• A unanimous Fifth Circuit panel vacated the National Labor Relations Board’s 2023 decision in Lion Elastomers¹ on the grounds that the NLRB exceeded the scope of the court’s 2021 remand and deprived Lion Elastomers of its due process rights.
• The court remanded the case to the Board with the instruction to apply General Motors² in this case only. But the decision highlights both the importance of raising procedural and other challenges in NLRB litigation, arguing that Lion Elastomers is no longer Board law (or was wrongly decided even if its), and the critical firewall role the Fifth Circuit continues to play in keeping the Board in check.

On July 9, 2024, the U.S. Court of Appeals for the Fifth Circuit took the latest step in a continuing controversy about when obscenity or other misconduct by a worker, while raising otherwise protected job complaints, justifies that worker’s termination. In Lion Elastomers, the court directed the National Labor Relations Board to review such a firing using the legal standard that the Fifth Circuit had specified in a prior remand decision. Instead of doing so, however, in 2023 the NLRB engaged in a “bait and switch,” the court said, when it claimed to overrule the standard in question. According to the court, this procedural maneuver not only exceeded the scope of the previous remand, but it also denied the company due process because the Board prevented it from submitting legal arguments about whether the prior standard should be overruled. While the Fifth Circuit did not determine what standard the Board will apply in similar cases going forward, it has left the door open to a potential reversion to the General Motors standard that the Board purported to overrule.

Section 7 Ping Pong

The NLRA does not address when Section 7 protection is lost by an employee’s misconduct, so in the past the Board has analyzed this question on a case-by-case basis. For example, in the 1979 Atlantic Steel decision, the NLRB outlined a four-factor test to determine if an employee’s concerted activity at work loses the protection of the Act by evaluating: "(1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee's outburst; and (4) whether the outburst was, in any way, provoked by an employer's unfair labor practice."

In 2020, the Board abandoned this test in its General Motors decision, which replaced the situation-specific tests with the longstanding framework established in Wright Line³ for mixed-motive cases. General Motors provided for use of this approach regardless of where the employee’s behavior took place. Wright Line features a burden-shifting analysis under which the NLRB’s general counsel must first show that an employer disciplined an employee because of Section 7 activity. An employer can then rebut that prima facie case by showing it would have taken the same action regardless of the Section 7 activity. By adopting this framework, the Board in General Motors sought to balance employees’ rights to engage in protected activities under Section 7 with the need for employers to comply with laws that prohibit abusive workplace speech, for example Title VII and state anti-discrimination laws.

Lion Elastomers’ Procedural History

In 2017, Lion Elastomers, a rubber manufacturer, discharged an employee after an expletive-laden and aggressive exchange with his boss while arguably engaging in protected activity under the Act. The union filed an unfair labor practice charge regarding the termination, and the case made its way through the NLRB administrative process, culminating in a Board decision upholding an administrative law judge’s finding that the discharge was unlawful. The employer then sought appellate review.⁴

Shortly thereafter, while Lion Elastomers’ appeal was pending, the Trump-era Board majority supplanted Atlantic Steel with the mixed-motive standard applied in General Motors, whereupon the NLRB’s general counsel filed with the Fifth Circuit an unopposed motion to remand the case to the Board "in light of the Board's decision in General Motors." The Board's motion explained that because General Motors had overruled Atlantic Steel, the Board needed to re-evaluate the behavior at issue under the newly issued General Motors test. The Fifth Circuit granted the motion in a one-sentence order.

The NLRB then sought the parties’ positions on “the issues raised by the remand.” In response, the NLRB's general counsel argued that the Board should overrule General Motors. In light of this position, Lion Elastomers sought to brief the issue raised by the NLRB’s general counsel, but the Board denied this request. The Board then issued a decision overruling General Motors and returning to Atlantic Steel.

The Fifth Circuit Decision

The Fifth Circuit strongly criticized the Board’s actions, holding that the Board committed two significant errors: (1) the Board exceeded the scope of the remand and (2) the Board denied Lion Elastomers its due process rights when it decided to overturn General Motors without affording the company the opportunity to be heard on that issue.⁵

With respect to the first error, the court held that the Board must follow the “letter and the spirit” of the remand, which had instructed the Board to review its analysis in light of the decision in General Motors, as it had requested, not to overturn General Motors. The Fifth Circuit noted, “if the NLRB intended to defend Atlantic Steel and its application to Lion Elastomers, it’s unclear why the Board sought remand at all.”

The Fifth Circuit also held that the NLRB violated Lion Elastomers’ due process rights by failing to afford it the opportunity to brief the issue of whether General Motors should be overturned. The court pointed out that Lion Elastomers could not have anticipated having to defend against this argument when it submitted its original position statement because that was not within the scope of the remand. Thus, in denying Lion Elastomers’ request to submit a reply brief on this issue, the NLRB deprived Lion Elastomers of a full opportunity to be heard.

Practical Considerations for Employers

While the Fifth Circuit vacated the 2023 Lion Elastomers decision, it did not opine on what standard – General Motors or Atlantic Steel – should be applied to employee conduct in other cases going forward. Instead, the Fifth Circuit remanded the case with a requirement that the Board apply General Motors only to this case. Thus, employers will continue to grapple with how to address arguably protected Section 7 activity that may get “heated” or involve the use of harassing language, profanity, or other misconduct.

Before taking disciplinary action, employers should review each case using both a Wright Line and the setting-specific analysis—even if the behavior runs afoul of anti-discrimination laws and company policies—and weigh the various legal and strategic considerations. While employers could approach decision-making on employee discipline related to this type of conduct as if Lion Elastomers were never decided, it is appropriate to assume the current Board majority will continue to resist a return to General Motors.

Further, and perhaps even more notably, the Fifth Circuit decision highlights the importance of raising procedural and due process arguments when challenging Board action. Lion Elastomers prevailed on two non-substantive arguments here – i.e., that the Board exceeded the scope of the remand and denied the employer due process in not being able to brief the issue decided by the Board. Although the Fifth Circuit did not address the substantive issue, it nevertheless held the Board in check by affirming these arguments, signaling to the Board that it cannot exceed the scope of its authority and play fast and loose with the rules.

Finally, this decision is yet another example of the Fifth Circuit holding the Board in check when it attempts to overreach. It, thus, continues to be a favorable circuit in which to challenge Board activity.

Footnotes

¹ 372 NLRB No. 83 (2023).

² 369 NLRB No. 127 (2020).

³ Wright Line, 25 NLRB 1083 (1980), enforced, 662 F. 2d 889 (1^st Cir. 1981).

⁴ 369 NLRB No. 88 (2020)

⁵ The Fifth Circuit specifically declined to opine on what Section 7 standard should have been applied in this case, holding that it did not need to rule on that issue because it resolved the case on other grounds – i.e., procedural deficiencies.