NLRB cannot punish employers by requiring consequential damages, Fifth Circuit Court of Appeals says

Washington, D.C.; October 31, 2025: In a major win for small businesses, the U.S. Court of Appeals for the Fifth Circuit ruled today that the National Labor Relations Board (NLRB) cannot award consequential damages—relief for “foreseeable harms”—in its administrative proceedings. The decision, in Hiran Management v. NLRB, confirms that the agency overstepped its authority when it ordered a Texas restaurant owner to reimburse former employees for losses beyond wages and benefits.

“This ruling reins in a federal agency that tried to expand its power beyond what Congress ever allowed,” said Pacific Legal Foundation attorney Kerry Hunt. “Hiran should have been offered an opportunity to stand before an Article III court with a trial by jury, not merely an administrative adjudicatory hearing. The NLRB cannot unilaterally invent new forms of damages to punish employers—it must follow the law as written.”

After an in-house tribunal found that Hiran Management engaged in unfair labor practices, the NLRB attempted to force Hiran Management to reimburse former employees for all “foreseeable pecuniary harms.” However, the NLRB had no authority under the National Labor Relations Act to do so—and the Fifth Circuit agreed that the Act permits only reimbursement for things like lost wages or benefits—not broad, consequential damages.

“As the Court wrote, the NLRB lacked statutory authority to order foreseeable compensatory damages. And Hiran cannot be compelled to pay those damages,” said Pacific Legal Foundation attorney Oliver Dunford. “The court’s decision creates a clear split among the federal circuits on the scope of the NLRB’s remedial powers, setting the stage for possible Supreme Court review.”

Pacific Legal Foundation represents Hiran Management to defend its right to fair treatment under the law and to curb the unchecked expansion of agency power.