SpaceX sues US labor board, claims agency structure is unconstitutional

After being charged with illegally firing workers who criticized Elon Musk, SpaceX yesterday sued the National Labor Relations Board (NLRB) in a lawsuit that claims the US labor agency's structure is unconstitutional.

On Wednesday, an NLRB regional director filed a complaint against SpaceX alleging that it illegally fired eight employees who drafted and distributed an open letter about Musk in 2022. If SpaceX doesn't settle the charges, the company is scheduled to face a hearing with an NLRB administrative law judge (ALJ) starting on March 5.

SpaceX filed its lawsuit against the NLRB in US District Court for the Southern District of Texas, claiming that the NLRB structure violates US law because the administrative law judge cannot be removed by the president of the United States. SpaceX made a virtually identically argument recently when it sued the US attorney general and two other Department of Justice officials in an attempt to stop a separate hiring-discrimination case.

"NLRB ALJs are 'Officers of the United States' under the Constitution's Appointments Clause—not mere employees—because among other things, they hold continuing offices through which they preside over adversarial hearings, receive testimony, shape the administrative record, and prepare proposed findings and opinions," SpaceX argued.

SpaceX: “The very definition of tyranny”

The NLRB administrative law judges have "at least two layers of removal protection," which "prevents that exercise of presidential authority and thus violates Article II of the Constitution," SpaceX told the court. "But for these unlawful removal restrictions, either the ALJ assigned to SpaceX's administrative case or the NLRB Members who bear responsibility to supervise and exercise control over the ALJ would face the prospect of removal by the President based on their conduct during the proceedings."

Musk's company asked for a preliminary injunction that would stop the proceeding, saying that "without interim injunctive relief from this Court, SpaceX will be required to undergo an unconstitutional proceeding before an insufficiently accountable agency official."

The NLRB declined to comment today on SpaceX's lawsuit. The NLRB complaint and notice of hearing to SpaceX said that during the scheduled administrative hearing, the company has "the right to call, examine, and cross-examine witnesses and to introduce into the record documents and other evidence."

SpaceX's lawsuit argues that NLRB members act as both prosecutor and judge. Quoting The Federalist No. 47 by James Madison, SpaceX wrote that the "NLRB's current way of functioning is miles away from the traditional understanding of the separation of powers, which views '[t]he accumulation of all powers legislative, executive and judiciary in the same hands' as 'the very definition of tyranny.'"

SpaceX is banking in part on an April 2023 Supreme Court ruling in a case involving the Federal Trade Commission and Securities and Exchange Commission. That ruling didn't resolve challenges to the agencies' use of administrative law judges, but found that federal district courts have jurisdiction to hear lawsuits over whether the agency structure is unconstitutional.

SCOTUS weighs similar challenge to SEC

The Supreme Court is currently weighing a challenge to the SEC's use of administrative law judges. The US Court of Appeals for the 5th Circuit ruled against the SEC, and the Supreme Court heard oral arguments in November 2023.

"Neither the Fifth Circuit nor the Supreme Court has decided whether the NLRB Members' layer of removal protection is unconstitutional," SpaceX's lawsuit said. "But the correct answer, given the relevant Supreme Court precedent and nature of the NLRB Members' functions, is a resounding yes."