Third Circuit Finds NLRB Exceeded its Authority in Issuing Order Against Starbucks

Legal Alert

December 31, 2024

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In June 2023, the NLRB ruled that Starbucks illegally threatened and terminated two former employees for engaging in protected activities. Among other relief, the Board’s order required that Starbucks must “compensate [its former employees] for any direct or foreseeable pecuniary harms against them, including reasonable search-for-work and interim employment expenses, if any, regardless of whether these expenses exceed interim earnings.” In issuing the relief, the Board relied on its 2022 decision in Thryv, Inc., which held that, “in all cases in which [its] standard remedy would include an order for make-whole relief,” it will also “expressly order that the respondent compensate affected employees for all direct and foreseeable pecuniary harms suffered as a result of the respondent’s unfair labor practice.” 2022 WL 17974951 at *9.

On Friday, December 27, 2024, the United States Court of Appeals for the Third Circuit vacated the above-referenced portion of the Board’s order, finding that the Board exceeded its authority under the NLRA. Section 10(c) of the NLRA authorizes the Board to order employers to “cease and desist from” unfair labor practices and to “take such affirmative action[,] including reinstatement of employees with or without back pay, as will effectuate the policies of [the NLRA].” 29 U.S.C. § 160(c). The Court emphasized that by empowering the Board to order companies to “cease and desist” and “take affirmative action,” Congress granted it the authority to order equitable remedies, but not legal relief. The Board’s order that Starbucks must “compensate” the employees for losses “incurred as a result” of Starbucks’ wrongdoing purports to grant broad compensatory relief and, thus, exceeds its authority under the NLRA.

In issuing its ruling, the Court explained that the Board can still award monetary relief to employees beyond wages alone, so long as the award is closely tied to the equitable remedy of back pay. For example, the Board may include the employee’s lost health insurance and retirement benefits as part of a backpay award.

If you have any questions regarding the issues raised in this client alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.