Siren Retail Corporation: Another Nail in the Coffin of NLRB Deference 

Earlier this summer, I highlighted the D.C. Circuit’s decision in Hospital Menonita and its rejection of deference to the National Labor Relations Board.  Last week, in Siren Retail Corporation v. NLRB, the Second Circuit joined the ranks of the Fourth, Fifth, Sixth, Tenth, and D.C. Circuits by emphasizing the judiciary’s obligation, after Loper Bright, to exercise independent judgment when determining the scope of agency authority, even under pre-APA organic statutes like the National Labor Relations Act.  This is an important development that demonstrates how Loper Bright is reshaping the law beyond the APA and the standard of review set out in 5 U.S.C. § 706.  There is growing consensus that Loper Bright has constitutional relevance for understanding the judiciary’s responsibility for determining what the law means. 

Loper Bright’s Constitutional Force 

In Loper Bright, the Supreme Court confirmed that, at least as far as the APA is concerned, federal courts are obligated to provide “independent judgment” as to the “best” meaning of the law.  Although courts should pay “due respect” to the views of the executive branch, those views are persuasive only insofar as they are probative of the original public meaning of the law.  And they are most persuasive when longstanding and contemporaneously issued with the underlying statute they purport to interpret.  In all cases, the text of the law is paramount and remains the principal object of judicial interpretation. 

Although Loper Bright can be read narrowly to provide only a definitive interpretation of Section 706, some have wondered whether the decision carries broader “constitutional atmospherics” that impact the validity of other deference doctrines, especially those that developed prior to the APA.  One such doctrine involves the NLRB, and rests on a presumption that Congress, through the NLRA, entrusted the Board with substantial discretion to interpret the law as part of its development of national labor policy.  On this view, the Board’s interpretations ought to be given “considerable deference” and be subject to “limited judicial review.”  This deference co-exists and intertwines with another line of cases stretching back to NLRB v. Hearst Publications, which suggests deference is due to the Board on so-called “mixed questions” of law and fact that arise whenever legal standards under the NLRA are applied to the factual circumstances in discrete cases. 

Most of the courts of appeals to have considered NLRB deference post-Loper Bright have rejected it and instead emphasize the importance of de novo “independent” judgment.  This development takes seriously Loper Bright’s broader consideration of how deference—at least on legal questions—stands in tension with judges’ Article III commitments. 

Pins and Shirts and Alleged Unfair Labor Practices 

Siren Retail arose from the NLRB’s determination that Starbucks committed unfair labor practices by mandating a uniform code that limited employees from wearing certain buttons, pins, or unapproved shirts.  The policy was applied in one of Starbucks’s upscale New York City “Reserve Roasteries.”  After an employee union filed a complaint, the Board initiated administrative proceedings and an administrative law judge sided with Starbucks, based on its reading of the Second Circuit’s opinion in NLRB v. Starbucks Corp. and the NLRB’s own precedent, Tesla, Inc.  The Board reversed. 

 “Unfettered Authority” to Interpret the Law 

Writing for a unanimous panel, Judge Walker rejected the Board’s position with respect to Starbucks’s “one-pin” policy but remanded the remainder of the case for re-application of the Tesla test under a proper understanding of relevant Supreme Court precedent, namely, Republic Aviation Corp. v. NLRB.  In doing so, he clarified the Board was not entitled to any deference on legal questions, including proper interpretation of controlling precedents. 

Before turning to the merits, it is worth highlighting Judge Walker’s discussion of the standard of review.  After recognizing Loper Bright does “not disturb the nature of [a federal court’s] review of the NLRB’s factual findings,” which are evaluated under the 29 U.S.C. § 160’s “substantial evidence” standard, Judge Walker emphasized the Board’s “legal conclusions” must be subject to an independent judicial check.  He explained (with my emphases): 

[W]e may no longer defer to the opinions of the NLRB . . . .  [W]hile the NLRB’s legal conclusions may no longer have the “‘power to control,’” as they did under Chevron, they may still have the “‘power to persuade.’” . . .  Such persuasive force is not present, however, . . . [if] the Board misinterprets and misapplies the law. . . .  We have unfettered authority under Loper Bright to analyze such questions de novo. 

Although Judge Walker wrote of the “power to persuade” and, in omitted passages, referenced Skidmore, his opinion is not an endorsement of the approach adopted by the Ninth Circuit in Lopez v. Bondi.  An agency’s legal conclusions cannot be the starting point for the court’s review, and those conclusions only have persuasive value so long as they represent a correct interpretation or application of the law.  Everything bends to the court’s exercise of “unfettered” independent judgment in search of the best meaning of the law. 

Judge Walker also recognized that, under Loper Bright, a “statute’s meaning may well be that the agency is authorized to exercise of degree of discretion,” which might trigger deferential review.  And he similarly recognized the Supreme Court’s suggestion, in Beth Israel Hospital v. NLRB, that the Board enjoys “authority to formulate rules to fill the interstices of the [NLRA’s] broad statutory provisions.”  But, as Loper Bright makes clear, courts enjoy “primary interpretive responsibility” for identifying and delimiting the boundaries of such delegations.  In this respect, much like Judge Rao’s sentiments in Hospital Menonita, it seems unlikely the general policy goals animating the NLRA can function as an implied delegation of regulatory authority, at least in the absence of an express textual grounding. 

It is also worth noting Judge Walker’s footnote on the continuing force of Hearst Publications.  As he wrote, it is unsettled whether “some deference may still be owed to [an agency’s] reasonable application of the correct law to a particular set of facts.”  Loper Bright admittedly suggested “due respect” to an agency is especially warranted when its interpretation rests on “factual premises within [its] expertise,” such as when “mixed questions” arise.   But as I discussed here and here, the “notion that, absent an express delegation, the mere application of law to facts could somehow insulate an agency’s judgment from meaningful de novo review . . . is simply wrong.” 

Back to the Percolating Question 

Having articulated the proper standard of review for the Board’s legal opinions, Judge Walker turned to the Board’s conclusion that Starbucks committed unfair labor practices.  On the question of Starbucks’s one-pin policy, the Circuit concluded the Board’s determination was foreclosed by NLRB v. Starbucks Corp., which the agency had misread and incorrectly distinguished given the facts of the present case. 

Turning to the other dress-code policies, the Circuit concluded the Board’s adjudication relied on a misunderstanding of controlling Supreme Court precedent.  In Tesla, the Board had moved from its earlier reasonable-balancing test for determining the validity of employer dress restrictions to a rebuttable presumption that mandatory uniform rules violate the NLRA.  Yet Tesla “rest[ed] on erroneous legal foundations.”  Despite the Board’s claim that the test was derived from the Supreme Court’s decision in Republic Aviation, that case “recognized that the right [of employees to display union insignia] is not absolute,” at least without evidence of discriminatory purpose.  Since “the interpretation of Supreme Court precedent is a question of law that ‘falls under the special, if not unique, competence of courts,’” the Circuit owed no special deference for the Board’s position. 

Conclusion 

Siren Retail now returns to the NLRB with directions that the Board “apply a more evenly measured balancing test.”  Interestingly, as others have noted, the Board’s General Counsel has called for the overruling of Tesla, Inc.  As for the broader question of deference to the NLRB, the agency has filed a petition for rehearing en banc in Hospital Menonita.  That petition relies heavily on Judge Randolph’s dissent, and the notion Loper Bright does not overturn earlier cases that held Congress delegated to the Board responsibility for “formulat[ing] rules to fill the interstices of the [NLRA’s] broad statutory provisions.”  In the near term, all eyes are on the Supreme Court.  The pending cert petition in PG Publishing, which challenges the Third Circuit’s decision in Alaris Health, has been distributed for the September 28^th “long” conference.  We may soon see the Supreme Court step into the fray to decide the future of NLRB deference. 

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