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Alan L. Rupe
Scott Jackson
Ashley Welch Hudson
Employment Law
News & Publications
Supreme Court Sets the Stage for Future Challenges with Pair of Labor-Related
Rulings
July 1, 2014
With its term coming to a close, the Supreme Court has issued a pair of important opinions that set the
stage for change in the labor and employment arena. The two cases National Labor Relations Board
v. Noel Canning, No. 12-1281, and Harris v. Quinn, No. 11-681 have the potential to shake up labor
relations in the years to come. Employers should remain vigilant as this precedent works through the
NLRB and the courts and should be prepared to modify policies and procedures as necessary.

National Labor Relations Board v. Noel Canning

On June 26, 2014, the Supreme Court issued its much-anticipated decision in the case of National
Labor Relations Board v. Noel Canning, No. 12-1281. In a unanimous decision, the Court invalidated
three of President Obamas 2012 recess appointments to the NLRB, calling into question hundreds of
NLRB decisions made between January 2012 and August 2013. The decision is significant for those
employers that faced NLRB scrutiny during the disputed period and those employers that relied upon
decisions made by the NLRB in formulating employment policies and procedures.

The case stems from a labor dispute. In 2012, the NLRB determined that Noel Canning unlawfully
refused to reduce to writing and execute a collective-bargaining agreement that it had orally agreed to
with a labor union. At the time of the NLRBs decision, the Board was comprised of two members
approved by the Senate and three members appointed by President Obama during a three-day Senate
recess. Under the Supreme Courts 2010 ruling in New Process Steel, L.P. v. National Labor Relations
Board, 130 S. Ct. 2635 (2010), the NLRB must have three lawfully-appointed members to make a
quorum and conduct business. Noel Canning challenged the authority of the Board to act, claiming that
the Presidents recess appointments were unlawful, and that without the disputed members, the NLRB
lacked the necessary quorum to conduct business. The United States Court of Appeals for the District
of Columbia Circuit agreed and invalidated the NLRBs ruling. The NLRB appealed to the Supreme
Court.

In a 9-0 victory for Noel Canning, the Supreme Court affirmed the Circuit Courts decision, though the
Justices split 5-4 on the rationale. Writing for the majority, Justice Stephen Breyer confirmed that the
President has the authority to make both intra-session and inter-session recess appointments under the
Constitutions Recess Appointments Clause and that the President may fill any vacant position during a
Senate recess, regardless of when that vacancy arises. As for the length of the Senate recess that will
trigger the Presidents appointment power, however, the Court stated, When the appointments before
us took place, the Senate was in the midst of a three-day recess. Three days is too short a time to
bring a recess within the scope of the clause. Because the three-day recess was not of sufficient
length to trigger the Presidents appointment power, the President lacked constitutional authority to fill
the vacancies without Senate confirmation. As such, the Presidents 2012 appointments were invalid,
and the NLRB lacked the quorum necessary to conduct business with respect to Noel Canning.

For those employers that have faced NLRB scrutiny in recent years, Noel Canning offers the opportunity
to revisit adverse decisions with hopes of convincing the NLRB to reverse course, though the probability
of reversal is unknown and may be small. Importantly, the decision applies equally to actions taken by
the General Counsel and Regional Directors, all of whom act with authority delegated by the Board.
Employers that relied upon NLRB decisions in formulating new employment policies and practices in
recent years should track ongoing challenges to the NLRBs 2012 and 2013 decisions and remain
prepared to modify policies as necessary. Finally, the Courts decision in Noel Canning could invalidate
recess appointments with respect to other federal agencies. Thus, employers should watch for potential
challenges to other federal agency appointments based on the rationale offered in Noel Canning.

Harris v. Quinn

On June 30, 2014, a divided Supreme Court held in Harris v. Quinn, No. 11-681, that quasi-public sector
employees receiving public funding through Medicaid cannot be compelled to support unions they do not
wish to join. Though the Court stopped short of declaring mandatory union dues unconstitutional for all
public-sector employees such as firefighters, teachers, and police officers the ruling signals a
willingness to revisit the constitutionality of such mandatory dues in the future. Additional challenges to
mandatory union dues are sure to follow.

The case pitted Pamela Harris, a home-health worker in Illinois who takes care of her disabled son,
against the Service Employees International Union. The union represents the interest of home health
workers before state agencies in Illinois. Illinois is one of 26 states that require public-sector workers to
pay partial dues to unions that negotiate their contracts and represent them in grievances, even if the
employees do not wish to be members of the union. Harris challenged these so-called fair-play fees or
agency fees as unconstitutional, claiming they violated her right to free speech.

In a 5-4 decision split down ideological lines, the Court declared that the First Amendment protects
Harris and others who are not full-fledged public employees from being forced to pay union dues to a
public-employee union whose speech they do not endorse. However, the Court stopped short of a
sweeping declaration that all public-sector employees enjoy the same protections as quasi-public
sector employees, leaving intact the Court's 1977 ruling in Abood v. Detroit Board of Education, 97 S.
Ct. 1781 (1977), which held that unions could collect compulsory dues used for non-political activities
under collective bargaining agreements. Keeping with its recent trend of narrow rulings, the Court
recognized a new category of partial-public employees who cannot be compelled to pay dues. The
home-health workers in Harris work directly for their customers, who control all aspects of the
employment relationship, but they receive public funding through state-run programs such as Medicaid.
Given that home-health workers operate in a setting where one employee works in a single house for
only one or two individuals, the Court found that the most powerful justification for mandatory
unionization that it procures labor peace by reducing conflicts between workers hardly applies.

While Harris only addresses a small group of quasi-public employees, the decision could signal the
end of fair-play fees for public-sector employees in the future. The Courts opinion indicates that
compulsory union membership is a restraint on employees First Amendment rights to free speech and
free association regardless of the employees public-private status. The majority opinion reinforces the
Courts deep skepticism of forcing public employees to contribute money to organizations whose
activities they do not endorse. The opinion telegraphs the majoritys willingness to revisit the Courts
decision in Abood if presented with the opportunity. While in the short run the decision is fairly limited,
employers should take note of the Courts skepticism of compulsory union membership as a possible
indication of the Justices thought process in addressing union activities in future decisions.
Additional Information
For more information about these decisions, please contact your Kutak Rock attorney or the authors of
this alert, Scott Jackson or Ashley Welch Hudson.

To download a print-quality PDF of this client alert, please click the link below.
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