A nursing home arguing that it can’t be subjected to financial penalties meted out by a National Labor Relations Board judge may prove a “well-suited” test of a recent Supreme Court ruling limiting the powers of such judges, some legal experts believe.
In May, the High Court ruled against federal regulators in Securities and Exchange Commission v. Jarkesy, finding that agency judges cannot enforce fraud complaints that should be tried in civil court. Experts said at the time that the decision would likely impact other agencies that impose civil penalties through the use of administrative law judges, but nursing home-related cases have been slow to percolate.
In September, Spring Creek Healthcare Center asked the US District Court for the District of New Jersey to issue a preliminary injunction that would block the NLRB from holding an administrative law judge hearing in its case with the SEIU. The NLRB’s general counsel has asked the ALJ to find the nursing home liable for violating collective bargaining provisions, including requiring penalties for “foreseeable economic harm to their unit employees resulting from their failure to comply.”
While Spring Creek allows that the ALJ can charge a nursing home for back pay or missing benefits, it notes that NLRB General Counsel Jennifer Abruzzo, wants a full “panoply of remedies,” in keeping with the agency’s recent push to financially penalize businesses outside of its Congressionally stipulated boundaries.
That, attorneys for the New Jersey operator argued in extensive fillings that continued through last week, conflicts with the Supreme Court’s Jarkesy ruling.
“In Jarkesy,” they wrote, “the Supreme Court precluded other branches from conferring ‘judicial power’ on entities outside [federal civil courts]. That also precludes the NLRB from doing so by adding a new remedy to its arsenal.”
Mark Reagan, managing shareholder of Hooper, Lundy & Bookman, told McKnight’s Long-Term Care News it’s “a really interesting complaint and one that I think is well-suited to test the application of Jarkesy.”
Some had thought civil monetary penalties issued by the Centers for Medicare & Medicaid Services and the administrative law judges that make up the Health and Human Services Departmental Appeals Board would be ripe for Jarkesy challenges. But so far, Reagan noted, such complaints have only gotten to the appeals board itself, where judges say they don’t have the jurisdiction to weigh on the Jarkesy issue.
“Ultimately, I believe that there will be a judicial challenge but it is hard to predict when that will occur given that very few SNF cases are getting released through the DAB process,” Reagan said. “As a result, the bottleneck of decisions is likely operating to delay that front of the war.”
Until the right case emerges from the CMS/HHS appeals board — or a provider attempts a legal challenge outside the appeals board process — nursing homes will face continued uncertainty around CMS’ right to assess civil penalties.
Labor front emerges
The employment front, however, may offer a more immediate and hopeful interpretation for providers.
Another attorney who specialized in NLRB cases told McKnight’s Spring Creek is in a growing group of employers seeking to use Jarkesy to try to curb the NLRB’s continued efforts to expand its authority and ability to impose financial penalties.
Spring Creek is a 179-bed nursing home; it is owned by Allaire Health Services, which specializes in acquiring nonprofit and other turnaround properties.
Traditionally, NLRB’s awards have included reinstatement of an employee to a prior position or back pay for a period of missed work. Since 2022, however, it has taken a more aggressive stance on restitution and penalties, as pointed out by Spring Creek.
“[T]he NLRB has recently claimed for itself the authority to award a broader range of relief, including traditional forms of legal relief that go far beyond the equitable restitutionary back pay remedy permitted by the statute,” the operator argued. “These new remedies, however, are nothing short of compensatory damages intended “to compensate [unlawfully terminated] employees for all direct or foreseeable pecuniary harms that these employees suffer as a result of” the unlawful termination.”
Those types of monetary damages, designed to compensate for losses, are “the classic form of legal relief,” attorneys added. Citing the Supreme Court’s Jarkesy ruling repeatedly, they argued that the Seventh Amendment prohibits an administrative agency from seeking legal relief for an alleged statutory violation. That would substitute an ALJ hearing for a trial by jury, they said.
Courts are split
So far, courts considering employers’ requests for the same type of injunction as Spring Creek have split. Legal experts expect the NLRB to continue to fight all such actions aggressively, meaning hearings could be put off indefinitely as cases weave their way through the federal court system.
In this case, the judge is also allowing for a brief to be submitted by the AFL-CIO and the SEIU. A hearing on that is set for Oct. 21, with the NLRB hearing currently scheduled for Nov. 7. Legal experts said a late October decision on the Jarkesy arguments and injunction is likely.
The case represents a more than three-year saga; the case began in 2021, after Spring Creek took over operations at the Perth Amboy facility and announced it would not adopt an expired collective bargaining agreement. Instead, the operator planned to negotiate a new agreement.
The union filed an August 2021 complaint against the previous operator, Amboy, saying that company made an “unlawful unilateral change by entering into an agreement to sell, transfer, or otherwise dispose of its business that does not comply with the successorship provisions of the parties’ collective bargaining agreement.” About 16 months later, it amended its complaint to include Spring Creek and make it a new party to that charge.
