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SpaceX wins block on US labor board case over severance agreements

Published 07/10/2024, 05:24 PM
Updated 07/10/2024, 05:33 PM
© Reuters. FILE PHOTO: SpaceX logo and Elon Musk photo are seen in this illustration taken, December 19, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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By Daniel Wiessner

(Reuters) - A federal judge in Texas said on Wednesday he would block the National Labor Relations Board from pursuing claims that Elon Musk's SpaceX forced workers to sign illegal severance agreements, pending the outcome of the rocket maker's challenge to the agency's structure.

U.S. District Judge Alan Albright in Waco, Texas, at the end of a 40-minute hearing said he would grant a temporary block on the NLRB's administrative case after SpaceX argued it would be "irreparably harmed" by having to face an unconstitutional proceeding and cover the legal costs of defending itself.

Albright, an appointee of Republican former President Donald Trump, did not explain his decision and barely spoke during the hearing, but said he would issue a written ruling.

In an April lawsuit, SpaceX said the NLRB's in-house enforcement proceedings violate the U.S. Constitution because its administrative judges and five board members appointed by the president cannot be removed without cause.

To issue a preliminary injunction as Albright said he would on Wednesday, a judge has to find that a plaintiff is likely to succeed in their case.

SpaceX and its lawyers did not immediately respond to requests for comment. An NLRB spokeswoman declined to comment.

A lawyer for the board argued at Wednesday's hearing that under decades of U.S. Supreme Court precedent, officials at agencies such as the NLRB that were designed to be independent from political influence can be insulated from at-will removal by the president.

But two lawyers for SpaceX countered that more recent rulings, including a pair of cases involving the U.S. Securities and Exchange Commission, have made clear that officials with the power to enforce federal laws must be accountable to the White House.

SpaceX initially sued the labor board in a different Texas court in January, one day after the NLRB general counsel issued a complaint alleging the company had fired eight engineers for circulating a letter criticizing Musk, its CEO.

The lawsuit before Albright, which makes similar claims against the board, came after the agency in March issued a separate complaint claiming severance agreements signed by ex-SpaceX employees unlawfully barred them from disparaging the company and joining class-action lawsuits against it.

© Reuters. FILE PHOTO: SpaceX logo and Elon Musk photo are seen in this illustration taken, December 19, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Amazon.com (NASDAQ:AMZN), Starbucks (NASDAQ:SBUX), Trader Joe's, and a hospital operator in Michigan are among the other companies that have brought challenges to the NLRB's structure, either in administrative cases or in federal court.

An administrative judge in a May ruling in a case involving Starbucks punted on the issue, saying he lacked the power to rule on constitutional claims and that the claims were ultimately "a matter for the federal courts to decide."

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