Ruling On National Labor Relations Board Authority in Starbucks Union Dispute Impacts NLRA Enforcement

According to an article by the Benesch firm, the Third Circuit Court of Appeals vacated a National Labor Relations Board (NLRB) order requiring Starbucks to compensate two baristas for “direct and foreseeable pecuniary harms” resulting from alleged unlawful firings tied to unionization efforts. 

On December 27, 2024, the court ruled that the NLRB exceeded its statutory authority under the National Labor Relations Act (NLRA). This ruling significantly limited the Board’s remedial powers and set a precedent for future challenges to its authority.

The dispute arose from unionization activities at two Philadelphia Starbucks locations in 2019 and 2020, during which the company allegedly unlawfully terminated two employees. The NLRB found Starbucks guilty of unfair labor practices and issued a 2022 order requiring compensation beyond traditional backpay, invoking a broader interpretation of Section 10(c) of the NLRA. This expansion followed the NLRB’s Thryv decision, which introduced the practice of awarding consequential damages for pecuniary harms.

The Third Circuit rejected the NLRB’s interpretation, emphasizing that Section 10(c) does not grant the Board authority to impose compensatory damages. The court concluded that requiring Starbucks to compensate the baristas for pecuniary harms was an unauthorized remedy. The decision vacated the Board’s order and remanded the case for further proceedings.

According to the article, this ruling underscores federal courts’ growing scrutiny of the NLRB’s expanded powers under the Biden administration. By invalidating the Board’s consequential damages remedy, the Third Circuit has constrained the NLRB’s enforcement capabilities in its jurisdiction, which includes Pennsylvania, New Jersey, and Delaware. 

Employers in these states may have a stronger basis for contesting similar National Labor Relations Board orders, signaling potential shifts in labor law enforcement strategies nationwide.