What Happened with the Recent Supreme Court Ruling on Labor?

With a summer defined by a series of dramatic rulings by the Supreme Court of the United States (SCOTUS) on topics from presidential criminal immunity to reproductive rights, the June 27th ruling on SEC v. Jarkesy did not prompt many bold, outraged headlines. And yet, while the case does not mention the National Labor Relations Board (NLRB) by name, the ruling did touch on the agency’s power in one important respect: namely, the NLRB may not issue punitive penalities against employers, only corrective ones.

What’s the difference between a punitive penality and a corrective one? A corrective penalty tends to focus on restoring the status quo: issues like back pay, reinstating wrongly fired employees, or other measures that fix a clearly defined transgression tend to qualify as corrective. A punitive penalty, however, may take the form of fining a CEO for flagrantly lying or otherwise demonstrating poor behavior.

In this specific case, SCOTUS ruled that an administrative law judge acting on a case brought by the SEC was wrong to fine hedge fund advisor George Jarkesy close to $1 million in penalties because Jarkesy made misrepresentations (i.e., lies) when launching the funds. The reasoning? The administrative law judge’s ruling violated the 7th amendment, which guarantees a trial by jury.

This ruling may not seem particularly earth-shattering, but by limiting the power of administrative law judges, the case seems like an invitation to other parties to start challenging the constitutional authority of the NLRB and its judges on other matters. Since administrative law judges oversee crucial labor issues—among them, how and when businesses bargain with their employees, how union elections are conducted, and the legality of misconduct rules, severance agreements, and the day-to-day rights of workers on company property—this ruling could be a backdoor into gutting the NLRB.

Many prominent organizations and CEOs, including Elon Musk, Trader Joe’s, and Jeff Bezos already have lawsuits against the NLRB working their way through the court system. While the speed of the court system is slow, the threat to organized labor is ever-present. Stay vigiliant and informed!

Photo Credit: Matt Popovich/Flickr

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