US court nixes NLRB ruling allowing for unionizing without elections

By Daniel Wiessner

March 9 (Reuters) - A U.S. appeals court has ruled that the National Labor Relations Board overstepped its powers when it issued a major ruling requiring employers that violate labor laws during union organizing drives to bargain with unions even when workers vote against joining them.

The Cincinnati-based 6th U.S. Circuit Court of Appeals in a 2-1 ruling on Friday called the board's 2023 decision in Cemex Construction Materials Pacific "rulemaking under the guise of an adjudication" that went far beyond the NLRB's authority to issue fact-based rulings and specific remedies in individual cases.

The NLRB routinely adopts new policies and interpretations of federal labor law by issuing decisions in cases and has only rarely engaged in formal rulemaking. Though the 6th Circuit ruling penned by Circuit Judge David McKeague only dealt with the Cemex standard, it appeared to call that broader practice into question.

The panel reversed an NLRB ruling ordering Brown-Forman, the maker of Jack Daniel's and other whiskeys, to bargain with a union representing workers at a Kentucky distillery. The case is among the first in which an appeals court has considered a challenge to the Cemex ruling, which has drawn criticism from business groups and Republican lawmakers.

"The Cemex standard was designed to generally deter potentially malfeasant employers from committing future, hypothetical violations," McKeague wrote, and not "as a specific remedy to undo the effects of the parties' violations of the [National Labor Relations] Act."

Circuit Judge Andre Mathis in dissent said the NLRB's authority to set policies through individual decisions is well established and that the board in Cemex followed its typical procedure of fashioning a new remedy and applying it to the case at hand.

"The majority reaches a different result by exalting form over administrative necessity," he wrote.

The NLRB declined to comment on Monday, and Brown-Forman did not immediately respond to a request for comment.

BOON TO UNIONS

The board in Cemex said employers can be ordered to bargain with unions if they engage in illegal labor practices such as threatening to close a worksite or firing union supporters during an organizing campaign, even when a union loses an election or one has not been held, because that conduct can improperly discourage workers from unionizing.

The ruling was widely seen as a boon to unions at a time when they were seeking and winning representation elections at a rate not seen in years. But the decision is likely to be overturned by the board now that it has a Republican majority appointed by President Donald Trump.

And Cemex, a construction materials distributor, has itself appealed the board's 2023 decision to the San Francisco-based 9th Circuit. The appeal is pending.

In Brown-Forman's case, the NLRB in 2024 found that the company had illegally interfered with a union campaign at its Woodford Reserve Distillery in Lexington, Kentucky. The company gave workers a raise of $4 an hour, more vacation time and a free bottle of bourbon to discourage unionizing after it became clear that the union could win an election, the board ruled. The union ultimately lost the election, 45-14.

The NLRB said that because the benefits granted to the workers could not be undone, it was not possible to hold a fair election. Instead, the board issued a so-called Cemex order requiring Brown-Forman to bargain with the union.

The 6th Circuit majority on Friday agreed that Brown-Forman had committed unfair labor practices by granting the raise and new benefits, but tossed out the Cemex order.

The board in Cemex had found that the company could also be forced to bargain under a different standard endorsed by the U.S. Supreme Court in the 1969 case NLRB v. Gissel Packing, which requires more severe illegal conduct. McKeague in the decision said that undermined the NLRB's rationale for carving out the broader test.

"The issue is that the Cemex Board created the standard for means unrelated to resolving the parties’ dispute," the judge wrote.

McKeague was joined by Circuit Judge Richard Griffin. Both judges were appointed by Republican former President George W. Bush. Mathis was appointed by Democratic former President Joe Biden.

The case is Brown-Forman Corporation v. NLRB, 6th U.S. Circuit Court of Appeals, No. 25-1060.

For Brown-Forman: Jacob Crouse and Oliver Rutherford of Smith & Smith

For the NLRB: Barbara Sheehy

For the union: Willie Burden of the International Brotherhood of Teamsters

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