Alert

Fifth Circuit Says No To NLRB’s Authority To Award Compensatory Damages

November 11, 2025

In a recent case decided on October 31, 2025, the Fifth Circuit gave a resounding “no” to the National Labor Relations Board (NLRB) in its effort to award compensatory damages to individuals who are the victims of unfair trade practices. The decision, Hiran Management, Incorporated v. National Labor Relations Board, found that the NLRB is limited to awarding equitable relief.

The Facts

Hiran Management operates a karaoke restaurant in Texas called Hungry Like the Wolf. After Hiran purchased the business in 2022, eight employees expressed unhappiness with the new management, alleging that they were being assigned extra duties without increased pay, such as checking inventory, collecting money from the safe, or opening and closing the restaurant. Efforts to appease the employees were unsuccessful, and they decided to strike. Hiran then terminated their employment.

NLRB Holding

After eight employees filed unfair labor practice charges, the Board had little difficulty finding that Hiran had retaliated against them for engaging in protected concerted activity. In keeping with NLRB practice, it ordered that the employer cease and desist from unfair labor practices. It also provided the employees with equitable relief in the form of an order of reinstatement and ordered that the employees be made whole “for any loss of earnings and other benefits, and for any other direct or foreseeable pecuniary harms suffered as a result” of the unfair labor practices.

Hiran appealed the damage award, arguing that Congress did not give the NLRB authority to award more than equitable relief.

Fifth Circuit Discussion

In finding that the NLRB exceeded its authority in awarding compensatory damages, the Fifth Circuit noted that Section 10(c) of the National Labor Relations Act (NLRA) authorizes the NLRB to issue orders requiring an employer “to cease and desist from [an] unfair labor practice, and to take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of this subchapter.” The Court found that the phrases “cease and desist” or “take affirmative action” gave the NLRB the authority to grant equitable remedies and that reinstatement and backpay are forms of equitable relief. It noted that Title VII was originally modeled after the NLRA. Until the Civil Rights Act of 1981, Title VII remedies were limited to equitable relief. Since Congress had to amend Title VII to provide for the availability of compensatory and punitive damages, the Fifth Circuit reasoned that the NLRA did not allow for such damages until Congress likewise amends the NLRA.

The Courts Are Divided

In making its decision, the Fifth Circuit noted that courts are split on the issue of whether the NLRB has the authority to award compensatory damages. In 2024, the Third Circuit held in NLRB v. Starbucks Corp. that the NLRB did not have this authority. On the other hand, in 2025, the Ninth Circuit ruled in Int’l Union of Operating Eng’rs, Loc. 39 v. NLRB that the NLRB did have the authority, stating that awarding employees damages for “direct or foreseeable pecuniary harm” is a natural extension of backpay relief.

Given the split among the circuits, this issue is one that is likely to land in the Supreme Court.