Shortly after the New Year, on January 4, 2024, Space Exploration Technologies Corp.—or “SpaceX”—filed a complaint in the District Court for the Southern District of Texas alleging that an administrative complaint filed by the NLRB against the company is illegal because the NLRB is unconstitutionally structured and the new expanded remedies sought by the NLRB violate employers’ constitutional right to trial-by-jury. Space Exploration Technologies Corp. v. NLRB et al., Case No. 1:24-00001 (S.D. Tex. 2024).

SpaceX’s complaint follows quickly on the heels of an administrative complaint filed by NLRB Regional Office 31 alleging the company unlawfully fired eight employees after they circulated an open letter to all employees critical of the company and the company’s CEO. In response to this administrative complaint, SpaceX is asking the federal court to stay or enjoin the NLRB’s complaint and to declare that (1) the NLRB’s structure is unconstitutional in that it limits the removal of NLRB ALJs and Board Members and permits Board Members to exercise executive, legislative, and judicial power in the same administrative proceeding; and (2) the Board’s new expanded remedies violate employers’ constitutional right to a trial-by-jury. 

NLRB’s Unconstitutional Structure

First, the federal court suit claims that NLRB administrative law judges (“ALJs”), who adjudicate complaints alleging unfair labor practices in the first instance, are unconstitutionally shielded from removal and therefore insulated from oversight and accountability to the President of the United States. The Constitution vests all executive power in the President, requiring that the President have sufficient control over the performance of executive functions and the individuals performing these functions. As such, according to the complaint, the President must have the power to remove executive officers who assist in carrying out the President’s executive duties. Under the National Labor Relations Act, NLRB ALJs are insulated from presidential oversight by two layers of removal protections whereby ALJs can only be removed by the Board for cause and Board Members can only be removed under the Act “for neglect of duty or malfeasance in office, but for no other cause.”

The complaint relies heavily on a recent decision by the Fifth Circuit, Jarkesy v. SEC (2022), which is currently on review before the Supreme Court. In Jarkesy, the Fifth Circuit held that the President’s constitutional removal power extends to ALJs for the U.S. Securities and Exchange Commission (“SEC”), and that the statutory restrictions on removing SEC ALJs are therefore unconstitutional. SpaceX’s complaint argues that NLRB ALJs are similar in that they have substantial authority and are therefore subject to the President’s removal authority. Like the restrictions on the removal of SEC ALJs, the two layers of removal protection for NLRB ALJs insulate them from oversight by the President in contravention of the Constitution.

Second, the complaint alleges that the NLRB is an unconstitutionally-structured agency because it consolidates all three constitutional powers—legislative, executive, and judicial—in the same administrative body in violation of the Constitution’s separation of powers. The complaint alleges that this structural deficiency is clearly illustrated in the case at hand where the NLRB Regional Office issuing the complaint against the company is seeking approval from the Board to seek injunctive relief in federal court against the company under Section 10(j) of the Act. The same Members of the Board determining whether to approve this 10(j) injunction will “later preside in a quasi-legislative, quasi-judicial capacity in the unfair labor practice proceeding involving the same alleged violations of the NLRA.” Thus, the Board Members are positioned to serve as both prosecutor, bringing charges against the company before an administrative tribunal, and as adjudicator, making determinations of fact as well as federal labor policy.

The complaint argues that, in order to avoid violating the constitutional separation of power, the Board Members who participate in the decision to approve a 10(j) injunction against the company must recuse themselves from subsequent proceedings on the same unfair labor practice allegations.

NLRB’s new Remedies Violate the Right to a Jury Trial

SpaceX also claims that the new remedies announced by the NLRB (as discussed previously here and here) and sought in this case are in contravention of the constitutional right to a jury trial. The complaint alleges that the Board’s new expanded remedies constitute compensatory damages and are therefore a form of legal relief that goes beyond the equitable backpay remedy permitted under the Act. The Constitution entitles the company to a jury trial to hear such legal claims. The complaint argues that the Fifth Circuit in Jarkesy held that the Constitution prohibits an administrative agency from substituting an ALJ hearing for a jury trial where it seeks legal relief for an alleged statutory violation.

Takeaways

SpaceX’s complaint goes to the very heart of the NLRB’s statutory structure and operations. As evidenced by the Jarkesy v. SEC case, similar arguments concerning administrative law judges and the ability to remove members of administrative bodies have been validated by the federal courts, although it is unclear how the Supreme Court will rule on the issue.

With respect to the Board’s new expanded remedies, SpaceX’s complaint directly challenges the Board’s authority to impose such significant relief through its ordinary processes and without the additional due process protections afforded and protected by jury trials.

Given the significance of the claims and potential ramifications if SpaceX is successful, we will continue to closely monitor this case and report any updates as they become available.

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Photo of Steven Porzio Steven Porzio

Steven J. Porzio is a partner in the Labor & Employment Law Department and a member of the Labor-Management Relations Group. Steve assists both unionized and union-free clients with a full range of labor and employee relations matters. He represents employers in contract…

Steven J. Porzio is a partner in the Labor & Employment Law Department and a member of the Labor-Management Relations Group. Steve assists both unionized and union-free clients with a full range of labor and employee relations matters. He represents employers in contract negotiations, arbitrations, and representation and unfair labor practice cases before the National Labor Relations Board.

Steve has experience conducting vulnerability assessments and providing management training in union and litigation avoidance, leave management, wage and hour, and hiring and firing practices. He provides strategic and legal advice in certification and decertification elections, union organizing drives, corporate campaigns, picketing and union contract campaigns. Steve has represented employers in a number of different industries, including higher education, health care, construction and manufacturing in successful efforts against unions in election and corporate campaigns.

In addition to his traditional labor law work, Steve assists companies with handbook and personnel policy drafting and review, daily management of employee disciplines and terminations, and general advice and counsel on compliance with federal and state employment laws.

Steve’s litigation experience includes work on matters before state and federal courts, the Equal Employment Opportunity Commission, the Connecticut Commission on Human Rights and Opportunities, the New York State Division of Human Rights and various other administrative agencies. He has litigated matters involving age, race, national origin, gender and disability discrimination, wage and hour, whistleblower and wrongful termination claims.

While attending the Syracuse University College of Law, Steve served as the editor-in-chief of the Syracuse Science and Technology Law Reporter. He also received the Robert F. Koretz scholarship, awarded in recognition of excellence in the study of labor law.

Photo of Joshua Fox Joshua Fox

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several…

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several Major League Baseball Clubs in all aspects of the salary arbitration process, including the Miami Marlins, Boston Red Sox, Los Angeles Dodgers, Kansas City Royals, San Francisco Giants, Tampa Bay Rays and Toronto Blue Jays. In particular, Josh successfully represented the Miami Marlins in their case against All-Star Catcher J.T. Realmuto, which was a significant club victory in salary arbitration. Josh also represents Major League Baseball and its clubs in ongoing litigation brought by current and former minor league players who allege minimum wage and overtime violations. Josh participated on the team that successfully defended Major League Baseball in a wage-and-hour lawsuit brought by a former volunteer for the 2013 All-Star FanFest, who alleged minimum wage violations under federal and state law. The lawsuit was dismissed by the federal district court, and was affirmed by the U.S. Court of Appeals for the Second Circuit.

Josh also has extensive experience representing professional sports leagues and teams in grievance arbitration proceedings, including playing a vital role in all aspects of the grievance challenging the suspension for use of performance-enhancing drugs of then-New York Yankees third baseman Alex Rodriguez. Josh also has counseled NHL Clubs and served on the trial teams for grievances alleging violations of the collective bargaining agreement, including cases involving use of performance-enhancing substances, domestic violence issues, and supplementary discipline for on-ice conduct. He has played a key role in representing professional sports leagues in all aspects of their collective bargaining negotiations with players and officials, including the Major League Baseball, National Hockey League, the National Football League, Major League Soccer, the Professional Referee Organization, and the National Basketball Association,.

In addition, Josh has extensive experience representing clients in the performing arts industry, including the New York City Ballet, New York City Opera, Big Apple Circus, among many others, in collective bargaining negotiations with performers and musicians, the administration of their collective bargaining agreements, and in grievance arbitrations.

Josh also represents a diverse range of clients, including real estate developers and contractors, pipe line contractors, hospitals, hotels, manufacturers and public employers, in collective bargaining, counseling on general employment matters and proceedings before the National Labor Relations Board, New York State Public Employment Relations Board and arbitrators.

Josh has also recently served as an adjunct professor at Cornell University’s School of Industrial Labor Relations for the past two years, teaching a course regarding Major League Baseball salary arbitration.

Prior to joining Proskauer, Josh worked for a year and a half at the National Hockey League, where he was involved in all labor and employment matters, including preparations for collective bargaining, grievance arbitration, contract drafting and reviewing and employment counseling. Josh also interned in the labor relations department of Major League Baseball and at Region 2 of the National Labor Relations Board. He was a member of the Brooklyn Law Review and the Appellate Moot Court Honor Society and served as president of the Brooklyn Entertainment and Sports Law Society.

Photo of Elizabeth Dailey Elizabeth Dailey

Elizabeth Ann Dailey is an associate in the Labor & Employment Law Department. Elizabeth assists clients in a variety of labor and employment matters, including motion practice, administrative proceedings, internal investigations, labor-management relations, and claims of employment discrimination. As part of her labor-management…

Elizabeth Ann Dailey is an associate in the Labor & Employment Law Department. Elizabeth assists clients in a variety of labor and employment matters, including motion practice, administrative proceedings, internal investigations, labor-management relations, and claims of employment discrimination. As part of her labor-management relations practice, Elizabeth has assisted in representation proceedings before the NLRB and has experience responding to unfair labor practice charges, conducting labor-related business risk assessments, and assisting with collective bargaining negotiations.

Elizabeth frequently represents clients across a variety of industries and sectors, including educational institutions, sports entities, news and media organizations, entertainment companies, healthcare institutions, and real estate companies.

Elizabeth earned her J.D. from the University of Pennsylvania Law School, where she completed a certificate program in business management from The Wharton School. While attending Penn Law, Elizabeth interned with the National Labor Relations Board Region 2 where she conducted investigations into unfair labor practices and recommended case dispositions to the Regional Director.