielding both Board members and ALJs is the structural component of the NLRB that the employers in Space Exploration Technologies Corp. v. National Labor Relations Board, challenge as unconstitutional.
Case Background & Overview
In the case, the employers SpaceX, Energy Transfer, and FindHelp, faced ULP charges. In response, and prior to the initiation of administrative proceedings before the NLRB, each employer filed suit in a federal district court challenging the constitutionality of the dual for-cause removal protections that shield both Board members and ALJs. Each of the federal district courts granted preliminary injunctions, which halted the agency’s proceedings. The NLRB appealed each of the district court decisions, resulting in the consolidated appeal before the Fifth Circuit. On appeal, the NLRB argued that the district courts lacked jurisdiction to enjoin agency proceedings on constitutional grounds and further abused their discretion in doing so because the employers were unlikely to prevail on the merits and had not shown irreparable harm.
The Fifth Circuit’s Decision
- Jurisdiction
Despite the agency’s jurisdictional challenges, the Fifth Circuit determined that the district courts have authority to enjoin NLRB proceedings based on constitutional grounds. Particularly, the court determined that the Employers’ claims did not “grow out of a labor dispute,” drawing a distinction between claims brought to challenge the structure of the NLRB and claims dealing in labor-related disputes, such as wages, hours, working conditions, or union representation. Since the employers’ claims challenged the structure of the NLRB, they implicated Article II Separation of Powers and removed the claims from the statutory framework of the Norris-LaGuardia Act, which creates a jurisdictional bar and prevents federal courts from enjoining proceedings “growing out of a labor dispute.” The Fifth Circuit noted that the NLRB’s competence is in labor policy, not constitutional questions of separation of power. As such, the Fifth Circuit determined both it and the federal district courts had authority to enjoin NLRB proceedings on constitutional grounds and proceeded to address the merits of the case.
2. Likelihood of Success on the Merits
In seeking preliminary injunctions, the employers had to establish that:
- They are likely to succeed on the merits of their underlying claim, which in this case, is whether the NLRB’s structure is unconstitutional.
- They are likely to suffer irreparable harm in the absence of preliminary relief, and
- The balance of equities tip in their favor and that the injunction is in the public’s interest.
Regarding the likelihood of success on the merits, the court first considered whether the ALJ removal process was unconstitutional. The court relied on its prior decision in Jarkesy v. Securities Exchange Commission, where it found the removal protections for the U.S. Securities and Exchange Commission’s (SEC) ALJs unconstitutional based on its nearly identical two-layer removal scheme. In Jarkesy, the Fifth Circuit noted that the two layers of for-cause protection impeded the control necessary for the president to ensure that the laws were faithfully executed, and as such, it was unconstitutional. These findings, as noted by the court, were not disturbed by the U.S. Supreme Court on its review of the Fifth Circuit’s Jarkesy decision. Because the two-layer removal scheme for SEC ALJs was nearly identical to the NLRB ALJ removal scheme, the Fifth Circuit determined that if the removal scheme for SEC ALJs was unconstitutional, the same must be true of NLRB ALJs, whose powers are more robust.
The court similarly determined that the Board member removal scheme is likely unconstitutional. Though the NLRB argued that the removal scheme was constitutional under Humphrey’s Executor, the Fifth Circuit found this argument unpersuasive. Humphrey’s Executor, a 1935 Supreme Court case challenging the removal of a commissioner of the Federal Trade Commission (FTC), carved out an exception to the general rule that a president may remove subordinates at-will, upholding removal restrictions for inefficiency, neglect of duty, or malfeasance in office for the FTC’s multi-member body of experts. However, the Supreme Court has been reluctant to extend Humphrey’s Executor beyond its facts, limiting it to multi-member expert agencies that do not wield substantial executive power.
Notably, the Fifth Circuit determined that the structure of the NLRB differed from that of the FTC. It specifically pointed to the fact that NLRB Board members today wield substantial executive power. Moreover, the Fifth Circuit pointed to the fact that unlike the FTC, the NLRB has no statutory party-balancing requirement, and Humphrey’s Executor has been limited to permitting for-cause removal protections only where the body of experts is statutorily “balanced along partisan lines.” The court explained that the work of the NLRB is widely acknowledged as politically charged, further distinguishing its structure from that of the FTC and other agencies where Humphrey’s Executor has been applied. Ultimately, the Fifth Circuit refused to extend Humphrey’s Executor, concluding that removal protections for Board members were also likely unconstitutional.
3. Irreparable Harm
After determining the likelihood of success on the merits, the court considered whether the employers had established irreparable harm sufficient for the issuance of injunction. The Fifth Circuit determined that the harm to the employers was the process itself. In other words, the injury or harm to the employers would be their participation in the NLRB proceeding. The court noted that once an unconstitutional proceeding begins, the damage has been done. As a result, “forcing the Employers to appear before an unconstitutionally structured agency inflicts irreparable harm.” This approach differs from standards adopted by the Tenth, Sixth, and Second Circuits, which have required more harm than just the existence of an unconstitutional provision. The Tenth, Sixth, and Second Circuits require a showing of “causal harm.” Specifically, to show irreparable harm, these Circuits have required parties to show how the removal protections would specifically impact the upcoming proceeding. The Fifth Circuit’s approach not only creates a circuit split on this issue, but it makes the Fifth Circuit a much more friendly forum for seeking injunction of agency proceedings based solely on the idea that the agency structure is unconstitutional regardless of whether the party has shown that the unconstitutional provision will directly impact the proceeding.
4. Balance of Equities & Public Interest
Finally, the court noted that the public is served when the law is followed, and that there is no cognizable harm to the government when the court enjoins a proceeding on constitutional grounds. Therefore, the Fifth Circuit determined that the equities and public interest also favored preliminary relief in this case.
What are the Implications for Employers?
The Fifth Circuit’s recent decision raises uncertainty about the constitutionality of the NLRB structure. But it is crucial for employers to understand that the ruling has not rendered the NLRB unconstitutional or inoperative. The court found that the removal protections are likely unconstitutional, which has temporarily halted the NLRB proceedings specific to SpaceX, Energy Transfer, and FindHelp, as these employers continue to pursue their underlying constitutional claims. Keep in mind, the NLRB continues to actively pursue ULP cases. Employers facing NLRB proceedings should consult with legal counsel to determine the best strategy for navigating these ongoing matters.
Even if the NLRB's removal protections are ultimately deemed unconstitutional, this does not necessarily spell the end for the agency. One potential outcome would be the severance of the removal protections provisions, allowing the rest of the NLRB structure to remain intact. While the Fifth Circuit acknowledged the concept of severability, it has deferred this issue to the merits phase of the litigation.
In summary, while the Fifth Circuit's decision has significant implications, the NLRB remains operational, and employers must stay informed and prepared for potential changes in the agency's structure.
Please contact Fallon A. Voltolina or any member of Phelps’ Labor and Employment team if you have questions or need advice or guidance.
