The debate over the scope of the National Labor Relations Board’s (the “Board”) remedial authority under the National Labor Relations Act (“NLRA”) continues to intensify, and the Sixth Circuit has now added its voice to the growing chorus of courts rejecting the Board’s recent attempt to broaden its make-whole remedy.
Background: The NLRB’s 2022 Expansion Effort
In 2022, the NLRB reinterpreted Section 10(c) of the NLRA in its Thryv, Inc. v. NLRB decision to authorize a sweeping new remedy. The Board concluded that its power granted in Section 10(c) to order employers to take “affirmative action,” including reinstatement with or without backpay, also allowed it to award compensation for “all direct or foreseeable pecuniary harms” arising from an unfair labor practice.
Under this view, an employer could be liable for a wide range of financial consequences including childcare expenses, transportation costs, credit-card interest, penalties for early retirement withdrawals or even the loss of an employee’s home. Traditionally, however, these types of losses fall within compensatory damages, which the NLRA has never been understood to authorize.
Although the Fifth Circuit ultimately reversed Thryv on unrelated grounds, both the Third and Fifth Circuits have since held that the NLRB lacks authority to award full compensatory damages. The Sixth Circuit has now joined them.
The Sixth Circuit’s Decision in the Starbucks Case: Liability Upheld, Remedy Rejected
In NLRB v. Starbucks Corp., the Board found that Starbucks unlawfully discharged an employee who had been active in a union-organizing campaign. It ordered Starbucks to compensate her for all “direct and foreseeable pecuniary harms” resulting from the termination. On appeal, the Sixth Circuit agreed that substantial evidence supported the Board’s finding of anti-union animus. However, the Court parted ways with the Board on the scope of its remedy.
Echoing the Fifth Circuit’s reasoning in Hiran Management, the Sixth Circuit focused on what Congress actually authorized in the NLRA. The Court found that the phrase “affirmative action” is customarily linked to equitable powers in both state and federal courts. Consistent with that understanding, the Court held that the Board’s authority in Section 10(c) to take “affirmative action” is merely incidental to the primary purpose of Congress to stop and prevent unfair labor practices which is an equitable scheme. Additionally, the Court found important that the only stated remedies in Section 10(c) are “reinstatement” and “backpay” which are imbued with equitable principles. The Court further noted that similar statutory language in Title VII (§ 706(g)) was interpreted by the Supreme Court in United States v. Burke to exclude compensatory damages until Congress expressly added such remedies in 1991. Congress, however, has never amended the NLRA to authorize compensatory damages.
Why This Matters
The Sixth Circuit’s decision deepens an already-developing circuit split on the scope of the Board’s remedial authority. With three circuits now rejecting the Board’s expanded make-whole remedy, the issue appears primed for eventual Supreme Court review, particularly given the significant financial exposure the Board’s interpretation could impose on employers.
Until then, the landscape remains divided. Employers facing NLRB litigation in circuits that have rejected the Board’s expansion will likely see more limited remedial exposure. But in circuits that have not yet weighed in, the Board may continue to pursue broader “foreseeable harm” remedies.
Key Takeaways
- Circuit split deepens: The Third, Fifth and now Sixth Circuits reject the NLRB’s 2022 attempt to award “all foreseeable harms” as part of its make-whole remedy. The issue is increasingly positioned for potential Supreme Court review.
- NLRB’s remedy authority may be limited: Courts are continuing to hold that Section 10(c) authorizes only equitable remedies such as reinstatement and backpay, not compensatory damages.
- “Affirmative action” = equitable relief: The Sixth Circuit reaffirmed that this statutory term has historically been tied to equitable powers, not broad compensatory awards.
- Congress controls any expansion: Unlike Title VII, which was amended to allow compensatory damages, the NLRA has not been similarly amended, limiting the NLRB’s remedial reach.
- Starbucks case reflects trend: Even when the Board’s finding of an unfair labor practice is upheld, courts are rejecting its expanded make-whole remedy.
Contact
To discuss further, contact KJK Labor & Employment attorney Maribeth Meluch (MM@kjk.com) or Alan Rauss (AMR@kjk.com).