When the National Labor Relations Board, or NLRB, dings a corporation for a labor violation, the typical chief executive’s response is to shrug and pay the man the $5. Corporations with a public image to protect may litigate matters for a while, but litigation is expensive—whereas NLRB penalties are scandalously cheap, consisting typically only of reinstatement and back pay to whoever got fired, the posting of public notices, or perhaps a modest change to workplace procedures. The NLRB is not permitted to issue fines or to reward the victim with punitive damages. The Protecting the Right to Organize Act would change that, leveling penalties of up to $100,000 per violation and holding corporate officers individually liable. Unfortunately, the PRO Act isn’t going to become law in this Congress.
Elon Musk is not a typical chief executive, or even a typical corporate scofflaw. Pick a corporate big shot. Mark Zuckerberg? A search of the NLRB’s website turns up three hits. Travis Kalanick, the famously obnoxious founder of Uber? Two hits. Jeff Bezos, whose union-busting at Amazon is the stuff of legend? Eighteen. Enter “Elon Musk,” though, and the NLRB search engine turns up no fewer than 86 hits.
Musk relishes union-busting so much that he craves an audience for it. In 2018, when Musk wanted to threaten Tesla plant workers with the loss of their stock options if they unionized, he did it on Twitter. The NLRB ruled Musk in violation of the Wagner Act; the (anti-regulatory) Fifth Circuit upheld the decision and ordered Musk to remove his tweet; Musk, who by now owned Twitter (now doing business as X), left it up anyway. The matter is currently being reviewed by the Fifth Circuit en banc.
More recently, a regional NLRB director issued a complaint concerning a third Musk company, Space X, which fired eight employees illegally for circulating a letter protesting Musk’s “inappropriate, disparaging, sexually charged comments on Twitter.” That too is a straight-up violation of the Wagner Act; the case will be heard in March. In the meantime, Space X this week filed a lawsuit arguing that the NLRB, which Congress created before Musk’s parents were born, ought not to exist. Not content to run Twitter into the ground, Musk now wants to repeal the New Deal. Naturally, that would be catastrophic, but this isn’t one of Musk’s nuttier crusades. He’s got a lot of allies sitting on the Supreme Court.
Musk’s Space X lawsuit argues that the NLRB is “an unconstitutionally structured agency” because its administrative law judges, or ALJs, can’t be fired by the president; because the NLRB performs both prosecutorial and judicial functions, thereby violating separation of powers; and because the NLRB’s board members, though appointed by the president, can be fired only for cause. His lawsuit also suggests that Congress can’t delegate judicial functions to an independent agency, an ancient argument the Supreme Court set aside when it reconciled itself in the late 1930s to the New Deal’s “alphabet agencies.”
Miraculously, the NLRB’s constitutional deficiencies went unnoticed by the courts for 89 years. They warrant attention now because the NLRB is inconveniencing Musk and his various companies.
If these arguments sound familiar, that’s because they’re part of Donald Trump’s war on the administrative state, which Trump’s then–chief strategist, Steve Bannon, pledged to “deconstruct” in 2017. In 2018 Trump issued an executive order giving the executive branch greater latitude in the hiring and firing of the federal government’s roughly 2000 ALJs (though not at the NLRB, where ALJs enjoy statutory protection). This was denounced by the ALJs’ professional organization, the Association of Administrative Law Judges, essentially as a return to the corrupt nineteenth-century spoils system. It will, the group said, “politicize our courts, lead to cronyism and replace independent and impartial adjudicators with those who do the bidding of political appointees.” On Trump’s way out the door in late November 2020, his administration also moved to bust a federal employees union for immigration ALJs, initiating a proceeding that remains unresolved.
The arguments in Musk’s lawsuit parrot those made in SEC v. Jarkesy, a case before the Supreme Court this term. The plaintiffs, led by a hedge fund manager and sometime Fox News blowhard named George Jarkesy, got busted by the SEC for securities fraud and fined $300,000; in addition, the SEC barred Jarkesy from the securities industry. Like the NLRB, the SEC is barred statutorily from ALJs serving at the pleasure of the president. ALJs can be fired only for cause. The Fifth Circuit, the most conservative appeals court in the United States, ruled that this arrangement is unconstitutional, and the SEC appealed to the Supreme Court. The Fifth Circuit also held that the SEC can’t perform both prosecutorial and judicial functions and that Congress lacks the power to delegate judicial adjudication to the SEC.
The New Republic’s Matt Ford, reporting in November on the Supreme Court’s oral arguments in Jarkesy, said the justices seemed entirely uninterested in the for-cause argument and only “fleetingly” interested in the nondelegation question (though five sitting justices have previously signaled a troubling eagerness to address it). But the justices seemed very interested in voiding Jarkesy’s SEC penalties on the grounds that the poor man didn’t get a jury trial.
According to Fortune’s Greg Stohr and Bloomberg, Musk is helping to bankroll Jarkesy’s legal challenge. Their obvious shared goal is to cripple regulatory agencies’ ability to pursue their fellow rich white-collar lawbreakers. I’m not familiar with all the details of Jarkesy’s case, but (also according to Fortune) he “said he didn’t recall more than 800 times during questioning at the SEC about deceiving investors.” Innocent parties tend to have less faulty powers of recollection.
Raise your hand if you think white-collar lawbreakers are treated too harshly in the U.S. White-collar prosecutions have been falling steadily for the past decade, according to TRAC, a nonprofit data tracker maintained by Syracuse University, and at the start of 2023 (the last year for which data are available), they’d fallen to a 41-year low. Seventy percent of all criminal referrals to the federal government result in prosecutions, but for white-collar prosecutions that proportion falls to 38 percent. The only types of criminal referrals less likely to result in prosecutions are those involving official corruption (34 percent), internal security or terrorism (25 percent), and civil rights (23 percent).
Regulatory agencies like the NLRB and the SEC pursue civil violations, not criminal ones, which by definition means they’re much more limited than prosecutors in the punishments they can impose. But there’s a growing likelihood that the Supreme Court will weaken even this pursuit of white-collar lawbreaking when it rules in Jarkesy and then, later, when it rules in another set of cases that deal with the “Chevron doctrine,” which limits how much judges like the reactionaries on the Fifth Circuit can cancel regulatory actions.
Bannon wasn’t lying when he said the Trump administration would move to deconstruct the administrative state; all it took was Trump’s appointment of three justices to the Supreme Court. Musk is famous for entertaining a lot of seriously crazy notions, but his idea that he can get the NLRB off his back by shutting it down, sad to say, isn’t crazy at all.