U.S. Supreme Court Ruling Makes It More Difficult for the NLRB To Secure Preliminary Injunctions: What Does This Mean for Employers?

In yesterday’s U.S. Supreme Court ruling in Starbucks v. McKinney, the Court held that federal courts must apply the traditional equitable four-factor test when evaluating National Labor Relations Board (“Board”) requests for preliminary injunctive relief. This pivotal ruling resolves a circuit split and, in many jurisdictions, raises the Board’s burden of proof when seeking preliminary injunctive relief. While four U.S. Circuit Courts of Appeals already apply the traditional four-factor test, six others use a more lenient standard. Summarized below are our legal analysis of the ruling and recommendations for best practices going forward.

Factual Background of the Starbucks “Memphis 7”
Seven Starbucks baristas in a Memphis, Tennessee, location (dubbed the “Memphis 7”) were fired by the company during a unionization push in early 2022. Starbucks alleged the Memphis 7 violated company policy by entering staff-only areas while off-duty and granting unauthorized individuals entry after hours. Region 15 Director McKinney argued that the terminations were unfair labor practices and, after filing an administrative complaint, sought preliminary injunctive relief under Section 10(j) of the National Labor Relations Act (“NLRA”).  

Differing Preliminary Injunction Standards
The United States District Court for the Western District of Tennessee agreed with the Board and ordered Starbucks to reinstate the baristas. Starbucks appealed, arguing that the district court had failed to apply the traditional equitable four-part test, which includes an analysis of whether the employees would suffer irreparable harm. The Sixth Circuit Court of Appeals affirmed the district court’s ruling, holding that a more lenient two-factor test applies when analyzing Section 10(j) injunctions. The two-factor test asks (1) whether there is “reasonable cause” to believe unfair labor practices occurred (meaning that the Board’s theory is substantial and not frivolous) and (2) whether injunctive relief is “just and proper” (meaning the relief is necessary to preserve the status quo until the administrative process is exhausted).

Starbucks appealed to the Supreme Court, arguing that preliminary injunctive relief is an extraordinary remedy that requires the more stringent traditional four-factor injunctive relief test. Under the traditional test, a plaintiff must establish (1) they are likely to succeed on the merits, (2) they are likely to suffer irreparable harm absent a preliminary injunction, (3) the balance of equities tips in their favor, and (4) an injunction is in the public interest. The Board responded that a more lenient standard was required.

The Supreme Court's Ruling
In an 8-1 decision, the majority rejected the two-factor test and held that the traditional four-factor test applies. The majority analyzed the statutory language and explained that Section 10(j)’s text does not support abandoning the presumption that the traditional four-factor test applies to cases under the statute. Accordingly, district courts must apply the traditional four-factor test when considering the Board's request for a preliminary injunction. The Court also observed that “[i]t is hard to imagine how the Board could lose under the reasonable cause test if courts deferentially ask only whether the Board offered a minimally plausible legal theory, while ignoring conflicting law or facts.”

While agreeing that courts must use the four-factor test, unlike the majority, Justice Jackson found Congress intended to vest authority in the Board as an expert agency to resolve unfair labor practices cases. As a result, the dissent concluded that to properly account for the district court’s limited role in reviewing the Board’s decisions, a less exacting standard should apply when ruling on preliminary injunction motions brought under Section 10(j).

The Court vacated the Sixth Circuit’s ruling and remanded the case for further proceedings.
 
Looking Forward
Employers should familiarize themselves with the four-factor test for preliminary injunctions and closely monitor this stricter test’s impact on labor disputes in the future. Employers should also consider the following best practices:

• Strengthen internal investigation procedures to ensure that any claims of misconduct have been investigated impartially and thoroughly. Pay particular attention to discipline imposed on employees who have engaged in similar misconduct.
• If a labor dispute appears likely, carefully document all actions taken and the reasons for such actions. Appropriate documentation can help employers defend against the Board's attempts to satisfy the four-factor test.
• Ensure supervisors, managers, and HR personnel understand their responsibilities under the NLRA. Training these individuals regarding their responsibilities and the potential consequences of engaging in unfair labor practices is a crucial compliance step that will help mitigate risks in any unionized workforce or workforce that is a likely target of union activity.
• Provide avenues for employees to express concerns. Proactive communication may prevent escalation to the point where the Board claims the employer engaged in an unfair labor practice.