In our post of August 30, 2011, we noted that the National Labor Relations Board (NLRB) had adopted a final rule requiring most employers to notify employees of their rights under the National Labor Relations Act (NLRA) by posting a notice in a conspicuous location in the workplace.   The poster requirement, designed to notify employees of their rights under the NLRA, such as the right to organize a union, had an original deadline of November 14, 2011.  This deadline for posting the notice was subsequently extended to April 30, 2012 because of litigation challenging the rule brought by various plaintiffs including the National Association of Manufacturers, the National Right to Work Legal Defense and Education Fund, Inc., the Coalition for a Democratic Workplace, and the National Federation of Independent Business.  (As noted in our August 30th post:  “This rule will undoubtedly be tested in the courts.”)

In a post of March 16, 2012, we advised that on March 2, 2012, the federal district court in Washington, D.C., upheld the statutory authority of the NLRB to require employers to display a poster informing employees of their rights under the NLRA.  Significantly, however, the court struck down two of the penalty provisions included in the NLRB’s final rule.  That ruling is now on appeal before the U.S. Court of Appeals, District of Columbia Circuit.

Now, in the latest development, the federal court in South Carolina found that the NLRB did not have the authority to issue the notice-posting rule and that it was, therefore, unlawful under the Administrative Procedure Act.  In this April 13, 2012 ruling, the court reasoned that the poster requirement was not “necessary to carry out” the NLRA because there is no provision in the NLRA itself that requires any type of notice posting.  The court also said that the NLRA contemplates that the NLRB will serve a reactive function, responding to charges or petitions filed by others, not a proactive function in requiring employers to take preventive actions.  Importantly, the court held that Congress did not intend to give the NLRB the power to require employers to post a notice of the rights afforded under the NLRA.

There now two different and opposing federal court decisions on the validity of the NLRB rule requiring employers to post the prescribed notice.  The April 30^th effective date of the rule has not been extended by the NLRB.  The Circuit Court for the District of Columbia has been asked by the appellants to stay the effectiveness of the rule until the Circuit Court reaches its decision, but no ruling on the request for a stay has been issued. This creates a number of interesting questions.

Will the NLRB voluntarily extend the effective date of the rule beyond April 30, 2012?  If they do not, employers in the District of Columbia will be subject to the rule after April 30^th while employers in South Carolina will not be.  Technically, employers in other states will still subject to the rule, but if the NLRB takes any future action against an employer based on the rule, the South Carolina decision, unless overturned on appeal, will offer the employer a basis for challenging the action.  Moreover, federal agencies abhor the idea of being able to apply their rules in some states but not others.

Will the NLRB appeal the South Carolina court’s decision?  Some commentators believe the NLRB will appeal but do not think so.  The appeal would be taken to the Fourth Circuit Court of Appeals in Richmond, Virginia, which, while not as ultraconservative as it once was, is not likely to side with the NLRB.  If the NLRB failed to get the South Carolina ruling overturned at the Fourth Circuit (likely), and assuming the Court of Appeals in Washington D.C. upholds the ruling of the federal court in D.C. (also likely), then there would be a “split in the Circuits”.  Such a split could be resolved only by a decision from the U.S. Supreme Court.  Even if the Supreme Court would hear such a case—always hard to predict—we do not think the Administration would want to run the risk of bringing national attention to a rule that small employers consider another example of burdensome and unnecessary federal regulation.  Of course, once the “split in the Circuits” occurs, the federal government is not the only party that can ask the Supreme Court to resolve the issue.  Such a request can be initiated by either party, and there is no reason to think that the National Association of Manufacturers, the National Right to Work Legal Defense and Education Fund, Inc., the Coalition for a Democratic Workplace, and the National Federation of Independent Business would be shy about seeking a decision from the Supreme Court.

Hence, the NLRB faces a dilemma.  If it appeals the South Carolina decision and loses, the poster rule will be dead for all practical purposes.  Applying the rule anywhere, even outside the Fourth Circuit, after an adverse ruling from the Fourth Circuit, would open the door to endless legal challenges.   The only option to save the rule would be to ask the Supreme Court to review the Fourth Circuit decision, but that would create political risks.

We will keep you posted (excuse the pun).