Fifth Circuit Ruling on SpaceX and NLRB Removal Protections

Sheppard, Mullin writes that the Fifth Circuit Court of Appeals recently issued a significant decision affecting the National Labor Relations Board’s (NLRB) authority to prosecute unfair labor practice cases.

In SpaceX v. NLRB, a three-judge panel upheld injunctions barring the agency from proceeding against SpaceX and two other companies. It found that statutory limits on the President’s ability to remove NLRB members and administrative law judges likely violate constitutional separation of powers.

The court emphasized that subjecting companies to adjudications overseen by officers insulated from presidential oversight amounts to irreparable harm and warrants preliminary relief.

The dispute arises from statutory protections in the National Labor Relations Act (NLRA) that allow the President to remove Board members only for “neglect of duty or malfeasance” during their five-year terms and to remove Board Administrative Law Judges only for “good cause” after Merit Systems Protection Board proceedings.

These restrictions trace back to the Supreme Court’s 1935 Humphrey’s Executor decision, which permitted Congress to shield certain independent agency officers from at-will removal.

SpaceX and others challenged these limits, arguing that the Board’s powers far exceed the narrow functions originally approved in that precedent.

The Fifth Circuit agreed that both ALJ protections and Board member tenure restrictions likely conflict with constitutional requirements, pointing to the Board’s modern authority to adjudicate disputes, determine bargaining units, and seek judicial enforcement.

The court also cited recent Supreme Court action in Trump v. Wilcox, involving the removal of NLRB member Gwynne Wilcox, as signaling potential movement toward revisiting the 1935 decision.

With the Board already hamstrung by a lack of quorum following Wilcox’s removal, the ruling intensifies scrutiny of its structural legitimacy.

For employers, the decision opens new avenues to challenge NLRB proceedings on constitutional grounds. While a final Supreme Court resolution remains pending, the case signals growing judicial skepticism of longstanding protections against removal.

Employers facing Board proceedings should evaluate whether to assert similar structural challenges while continuing to comply with existing labor law obligations.