Last week, a divided Sixth Circuit rejected the NLRB’s right to award compensatory damages as a remedy for unfair labor practices, but unanimously agreed to affirm the finding of an illegal termination by Starbucks during a union campaign. NLRB v. Starbucks Corporation, No. 23-1767 (6th Cir. 11-5-25). The unanimous Court found that the NLRB met its burden of proving that the employer treated the supervisor more harshly because of her union activities because it terminated her for a first policy violation six weeks after it happened, but shortly after it learned about unfair labor practices and other union activities and had not fired other supervisors for the same infraction on a first offense. However, the Court concluded that statutory and legal history provided that “affirmative action” powers given to the NLRB are limited to equitable remedies, and not the ability to punish or deter or to award monetary relief unrelated to the unfair labor practice (such as child care, credit card fees, etc.). Moreover the Seventh Amendment requires jury trials for compensatory and punitive damages, meaning a government agency lacks such unilateral authority.
According to the Court’s opinion, the supervisor began a
union organizing campaign. She was fired
in April several months later – along with another employee – because she violated
company policy by leaving that employee alone in the store (in high crime
neighborhood) in February for 30 minutes without previously informing
management. The employee was fired for
using profanity in front of customers.
Another supervisor had violated the same policy two years earlier before
he was fired. Although the supervisor
had reported the policy violation the next day, she was not demoted or suspended
pending investigation. While the manager
who recommended her termination was unaware of all of her activities, the legal
department could not deny the same.
§ 10(c) of the NLRA authorizes the
Board to order the employer to “cease and desist” from that practice and to
“take such affirmative action, including reinstatement of employees with or
without back pay, as will effectuate the policies of th[e] [NLRA.]” . . .. the Board now reads the phrase
“affirmative action” to authorize it to compensate “affected employees for all
direct or foreseeable pecuniary harms suffered as a result of the [employer’s]
unfair labor practice.” . . .
. . . the Board then crafted a “myriad of
other possible examples” of direct or foreseeable harms: childcare costs,
transportation expenses, credit card debt (including interest and late fees
thereof), penalties on early withdrawals from retirement accounts, and the loss
of a car or home from missed loan and mortgage payments. . . .
. . .
The question before us is whether
Congress used “affirmative action” as a phrase of art referring only to
equitable remedies, as Starbucks urges, or instead as a literal phrase
encompassing all types of relief, including those legal in nature, as the Board
suggests. To our minds, all signs point to the former.
In analyzing the text, the Court determined that legal
precedents and legal scholars: “likewise describe “affirmative action” as
authorizing relief that is equitable in nature.”
Consistent with this shared
understanding, the Board’s authority under § 10(c) to order employers to take
“affirmative action” encompasses only equitable remedies. That phrase has a
well-established meaning associated with the function or effect of traditional
equitable remedies. And “where Congress borrows terms of art in which are
accumulated the legal tradition and meaning of centuries of practice, it
presumably knows and adopts the cluster of ideas that were attached to each
borrowed word.” . . . Our conclusion, we note, aligns with the
Supreme Court’s NLRA-related recognition that “Congress did not establish a
general scheme authorizing the Board to award full compensatory damages for
injuries caused by wrongful conduct.” Int’l Union, UAW v. Russell, 356 U.S.
634, 643 (1958). Rather, “[t]he power to order affirmative relief under § 10(c)
is merely incidental to the primary purpose of Congress to stop and to prevent
unfair labor practices.” . . .
In addition to the textual analysis, the Court concluded
that
the structure of § 10, which
further confirms the equitable nature of “affirmative action.” Begin with the
fact that Congress, in the NLRA, did not make the Board’s remedial orders
self-executing. Rather, federal appellate courts must enter a “decree enforcing,
modifying and enforcing as so modified, or setting aside in whole or in part
the order of the Board.” . ..
. . . . Congress, when bestowing federal
courts with the power to award damages remedies, ordinarily does so only with
express limits. . . . .
Finally, the Court noted that the Seventh Amendment reserves
for juries the right to award compensatory and punitive damages. Having recently concluded that the SEC lacks
the authority as a government agency to impose damages, “the Supreme Court
reaffirmed that the Seventh Amendment encompasses all claims that are “legal in
nature,” regardless of whether they derive from statute or common law.”
In any event, the Board seeks to
grant monetary remedies at least partly designed to punish or deter employers
acting unlawfully. That is the very definition of legal relief.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
