SpaceX Wins Landmark Appeal as Court Challenges NLRB’s Constitutionality

In a decision that could fundamentally alter the landscape of American labor law, the Fifth Circuit Court of Appeals has ruled that the National Labor Relations Board’s constitutional structure likely violates separation of powers principles. The landmark ruling represents a major victory for SpaceX and signals a potential constitutional crisis for federal labor enforcement that has operated largely unchanged for nearly nine decades.

The Constitutional Challenge – Separation of Powers at Stake

The Fifth Circuit’s ruling centers on a fundamental constitutional principle: the separation of powers doctrine that requires clear delineation between executive, legislative, and judicial functions. The court determined that the NLRB’s removal protections for board members and administrative law judges create an unconstitutional dual-layer insulation from presidential oversight.

The Fifth Circuit upheld lower court injunctions barring the National Labor Relations Board from prosecuting unfair labor practice cases against SpaceX and two other companies, finding that removal protections for board members and agency judges likely violate the U.S. Constitution. This decision builds upon previous Supreme Court precedents that have increasingly scrutinized independent agency structures.

SpaceX’s Legal Strategy – From Complaint to Constitutional Victory

The legal battle began in 2022 when eight former SpaceX employees filed a complaint with the NLRB alleging unfair labor practices. Rather than simply defending against the charges, SpaceX chose to challenge the fundamental constitutional authority of the NLRB itself, transforming a routine labor dispute into a landmark constitutional case.

Strategic Legal Maneuvering

SpaceX’s legal team employed a sophisticated constitutional strategy that went far beyond traditional labor law defenses. By challenging the NLRB’s structural authority rather than simply disputing the specific allegations, the company opened a new front in corporate constitutional litigation that could have implications extending well beyond labor law.

The Three-Judge Panel – Conservative Judicial Philosophy in Action

The unanimous ruling came from a three-judge panel that included two judges appointed by President Donald Trump and a third judge appointed by George H.W. Bush. This composition reflects the broader conservative judicial philosophy that has increasingly scrutinized the constitutional foundations of federal administrative agencies.

The Fifth Circuit has established itself as a leading judicial forum for constitutional challenges to federal agency authority, with this ruling representing the latest in a series of decisions that have questioned the constitutional foundations of the modern administrative state.

NLRB’s Strategic Retreat – Dropping Constitutional Defense

In a surprising strategic development, the NLRB filed a letter with the Fifth Circuit on February 3, 2025, indicating that it would not address constitutionality arguments. This decision to essentially concede the constitutional challenge represents a significant tactical retreat that may have contributed to the strength of the court’s eventual ruling against the agency.

Institutional Consequences

The NLRB’s decision not to defend its constitutional structure raises serious questions about the agency’s long-term viability and its confidence in its own legal foundations. This strategic choice could signal internal recognition that the agency’s current structure is indeed constitutionally problematic.

Broader Implications – The Future of Federal Regulatory Authority

The Fifth Circuit’s ruling extends far beyond the specific SpaceX case, potentially affecting numerous federal agencies that operate with similar structural protections. The decision could fundamentally alter how federal regulatory agencies are organized and how they exercise enforcement authority.

The ruling builds upon the Supreme Court’s decision in SEC v. Jarkesy, which has emboldened corporate constitutional challenges against the 89-year-old National Labor Relations Board. This growing line of precedent suggests that the current Supreme Court is increasingly receptive to structural challenges against federal administrative agencies.

Labor Law Revolution – Impact on Worker Rights

The constitutional challenge to the NLRB’s structure could have profound implications for American labor law and worker rights. If the ruling is upheld on appeal, it could fundamentally alter how labor disputes are resolved and how workplace rights are enforced.

Corporate Strategy Implications

The SpaceX victory provides a roadmap for other corporations facing NLRB enforcement actions. SpaceX and two other companies can keep their court orders freezing unfair labor practice cases as they litigate their constitutional challenges, demonstrating the practical power of constitutional challenges to halt regulatory enforcement.

The Road Ahead – Supreme Court and Congressional Response

The Fifth Circuit’s ruling is virtually certain to be appealed to the Supreme Court, setting up what could be one of the most significant constitutional cases affecting federal regulatory authority in decades. The current Supreme Court’s conservative majority has shown increasing willingness to scrutinize administrative agency structures.

Congressional Response and Reform Options

Congress faces several potential responses to the constitutional challenge, ranging from restructuring the NLRB to clarify its constitutional authority to potentially eliminating certain removal protections. The political dynamics surrounding labor law make comprehensive reform challenging but potentially necessary.

Potential legislative responses include:

• Restructuring NLRB governance to eliminate dual-layer protections
• Clarifying presidential removal authority over board members
• Separating prosecutorial and adjudicatory functions within the agency
• Creating alternative dispute resolution mechanisms for labor conflicts

Corporate America’s Constitutional Strategy

The SpaceX victory demonstrates the growing sophistication of corporate constitutional litigation strategies. Rather than simply defending against individual regulatory actions, companies are increasingly challenging the fundamental authority of federal agencies to regulate their conduct.

This trend toward constitutional challenges could fundamentally alter the relationship between federal regulatory agencies and the industries they regulate, potentially shifting power away from administrative enforcement and toward federal courts for constitutional interpretation.

A Constitutional Watershed Moment

The Fifth Circuit’s ruling in favor of SpaceX represents more than a single legal victory; it signals a potential constitutional watershed moment that could reshape federal regulatory authority for generations. The decision challenges nearly 90 years of accepted practice in federal labor law and opens new avenues for corporate constitutional challenges across the regulatory spectrum.

The implications extend far beyond SpaceX or even labor law, potentially affecting how federal agencies from the SEC to the FTC exercise their regulatory authority. As the case moves toward inevitable Supreme Court review, it carries the potential to fundamentally alter the balance of power between federal agencies, corporate entities, and constitutional governance.