National Labor Relations Board v. Bell Aerospace 416 U.S. 267 (1974)
Some of Bell Aerospace's
employees were trying to form a union. Bell was not happy about this and
brought the matter to the NLRB for adjudication.
Bell argued that the
employees had managerial duties and therefore shouldn't be allowed to
NLRB approved the
They made the approval even
though it went against decisions in previous NLRB adjudications.
Bell Aerospace sued to block
The Appellate Court reversed
the NLRB. NLRB appealed.
The Appellate Court reasoned
that this decision was a sudden change of position for NLRB, and such
drastic changes should only be announced by the rulemaking process.
The unstated reason for the
Court's decision was that for years NLRB never made a single rule and
the courts were annoyed with the way NLRB was doing business.
The US Supreme Court reversed
and found for NLRB.
The US Supreme Court looked
to SEC v. Chenery (332 U.S. 194
(1947)), which said that that while an Agency might be encouraged to use
the rulemaking process to promulgate a new policy, they can
come up with a policy and immediately and without warning start finding
against people/companies in adjudications.
The Court took the occasion
to limit the discretion they gave to the Agencies in Chenery. The Court suggested that there were some
factors that could require an Agency to announce a new position as a rule.
Does the diversity and
complexity of the problem justifying proceeding on a case-by-case basis?
Did the company place a
great reliance on the previous policy?
Does the change in policy
involve any new liability that would be suffered because of a good faith
reliance on the previous policy?
Does the company face any
damages or fined because of reliance on the previous policy?
Although the Court suggested
the factors and possible reasons for denying an Agency the ability to
change a position via an adjudication
as oppose to a rule, they
have never reversed an Agency action for abuse of discretion in choosing
an order rather than a rule.