Hospital Menonita and the Future of NLRB Deference 

In the wake of Loper Bright and the end of Chevron deference, commentators have wondered whether the Supreme Court’s definitive interpretation of Section 706 could spell the end of other deference doctrines, including those that have developed outside the context of the APA.  One conspicuous body of caselaw under suspicion involves deference to the National Labor Relations Board (“NLRB”) and its interpretations of the National Labor Relations Act (“NLRA”). 

The D.C. Circuit’s decision last week in Hospital Menonita de Guayama, Inc. v. NLRB may not end the debate over NLRB deference, but it meaningfully shifts its terms.  Drawing on Loper Bright and its conception of the Article III judicial function, the Hospital Menonita majority held that courts have an independent obligation to determine the scope of the NLRB’s statutory authority.  This is a major development with serious consequences for deference doctrines that implicate independent regulatory agencies, and the ability of those agencies to repackage such deference doctrines as statute-specific delegations under Loper Bright. 

Background – The NLRB’s “Successor Bar” Rule 

The NLRA establishes the rights of employees to self-organize and join a union, and as a union, to collectively bargain with an employer.  It ensures that any union must retain majority support of the employees it claims to represent.  By the same token, the statute prohibits unfair practices that would restrain employees’ collective bargaining efforts.  An employer that believes a union no longer has the support of its workforce can challenge its representation status.  This is done either by asking the NLRB to facilitate a new election to confirm the union’s representation status, or instead, withdrawing recognition and defending that decision before the agency. 

In Hospital Menonita, the Circuit considered the NLRB’s so-called “successor bar,” which created an irrebuttable presumption that incumbent unions have majority support for up to one year after any change in business ownership.  The agency defended the rule as necessary to “preserve . . . the stability of . . . existing collective-bargaining relationship[s].”  But, to critics, it was a legal fiction that impinged on the associational rights of employees, as well as the ability of an employer to defend itself against charges of unfair labor practices.  (As an aside, the NLRB devised the successor bar—both in its current form and previous iterations—through individual adjudications, rather than rulemaking, which raises a separate question regarding its lawfulness.) 

The petitioner in Hospital Menonita was a Puerto Rican hospital.  The new owners of the hospital initially recognized the facility’s incumbent union, even though it did not enjoy majority support of any of the relevant collective bargaining units.  Once the hospital owners realized this, they withdrew recognition of the union.  The NLRB intervened, charging the hospital with unfair labor practices.  The agency ruled against the hospital, citing the successor bar. 

Prior Proceedings – Round One at the D.C. Circuit 

In early 2024, the D.C. Circuit rejected the hospital’s petition for review, concluding the NLRB was “entitled to deference” and the successor bar was “within the scope of reasoned interpretation of the NLRA.”  Judge Edwards noted that case law from the Supreme Court and the Circuit had long required reviewing courts to “accord[] Board rules considerable deference.”  Given the NLRB’s status as an expert on national labor policy, it was inappropriate for a court to second-guess its judgments.  Judge Katsas, in a concurrence, went a step further, explaining the “governing standard of review” was the “familiar Chevron framework.” 

The Supreme Court decided Loper Bright a few months later.  The hospital petitioned for writ of certiorari, arguing the deference afforded to the NLRB violated Loper Bright and its requirement for de novo review on legal questions.  The Supreme Court granted certiorari, vacated the D.C. Circuit’s judgment, and remanded for “further consideration in light of Loper Bright.” 

The Case on Remand – Judge Rao’s Opinion 

The D.C. Circuit reversed its judgment on remand.  Judge Rao, writing for herself and Judge Walker, opened her opinion by explaining why Loper Bright required the Circuit to revisit its earlier statutory analysis.  Although Loper Bright technically concerned the proper construction of Section 706, the Chief Justice’s discussion of the “traditional understanding of the judicial function”—what I have elsewhere termed the decision’s “constitutional atmospherics”—and the obligation of a federal court to provide the “single, best meaning” of the law after applying the traditional tools of statutory construction, was generally applicable. 

In Judge Rao’s mind, the prior panel “was explicit about its choice to defer to the Board’s ‘reasoned interpretation of the NLRA,” even going so far as to rely on the First Circuit’s express adoption of Chevron in another successor-bar case, NLRB v. Lily Transportation.  Moreover, even if Congress delegated some authority to the NLRB to exercise regulatory discretion on questions of labor law—something that has come to be known as “Loper Bright delegation”—federal courts remained responsible for policing the boundaries of that delegation, rather than testing the NLRB’s formal interpretations for mere “reasonableness.” 

Of note, at the outset Judge Rao addressed a stare decisis argument.  In Loper Bright, the Chief Justice had noted that, while the Chevron interpretive methodology was gone, that result did not “call into question prior cases that relied on the Chevron framework” to uphold specific agency actions.  These cases would instead be “subject to statutory stare decisis.”  Yet here, as Judge Rao explained, Hospital Menonita was decidedly not “settled precedent.”  It was the Circuit’s “first decision on the successor bar,” and the judgment was vacated in the wake of Loper Bright with a “specific directive” for reconsideration from the Supreme Court. 

Turning to the merits, Judge Rao explained the successor bar exceeded the statutory authority of the NLRB in two ways.  First, it violated employees’ “right to choose whether and how to collective bargain.”  Second, it impinges on their “right to be represented by a union that has majority support.”  In fact, the bar operated as a legal fiction: “Incumbent unions . . . [were] deemed majority representatives by Board decree,” in direct violation of the NLRA’s statutory protections, and its careful provision of a single, limited (and rebuttable) exception to challenges against a union’s majority status in the year immediately following any election.  That the petition in Hospital Menonita had abundant evidence that the union lacked majority support only underscored the practical consequences of the successor bar. 

Finally, Judge Rao rejected the NLRB’s arguments that it had broad “policy making authority” to “prevent unfair labor practices,” secure “industrial peace and stability,” and promote “efficiency” in labor law disputes.  On each point, she concluded that the general policy goals animating the NLRA could not function as grants of delegated regulatory authority, especially when the exercise of that ostensible authority transgressed clearly defined statutory requirements. 

The NLRA and Loper Bright Delegation – Judge Randolph’s Dissent 

Judge Randolph departed from the panel majority and offered a stinging dissent.  Relevant here, he correctly characterized Loper Bright as “reject[ing] the view that courts may treat statutory ambiguity as an implicit delegation of discretionary interpretive authority to an agency.”  But, in his view, the earlier Hospital Menonita panel had neither relied on “statutory ambiguity” nor an implicit delegation to uphold the successor bar.  Although the Circuit may have looked to Chevron as “suppl[ying] one theory of agency deference,” it also cited decades of caselaw that concluded the NLRA “itself entrusts the Board with substantial discretion to develop and implement national labor policy,” including Supreme Court decisions from after 1984 (here, here, and here) that never mentioned Chevron. 

Judge Randolph insisted that, even under Loper Bright, the NLRA should be read as providing the NLRB with sufficient authority to uphold the successor bar: “[W]hen Congress entrusts an agency with the responsibility to formulate and implement national policy, courts may reasonably infer a congressional intent to afford that agency discretion in executing that charge.”  The end of Chevron may have meant the end of an “across-the-board presumption” vis-à-vis implied delegations, but in Judge Randolph’s view it “preserved the distinct principle that Congress may confer discretionary authority . . . in particular statutory schemes,” like the NLRA.  (Of course, whether that view of implied delegation is compatible with Loper Bright is debatable, as I have argued elsewhere.  And it is equally curious that Judge Randolph avoided engaging with the possibility of an express delegation, which would just trigger a debate of the requisite specificity of a delegation, as my colleague and I have discussed with generalized “housekeeping” provisions.) 

Loper Bright and the End of Board Deference Under the NLRA 

Hospital Menonita joins a growing body of post-Loper Bright appellate decisions rejecting continued deference to the NLRB’s legal interpretations.  The Fourth, Fifth, Sixth, and Tenth Circuits have all emphasized the judiciary’s obligation to exercise independent judgment when determining the scope of agency authority, even under pre-APA organic statutes like the NLRA.  Yet some disagreement remains.  The Third Circuit, for example, continues to maintain that “judicial deference to the Board’s classifications . . . is distinct from Chevron deference.”  This leaves a circuit split that the Supreme Court has declined so far to resolve, although not for lack of relevant petitions, as the denial in United Natural Foods and pending request in PG Publishing Company demonstrate. 

Conclusion 

The NLRB’s successor bar may involve labor law, but at its heart, Hospital Menonita is an administrative law case.  Judge Rao’s opinion seeks to extend the central holding of Loper Bright, and its conception of the traditional role of the federal judiciary, beyond the confines of standard APA or “Chevron” cases.  Whenever an agency—“independent” or not—claims authority to bind private parties and interpret the law, courts must be prepared to ascertain whether Congress gave the agency such authority.  The NLRB’s supposed expertise on labor issues may inform its policy choices—as it claimed with the successor bar—but such broad policy expertise does not grant it regulatory discretion beyond what Congress has expressly bestowed in the NLRA. 

Ryan P. Mulvey is senior policy counsel at Americans for Prosperity Foundation.