Starbucks Convinces Third Circuit to Dial Back NLRB Power (1)

A federal appeals court pared back the National Labor Relations Board’s power to order employers to pay for the downstream economic consequences of their labor law violations in a case involving Starbucks Corp.

The NLRB’s remedial authority falls short of requiring companies to repay their workers for expenses that aren’t directly caused by unfair labor practices, the US Court of Appeals for the Third Circuit ruled Friday.

The appeals court drew a line between traditional make-whole remedies like back pay and reinstatement on one hand, and orders for the reimbursement of credit card late fees and medical expenses on the other.

Although the NLRB will likely continue to impose consequential damage orders in future cases, the decision means the agency won’t be able to have those orders enforced in Pennsylvania, New Jersey, and Delaware, where Third Circuit precedent is binding.

The Fifth Circuit also heard arguments around Thryv remedies in a case involving a Yellow Pages advertising company but ultimately vacated part of the decision based on the board failing to justify that the company illegally laid off workers. The NLRB’s lone Republican member Marvin Kaplan has since dissented on decisions involving the remedies, saying he believes the board doesn’t have the authority to issue them.

The case stems from Starbucks’ challenge to an NLRB ruling that it illegally fired two workers and committed other labor law violations in response to unionization efforts at two Philadelphia stores in 2019 and 2020.

The NLRB ordered the coffee giant to compensate the two terminated workers for expenses incurred as a result of the unlawful actions it took against them. The board recognized its power to regularly order such payments in its 2022 ruling in Thryv, Inc.

While the NLRB’s underlying findings were supported by “substantial evidence,” the board lacked authority to order that Starbucks compensate the fired workers for all “direct or foreseeable pecuniary harms,” Judge Thomas Ambro wrote in the opinion Friday.

Ambro said Congress didn’t “establish a general scheme authorizing the board to award full compensatory damages for injuries caused by wrongful conduct.”

The NLRB can still reward backpay and reinstatement but “cannot exceed what the employer unlawfully withheld,” the opinion said.

The court remanded the remedies portion of the order and handed it back down to the board for reconsideration.

The panel dismissed Starbucks’ allegations that the NLRB’s ALJs are unconstitutionally shielded from removal, saying the court lacks jurisdiction of the issue because the company didn’t bring it up before the board. Ambro also said the company failed to prove they were harmed by the removal protections at hand.

Judges Kent Jordan and Theodore McKee also sat on the panel.

Starbucks is represented by Williams & Connolly LLP. Agency lawyers represent the NLRB.

The case is NLRB v. Starbucks Corp., 3d Cir., No. 23-1953, 12/27/24.