A federal court in South Carolina today ruled that the National Labor Relations Board lacked authority to issue the notice-posting rule. Under the NLRB’s notice-posting rule, all private-sector employers subject to the National Labor Relations Act must post a notice to employees informing them of their rights under the Act. Employers had until April 30, 2012 to comply with the Rule.

In Chamber of Commerce of the United States v. NLRB, Case No. 2:11-cv-02516-DCN (D.S.C.), District Court Judge David C. Norton relied upon the plain language and structure of the Act to invalidate the Rule.

Critical to Judge Norton’s order was the fact that the Act as well as the NLRB’s own materials and statements clearly demonstrate that the NLRB functions as a reactive agency:

Congress intended the NLRB to be a quasi-judicial body that “has two main functions: to conduct representation elections and certify the results, and to prevent employers and unions from engaging in unfair labor practices.” … “In both kinds of cases the processes of the NLRB are begun only when requested.” … The Acting General Counsel, Lafe Solomon, has explained that the “NLRB’s processes can be invoked only by the filing of an unfair labor practice charge or a representation petition by a member of the public. The agency has no authority to initiate proceedings on its own.”

With this understanding, Judge Norton examined the propriety of the notice-posting rule under Section 6 of the Act, which sets forth the NLRB’s rule-making authority. Specifically, Section 6 states:

The Board shall have authority from time to time to make, amend, and rescind, in the manner prescribed by the Administrative Procedure Act, such rules and regulations as may be necessary to carry out the provisions of this Act.

The court found that the NLRB lacks authority under both the plain language of Section 6 and the structure of the Act to issue the Rule because it was not "’necessary’ to carry out other sections of the Act."

First, the plain language of Section 6 requires that rules promulgated by the Board be “necessary to carry out” other provisions of the Act. Defendants argue that the rule is “necessary to carry out” Sections 1 and 7 of the Act, but confuse a “necessary” rule with one that is simply useful. It can be said that the notice-posting rule “aids” or “furthers” the aspirational goals of Section 1 by notifying employees of their rights under Section 7, but defendants have not shown that the rule is “necessary” to carry out any other provision of the Act.

Moreover, Judge Norton noted that given the NLRB’s "reactive role in relation to employers covered under the Act," "[f]inding the challenged rule is ‘necessary’ to carry out other provisions of the Act would require the court to ignore ‘the statutory language as a whole,’ … and allow the Board to create rules in any area in which Congress did not specifically withhold the Board’s power."

With respect to the structure of the Act, Judge Norton noted:

Congress authorized the Board to regulate employers’ conduct in two essential areas: preventing and resolving ULP charges and conducting representation elections. It is clear from the structure of the Act that Congress intended the Board’s authority over employers to be triggered by an outside party’s filing of a representation petition or ULP charge.

It is in this context that the Board’s Section 6 authority is elucidated.

Here, the notice-posting rule does not serve to “carry out” any existing duties under the Act, but instead places an affirmative obligation on employers prior to a charge or petition first being filed. Congress did not impose a notice-posting requirement on employers in the Act or commit this area of regulation to the Board. “Where Congress has in the statute given the Board a question to answer, the courts will give respect to that answer; but they must be sure the question has been asked.” NLRB v. Ins. Agents’ Int’l Union, 361 U.S. 477, 499 (1960).

Defendants have not shown that Congress delegated authority to the Board through Section 6 to regulate employers in this manner.

The court also rejected the NLRB’s argument that the Act’s silence regarding a notice-posting allowed it to fill a statutory "gap" left by Congress. In addition to the statutory scheme, Judge Norton found that the legislative history of the Act supports a finding that Congress did not intend to impose an universal notice-posting requirement on employers, nor did it authorize the Board to do so. Indeed,

Congress has inserted at least eight additional notice requirements in federal labor laws since 1934, while the NLRA remained silent. … Congress clearly knows how to include a notice-posting requirement in a federal labor statute when it so desires.

Accordingly, the court found that the NLRB "stretch[ed] the basic meaning of a ‘gap’ in a statute."

Judge Norton’s order contradicts, in part, District Court Judge Amy Berman’s ruling in National Association of Manufacturers v. NLRB, Case No. 11-CV-1629 (D.D.C. Mar. 2, 2012), upholding the requirement for employers to post the notice. The plaintiffs in National Association of Manufacturers filed an appeal, and the NLRB will certainly appeal Judge Norton’s order. Accordingly, we recommend that employers continue to monitor both cases and the NLRB’s website closely as it may elect to postpone enforcement of the Rule pending further developments in these cases.