A running gag in American movies, stemming from a line in the 1948 film “Treasure of the Sierra Madre,” is now common lingo. A brigand says, regarding his purported law enforcement credentials, “We don’t need no stinking badges.” Federal administrative agencies are fielding similar questions about their adjudicative authority. Don’t expect them to drop their proceedings and run.
After oral argument of SEC v. Jarkesy, two things seem likely: (1) Mr. Jarkesy’s Seventh Amendment argument—i.e., that Congress may not dodge jury trial of fraud claims by codifying them—will prevail; and (2) the Article III argument—i.e., that only courts may adjudicate—may be a bridge too far. If either argument comes up a winner, how might National Labor Relations Board unfair labor practice adjudication need to adapt?
A narrowly drafted holding would not overrule Atlas Roofing Co. v. OSHA, which approved OSHA adjudication of workplace health and safety penalties, and would not discuss NLRB v. Jones & Laughlin Steel Corp., which approved NLRB adjudication of anti-union discharge allegations. If those pillars of the Administrative State remain, would the NLRB wobble? It’s relatively easy to argue that, in those cases, the agencies were enforcing newly created public rights with no close common law analog. The common law of 1791 did not recognize a right to a workplace free of recognized hazards (the Occupational Safety and Health Act) and did not protect employees who engaged in union activities (the National Labor Relations Act). Are any NLRB proceedings distinguishable? Yes.
The Board regularly adjudicates employer common law rights that pre-existed the Act. It has ordered employers to cede property rights to accommodate union organizing. In McLaren McComb, the Board outlawed non-disparagement terms in unrelated employer settlement agreements. The Board’s General Counsel also has begun a crusade to ban non-compete agreements. For each of these actions, the statutory nexus is relatively weak. If the Jarkesy majority adopts any meaningful Article III restraint, such Board adjudications will make tempting targets, but few should trigger jury trial rights, because the remedial orders in those cases typically are injunctive. The best Seventh Amendment contests will be those that question Board orders requiring employers to pay money to or for the benefit of employees for contract breach—the classic form of legal relief for a common law action that would have been recognized in 1791, when the Bill of Rights was ratified.
In awarding damages in contract disputes, the Board finds itself quite far out on an unhealthy limb. Even under the deferential “sound arguable basis” standard (now under attack), the current Board majority claims authority to adjudicate labor contract disputes arising solely from reasonably differing contract interpretations, unless the employer’s reading is at least as persuasive as the Union’s. A Venn diagram comparing that to a District Court’s role under 29 U.S.C. § 185 would look like a O.
NLRB adjudication of such disputes should not survive the SEC’s loss to Mr. Jarkesy if Board Respondents are prepared to exploit the opportunity. To preserve the jury trial issue for appeal, Respondents will need to plead their Seventh Amendment defenses and perhaps seek dismissal of the contract breach claims (without prejudice) under 29 CFR § 102.24. The same is true of Respondents’ Article III arguments. More aggressive Article III cases are coming along behind Jarkesy; one of them may find pay dirt. If the Board runs roughshod over such objections, it may jeopardize its remedial orders and might find itself on the SEC’s hot seat, needing to show its adjudicative badges.
Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at email@example.com.