Am. Fed'n of Labor & Cong. of Indus. Organizations v. Nat'l Labor Relations Bd.

57 F.4th 1023

AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Appellee

v.NATIONAL LABOR RELATIONS BOARD, Appellant

No. 20-5223

C/w 20-5226

United States Court of Appeals, District of Columbia Circuit.

Argued May 14, 2021

Decided January 17, 2023

Paul A. Thomas, Attorney, National Labor Relations Board, and Tyler James Wiese, Attorney, argued the causes for appellant/cross-appellee. With them on the briefs were Nancy E. Kessler Platt, Associate General Counsel, William G. Mascioli, Assistant General Counsel, Dawn L. Goldstein, Deputy Assistant General Counsel, Helene D. Lerner, Supervisory Attorney, and Molly G. Sykes, Attorney.

Matthew J. Ginsburg argued the cause for appellee/cross-appellant. With him on the briefs were Leon Dayan and Maneesh Sharma.

Before: Srinivasan, Chief Judge, Pillard And Rao, Circuit Judges.

Opinion concurring in the judgment in part and dissenting in part filed by Circuit Judge Rao.

Pillard, Circuit Judge:

Unique among major federal agencies, the National Labor Relations Board (NLRB or Board) sets almost all of its policy through adjudications rather than rules. That makes the object of this case—a 2019 NLRB rule—somewhat unusual. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) challenges a rule governing the elections in which employees vote on whether to be represented by a union. The Board promulgated the 2019 Rule without notice and comment, asserting that it falls within the Administrative Procedure Act's (APA) exception for "rules of agency organization, procedure, or practice." 5 U.S.C. § 553(b)(A).

The 2019 Rule undid a slate of changes pertaining to representation elections that the Board in 2014 had promulgated following notice and comment. The Board in 2019 acted without notice and comment. And it acknowledged that the 2014 Rule had achieved its objective of significantly reducing the time between a representation petition, an election, and the certification of election results, and that reversing those changes would result in longer waits for elections and the benefits that flow from union representation. As the Board explained, and the AFL-CIO agrees, the changes introduced by the 2014 Rule did not alter the rate at which unions win or lose elections. But the Board nonetheless promulgated the 2019 Rule, viewing it as an advisable set of changes to ensure fair and accurate voting, transparency and uniformity, certainty and finality, and efficiency.

The NLRB argues that the National Labor Relations Act (NLRA or Act), 29 U.S.C. §§ 151 - 69, mandates direct review from the Board to the circuit court, see id. § 160(f), and so asks us to treat this case arriving on its appeal from district court as if it were before us on a petition for direct review by the AFL-CIO challenging the 2019 Rule. The Board also asserts that, even if the district court had jurisdiction, it erred in holding that five challenged provisions of the Rule fall outside the APA's procedural exception. The Board asks us to sustain those provisions even though they were not promulgated by notice and comment rulemaking. The AFL-CIO cross-appeals, arguing that the 2019 Rule as a whole is arbitrary and capricious and that the provision concerning ballot impoundment specifically is arbitrary and capricious and contrary to law.

We hold that the statutory provision for direct review in federal appellate courts of NLRB orders regarding unfair labor practices did not divest the district court of jurisdiction over rules that are exclusively concerned with representation elections, as is the 2019 Rule. On the merits, we hold that the district court erred in concluding that none of the five challenged provisions comes within the procedural exception; we hold that two of them do. Those two are rules of agency procedure, so were validly promulgated without notice and comment. We affirm the district court's invalidation of the rules regarding the eligible employee-voters list, the timeline for certification of election results, and election-observer eligibility. The AFL-CIO's challenge to the 2019 Rule as arbitrary and capricious when considered as a whole fails. Finally, we hold that the Rule's impoundment provision is contrary to law, making it unnecessary to address whether it is also arbitrary and capricious.

BACKGROUND

The NLRA covers two important topics in labor relations: the protection of employees’ right to elect representatives of their choice, and the prevention of unfair labor practices. See 29 U.S.C. §§ 158, 159. The Act addresses those topics in separate sections, with section 8 prohibiting unfair labor practices and providing for enforcement against them, see id. § 158, and section 9 outlining the process for conducting elections by which employees may select unions to represent them, see id. § 159. As the Board explains in its Rule, the Act's provisions regarding representation "protect the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection." Representation-Case Procedures, Final Rule, 84 Fed. Reg. 69,524, 69,524 (Dec. 18, 2019) (hereinafter 2019 Rule). Union representation, where employees choose it, is a statutorily protected means of advancing many other employee rights and interests, including resolving grievances and bargaining collectively with employers.

The NLRA provides for direct review in the federal appellate courts of at least some NLRB actions. Section 10 of the Act, titled "Prevention of unfair labor practices," includes the Act's only such grant of judicial review directly in a court of appeal. See 29 U.S.C. § 160(f). It provides:

Any person aggrieved by a final order of the Board granting or denying in whole or in part the relief sought may obtain a review of such order in any United States court of appeals in the circuit wherein the unfair labor practice in question was alleged to have been engaged in or wherein such person resides or transacts business, or in the United States Court of Appeals for the District of Columbia ....

Id. The Act thus provides for direct appellate review of "a final order," and places venue where "the unfair labor practice in question" took place. Id. Nowhere does the Act specifically address review of Board actions pertaining to representation elections. The Act grants the NLRB general rulemaking authority in section 6, id. § 156, and references rulemaking specific to representation and elections in section 9, id. § 159(c)(1). Nothing in either section addresses judicial review of NLRB rules as distinct from orders, whether the rules address unfair labor practices or representation elections.

The Rule at issue here addresses the representation election process, which the NLRA describes in some detail. The Act outlines four basic steps for parties to follow to organize a secret-ballot election under Board supervision to determine whether a union will represent a group of employees.

First, an employee, union, or employer may file a petition with the Board calling for an election among a particular group of employees, proposing the group as an appropriate "unit" of representation, and seeking either certification or, less commonly, decertification of a union as the employees’ exclusive collective bargaining representative. See id. ; 2019 Rule, 84 Fed. Reg. at 69,524. Most petitioned-for elections are conducted pursuant to an election agreement reflecting the parties’ accord on details like the date of the election and the employees who may appropriately be included in the bargaining unit. Both before and after the Board's 2014 Rule changes, more than ninety percent of elections were conducted pursuant to agreements. See 2019 Rule, 84 Fed. Reg. at 69,528 n.16.

If the parties cannot reach an election agreement, the second step is a hearing to develop the record on which a Regional Director determines whether a "question of representation" exists, i.e. , whether the petitioner filed a proper petition concerning a unit appropriate for collective bargaining, so eligible for an employee vote. See 29 C.F.R. § 102.64. If the proposed unit would not be appropriate for the purpose of collective bargaining, the Regional Director dismisses the petition; if it would be appropriate, the Regional Director issues a decision and direction of election setting parameters like the election date and the contours of the voting unit. Any party can file a request for Board review of the Regional Director's decision and direction of election.

The third stage is the election itself, in which employees vote by secret ballot for or against union representation. The parties and the Board may also challenge the eligibility of voters during the election, after which they may attempt to resolve any such challenges. Challenged ballots the validity of which remains unresolved are set aside, and the valid ballots are counted at the conclusion of the election. See id. § 102.69. The parties litigate the validity of challenged ballots only if they are outcome determinative.

Fourth, after the election, the Board, either itself or through its Regional Director, certifies the election results. See id. § 102.69(b). If a majority of employees voted for union representation, the union's certification as the employees’ representative obligates the employer to bargain with it in good faith and renders the failure to do so an unfair labor practice. See 29 U.S.C. § 158(a)(5). The post-election stage can also include party objections to the conduct of the election, which the Regional Director investigates, potentially calling a post-election hearing to inform the decision on those objections. See 29 C.F.R. § 102.69(c). A Regional Director's decision on objections is subject to review by the Board in response to a party's request. Id. § 102.69(c)(2).

The Board first promulgated a set of...