A new federal court decision could fundamentally transform private sector labor law. In Space Exploration Technology Corporation v NLRB et al, the United States District Court for the Western District of Texas ruled Monday that the National Labor Relations Board, and by extension the National Labor Relations Act, were unconstitutional. While the case is not yet resolved and appeals are likely, the landscape of labor law could be forever changed should the ruling stand.

The case is the result of the National Labor Relations Board’s aggressive opposition to requirements that workers sign arbitration agreements as a condition of employment. Arbitration agreements require employees to waive their right to sue over employment disputes in favor of private arbitration. Elon Musk’s SpaceX is one of the many companies which require these agreements. This drew the attention of the NLRB, which issued a formal complaint against the company.

SpaceX responded by arguing that the board’s very existence was unconstitutional. The district court agreed.

SpaceX’s argument was simple: The members of the National Labor Relations Board, and some of the lower officials they supervise, are improperly insulated from being fired by the President. Since Article II of the U.S. Constitution vests the executive power of the government with the President, argued SpaceX, these restrictions on removal are an unconstitutional infringement on that office’s authority.

The district court agreed and granted SpaceX’s request for a preliminary injunction. By granting that injunction, the court necessarily determined that SpaceX was likely to succeed in the case overall. The decision prevents the NLRB from taking further action against SpaceX in this case. While this ruling is currently narrow, it has the potential to have far broader implications.

The decision evaluated several of the NLRB’s arguments, including those that were focused on how the case could be finally decided. The court laid out two options for remedying the constitutional issues with the NLRB that it would have to choose from when making a future final decision.

First, the court could separate the unconstitutional protections for NLRB officials against removal by the president from the rest of the National Labor Relations Act via a process known as “severance.” If the court chooses this option, the board would continue to exist, but it would be subject to greater presidential control.

Second, the Court could conclude that the removal provisions are so entwined with the rest of the NLRA that severance would be impossible without the risk of improperly overriding congressional intent through what would amount to a judicial re-write of the law. If the court were to go with this second option, it would be forced to strike the entirety of the National Labor Relations Board as unconstitutional.

The court left little doubt about which approach it is likely to take:

“Here there is no appropriate way to sever any of the removal protections to remedy the constitutional problems with the NLRB’s structure.”

Thus, it appears that the court will, in the near future, strike the entirety of the NLRA due to constitutional defects.

The ramifications of such a decision would be monumental. If the National Labor Relations Act is found unconstitutional, there would be no enforceable private sector labor law. Employers could not be forced to bargain with unions. Employees could not be forced to choose between paying a union and keeping their jobs. Strikes would no longer have any legal protection. Individual states could adopt their own private-sector labor laws, as there would no longer be a federal law preempting them from doing so.

It's likely that a decision ruling the NLRA unconstitutional will be appealed and that courts will stay the effects of that ruling in the meantime. But this decision is important even if its direct impacts are not immediate. For the first time in almost a century, there is a genuine possibility that the National Labor Relations Act will have to be fundamentally transformed. It is our hope that this transformation remains worker-focused and government-neutral, as doing so would modernize labor relations that have gone largely unchanged since the passage of Taft-Hartley Act in 1947.

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