The Case
In 2022, a former SpaceX employee filed an unfair labor practice charge with the NLRB. After investigating, the NLRB issued a complaint in March 2024 that SpaceX’s severance agreements violated the NLRA. An administrative hearing was set for October later that year.
Instead of letting the case go forward, SpaceX filed suit in the Western District of Texas, not arguing about the legality of its severance agreements, but rather arguing that the NLRB itself was unconstitutional because both its judges and board members are too protected from presidential removal. The district court agreed and blocked the hearing.
A case that was originally about severance agreements (which, if you want to learn more, check out our YouTube videos) transformed into a separation-of-powers battle about whether or not the NLRB’s structure violates the Constitution.
The NLRB Challenged
The NLRB is split in a few different ways. There is the General Counsel, the Board, and the Administrative Law Judges. The General Counsel is appointed by the President and later confirmed by the Senate. The GC runs the investigative and prosecutorial arm of the NLRB by deciding whether to issue complaints after charges are filed and overseeing the NLRB’s regional offices.
The Board is a five-member body, also appointed by the President and confirmed by the Senate. It functions as an appellate court for labor cases and reviews decisions made by the ALJs when parties file “exceptions.”
Administrative Law Judges are not part of the Board, but they are employees of the NLRB. They conduct hearings when the General Counsel issues a complaint. Their decisions are final, unless one of the parties appeals to the Board.
This SpaceX case focuses on removal protections for board members and ALJs. Board members can only be removed for neglect of duty or malfeasance, and ALJs can only be removed for “good cause.” This means neither group can be directly removed by the President. This raises a concern about the separation of powers in this case.
The Employers’ Argument
SpaceX, joined by Energy Transfer and Findhelp, argued that ALJs have two layers of protection, thus violating the Constitution. The double layer matters because it cuts the President out of the chain of accountability. If ALJs can’t be removed except by another agency that is also insulated from removal, then no one the voters can hold responsible is really in charge. In this case, the employers argued that due to the double layer of protection, they faced immediate harm.
The NLRB’s Counterargument
The Board claimed that district courts had no authority to step in and stop the hearings because the underlying disputes involved unfair labor practice charges. The Fifth Circuit rejected that argument because there were structural constitutional challenges to the NLRB. This boils down to federal courts can enjoin unconstitutional agency action.
The Board also claimed that employers weren’t actually harmed just by having to go through the hearing, but the Fifth Circuit disagreed. The Fifth Circuit argued that the harm was the process of going through the hearings themselves.
The Fifth Circuit’s Decision
Injunctions for SpaceX, Energy Transfer, and Findhelp were all affirmed. The Fifth Circuit held that ALJs’ double removal protection is unconstitutional. It also held that the NLRB Board Members’ protections were also likely unconstitutional. Lastly, the injury of being subjected to unconstitutional proceedings is irreparable; therefore, injunctions are necessary.
The dissenting opinion by Judge Wiener concurred in part with the majority opinion. They held that ALJ protections were indeed unconstitutional, but thought that the Board Member protections did not justify injunctions because employers hadn’t shown specific causal harm.
The Key Takeaway
For employers, this case isn’t about severance agreements anymore; it’s about whether or not the NLRB itself is Constitutional. The Fifth Circuit clarified that if an agency’s structure is unconstitutional, businesses can challenge not only the agency’s actions, but also its authority to act.
