Elon Musk hits back against NLRB for SpaceX court case by filing lawsuit that questions the very legitimacy of the federal agency

Elon Musk wants answers after the federal agency accused the SpaceX CEO of unlawfully terminating employees who called the tycoon an “embarassment“, setting a March 5 court date with an NLRB judge.

In a lawsuit filed in federal district court in Texas, Musk’s attorneys from the firm Morgan Lewis & Bockius in Houston argued the very idea of being both accused of and judged by the same agency without the benefit of a jury is itself a violation of his rights. 

“SpaceX will be required to undergo an unconstitutional proceeding before an insufficiently accountable agency official,” the claim states.

They contend that NLRB judges are beyond the reach of traditional government oversight and can act largely with impunity.

Should the White House decide an NLRB judge has exceeded their authority, it cannot simply fire them at will, the legal term for terminating an employee at any time for any reason. Instead there must be grave reasons, such as gross negligence, misconduct, or fraud that can cause serious harm to their employer. 

Even if the conduct of an administrative law judge (ALJs)—for example, the one presiding over the SpaceX case—were to come under scrutiny, such a judge would have little to fear. That’s because the judge’s direct superiors who would be tasked with any inquiry only risk losing their position for cause as well. 

“NLRB ALJs are covered by two layers of removal protection, which insulate them from oversight by the President,” the law firm claims.

The agency itself, they continue, moreover lacks the typical checks and balances that apply to any other government branch.

“The NLRB is also unconstitutionally structured because its members exercise all three constitutional powers—legislative, executive, and judicial—in the same administrative proceedings,” the claim states.

Finally, they claim the NLRB’s proceeding itself impinges on SpaceX’s legal rights.

“They violate the Seventh Amendment, which preserves the right to trial by jury,” Musk’s team states.

SpaceX’s lawyers argue the Fifth Circuit appellate court ruling in the 2022 case of SEC v. Jarkesy already determined this kind of reinforced safety net for officials was unconstitutional.

The landmark case, which involved a fine imposed on a hedge fund speculator, questioned whether in-house legal proceedings conducted by the Securities and Exchange Commission violated his right to a jury trial in civil lawsuits.

A reputation for regulating through enforcement

Whether Musk’s lawsuit will go anywhere is questionable. Thanks to his vast wealth and allergy to outsiders interfering with his business interests, Musk has a track record of launching symbolic if not frivolous lawsuits experts say have little hope of success.

But he may have a stronger case with NLRB, which has been a source of controversy. The agency’s rulings swung wildly from the business-friendly Trump administration that sought to quash organized labor to the now union-friendly NLRB under the Biden White House. 

While it’s not unusual for the party in power to stuff government agencies with loyal allies rather than independent experts, a libertarian think tank that guards against government overreach argued recently the NLRB is even less predictable.

“Unlike other agencies, the Board makes almost all its decisions not through rulemaking, but through one-off panel decisions,” the Federalist Society wrote in November. At the top of the NLRB is a five-person board appointed by the president and approved by the Senate.

As a result, “the ‘law’ can swing wildly from case to case,” according to the think tank, with the agency’s judgements posing wide ranging ramifications for employment law.

The NLRB did not respond to a request by Fortune for comment by press time.

One other agency has recently developed a similar reputation for “regulation by enforcement”. Biden appointee, SEC chair Gary Gensler, has been heavily criticized over allegetions his financial watchdog making up policy on the fly when it comes to cryptocurrencies.

Either way, for constitutional and labor law scholars, Musk’s NRLB lawsuit means things could soon get interesting.