On December 27, 2024, the United States Court of Appeals for the Third Circuit (“the Third Circuit”) vacated a portion of the National Labor Relations Board’s (NLRB) order requiring Starbucks to compensate two allegedly wrongfully terminated employees for “all direct or foreseeable pecuniary harms” resulting from Starbucks’ alleged unfair labor practices. The Third Circuit held that such a remedy exceeded the NLRB’s authority under the National Labor Relations Act (NLRA).
The decision stems from a case where two Starbucks employees were terminated after engaging in labor organizing activities. Starbucks claimed the terminations were due to policy violations and poor performance. However, the NLRB found that the terminations were motivated by the employees’ organizing activities, violating Sections 8(a)(1) and 8(a)(3) of the NLRA.
An ALJ found substantial evidence that the terminations and reduction in hours were motivated by anti-union animus, supported by internal communications and the timing of disciplinary actions, and the NLRB adopted the ALJ’s findings and ordered Starbucks to reinstate the employees and compensate them for lost earnings and benefits. Specifically, the NLRB cited the NLRB’s 2022 decision in Thryv, Inc. where the NLRB determined that in cases involving remedies of make-whole relief, the respondent must also compensate affected employees for “all direct or foreseeable pecuniary harms” caused by the unfair labor practices.
The Third Circuit reviewed the case and found, among other things, that the NLRB had exceeded its authority under the NLRA, explaining that the NLRA limits the NLRB’s remedial authority to equitable relief, such as cease and desist orders to entities engaging in unfair labor practices and reinstatement orders that may include back pay, and that the NLRB’s remedial authority does not extend to imposition of consequential damage orders. In essence, the Third Circuit altered the NLRB’s holding in Thryv that all cases involving a make-whole remedy would necessarily include compensation for the affected employee’s direct or foreseeable pecuniary harms suffered because of the unfair labor practices.
The Third Circuit is the only U.S. Court of Appeals to recognize such a limit, so NLRB decisions that order compensation for direct or foreseeable pecuniary harms will still be enforceable in all states and territories outside of Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands. If you have any questions about the subject of this article and its implications for your business, please contact Forework.