Courts Split Over NLRB Authority to Award Pecuniary Harm Remedies

Squire Patton Boggs notes in an article that a recent Sixth Circuit decision in NLRB v. Starbucks Corp. highlights a growing split among federal appeals courts regarding the National Labor Relations Board’s (NLRB) remedial authority under Section 10(c) of the National Labor Relations Act (NLRA). The court ruled that the Board exceeded its statutory authority by ordering an employer to compensate an unlawfully terminated employee for any direct or foreseeable pecuniary harm arising from the termination. This decision aligns with similar conclusions from the Third and Fifth Circuits.

The Ninth Circuit has reached the opposite conclusion, creating a split over the scope of remedies the NLRB may impose.

The dispute traces back to the NLRB’s 2022 decision in Thryv, Inc., where the Board expanded its make-whole remedy to include consequential damages arising from unfair labor practices. In Thryv, the Board asserted that Section 10(c) allowed it to order relief for out-of-pocket expenses such as credit card fees, medical costs, and interest on missed payments. It reasoned that such remedies were necessary for the purposes of the NLRA.

Traditionally, the Board’s remedies included reinstatement, back pay, and interest, all considered equitable relief. The expanded interpretation of remedial authority under Thryv became an issue in subsequent appeals, including Starbucks and Hiran Management v. NLRB.

In Starbucks, the Sixth Circuit agreed that the employee had been unlawfully terminated for union activity, but concluded that ordering compensation for pecuniary harm exceeded the Board’s equitable authority. It reasoned that Section 10(c) empowers the Board to grant affirmative equitable relief to remedy unfair labor practices, but monetary damages for indirect harms constitute legal relief beyond the Board’s statutory power.

The Fifth Circuit reached the same conclusion in Hiran, while the Ninth Circuit upheld such remedies in IUOE, Local 39 v. NLRB, viewing them as analogous to back pay.

This split leaves uncertainty regarding the enforceability of the NLRB’s expanded remedies. Employers, employees, and counsel should monitor developments until the US Supreme Court resolves the matter or a future Board provides clarification.