Federal Appeals Court Split on NLRB's Power to Award Consequential Damages Sets Stage for Supreme Court Review

A common assumption in workplace negotiations is that federal labor law applies uniformly across the United States, offering the same protections and penalties regardless of where a company is headquartered. The reality, however, is that the financial stakes of a labor dispute now depend entirely on geography. Recent rulings from the Fifth and Sixth Circuit Courts of Appeals have struck down the National Labor Relations Board’s ability to award consequential damages to unlawfully terminated employees, deepening a stark divide in how federal labor law is enforced [1][2]. By rejecting the NLRB's expanded remedial powers, these courts have effectively created a fractured landscape where an employee's leverage in a severance or salary dispute varies wildly from state to state [4].[1][2][4]

The conflict centers on a 2022 NLRB decision known as Thryv, Inc., which fundamentally altered the calculus of labor disputes. For nearly ninety years, the NLRB’s remedial authority was generally understood to be limited to equitable relief, primarily reinstatement and back pay [2][7]. In Thryv, the Board broke from this precedent, asserting that it could order employers to compensate workers for all 'direct or foreseeable pecuniary harms' resulting from an unfair labor practice [1][5]. This meant that if an employee was fired for protected organizing activity, the employer could be liable not just for lost wages, but for cascading financial consequences such as credit card late fees, early retirement withdrawal penalties, and even the costs of defending against an eviction [2][7].[1][2][5][7]

That expanded authority has now faced severe judicial pushback. In late 2025, the Fifth Circuit ruled in Hiran Management v. NLRB that the Thryv remedy exceeded the statutory text of the National Labor Relations Act, which authorizes equitable relief rather than legal damages [2][3]. Less than a week later, the Sixth Circuit reached a similar conclusion in NLRB v. Starbucks Corp., vacating the Board's award of consequential damages and ruling that the NLRB cannot unilaterally invent new forms of monetary punishment [1][4]. These decisions align with a December 2024 ruling from the Third Circuit, which also rejected the Board's expanded remedial approach on statutory grounds [1][6].[1][2][3][4][6]

However, the legal landscape remains sharply divided because the Ninth Circuit has taken the opposite stance. In early 2025, the Ninth Circuit upheld the Thryv framework in a case involving Macy's, ruling that consequential damages further the policy of the NLRA by restoring the economic strength necessary to return an employee to the status quo [4][6]. Because the Supreme Court denied certiorari in the Macy's case in June 2026, the Ninth Circuit's ruling stands, meaning the NLRB can still pursue broad financial remedies against employers operating within that jurisdiction [6]. This creates a scenario where a company operating nationally faces vastly different liability profiles depending on where a labor violation occurs [5].[4][5][6]

For professionals navigating salary negotiations, severance agreements, or union organizing efforts, this circuit split directly impacts bargaining leverage. In jurisdictions where Thryv remedies have been struck down, employers face lower financial risks when taking aggressive stances during labor disputes, knowing their maximum exposure is largely capped at back pay [2][5]. Conversely, in the Ninth Circuit, the threat of uncapped consequential damages provides employees and unions with a powerful deterrent against retaliatory terminations, forcing companies to carefully calculate the potential downstream costs of a wrongful discharge [6][7].[2][5][6][7]

Beyond the statutory interpretation of the NLRA, the appellate courts have also raised constitutional concerns regarding the NLRB's expanded powers. The Sixth Circuit noted that awarding compensatory and consequential damages—remedies traditionally associated with tort and contract law—implicates the Seventh Amendment right to a jury trial [5][7]. By seeking legal damages in an administrative forum rather than an Article III court, the NLRB's approach has drawn scrutiny under recent Supreme Court precedents that limit the ability of federal agencies to impose civil penalties without a jury [3][5].[3][5][7]

The growing circuit split makes it increasingly likely that the Supreme Court will eventually have to intervene to establish a uniform standard for NLRB remedies [4][6]. Until that happens, or until a newly constituted NLRB reconsiders the Thryv precedent entirely, employers and employees must navigate a patchwork of enforcement [2][6]. Legal experts advise that companies litigating cases before the NLRB will routinely cite the Third, Fifth, and Sixth Circuit decisions to challenge any attempt to impose non-equitable damages, while unions will continue to leverage the Ninth Circuit's precedent wherever possible [2][5].[2][4][5][6]

This judicial pushback against the NLRB is part of a broader trend of federal courts reining in the administrative state and strictly interpreting the statutory limits of agency power [3][5]. For the workforce, the immediate takeaway is that the protections afforded by federal labor law are currently filtered through the lens of regional appellate courts. Understanding which remedial framework applies in a specific jurisdiction is now a critical component of any comprehensive strategy for workplace negotiation and dispute resolution [4][7].[3][4][5][7]