When significant changes in federal labor law arise, Texas employers need to understand the implications, and recent developments from the U.S. Court of Appeals for the Fifth Circuit are among them. In a pivotal ruling that significantly limits the National Labor Relations Board’s (NLRB) ability to impose broad monetary awards on employers, the Fifth Circuit held that the NLRB may not impose broad monetary awards on employers.
For Texas businesses navigating labor disputes, this decision brings both clarity and caution. Here, our labor and employment attorneys at Fee, Smith & Sharp LLP explain what this ruling means for employers operating in Texas and the broader Fifth Circuit.
The NLRB’s Traditional Role in Remedying Labor Violations
For nearly 90 years, the NLRB’s authority to remedy unfair labor practices under the National Labor Relations Act (NLRA) followed a fairly settled path. Section 10(c) of the NLRA authorizes the Board to order affirmative action to address violations of the law. In practice, that authority has long been understood to mean equitable remedies designed to restore the status quo. Historically, when an employer was found to have violated the NLRA, the Board’s remedies typically included:
- Reinstatement of employees who were unlawfully terminated, and
- Back pay with interest to cover wages and benefits lost as a result of the violation.
The goal was not to punish employers or award damages as in a civil lawsuit, but rather to put employees back in the position they would have been in had the violation not occurred.
The Shift Toward Expansive Make-Whole Remedies
That long-standing framework changed in 2022, when the NLRB issued its decision in Thryv, Inc. In that case, the Board announced that make-whole relief would now include compensation for all direct or foreseeable pecuniary harms caused by an unfair labor practice. Under this expanded approach, remedies were no longer limited to lost wages. Instead, employees could seek reimbursement for a wide range of secondary financial losses, including:
- Credit card interest and late fees incurred while unemployed
- Out-of-pocket medical expenses caused by a loss of insurance coverage
- Penalties for early withdrawals from retirement accounts
- Even losses tied to missed rent or car payments
For employers, this was a dramatic shift. What had traditionally been an administrative labor dispute began to resemble a personal injury or tort claim, where damages could expand well beyond wages and benefits and were limited only by what the Board deemed foreseeable.
The Fifth Circuit’s Rejection in Hiran Management
The case before the Fifth Circuit involved a Houston karaoke restaurant, Hiran Management, doing business as Hungry Like the Wolf. After non-union employees walked out over working conditions and were fired, the NLRB found an NLRA violation and ordered reinstatement, back pay, and additional make-whole damages under Thryv. The Fifth Circuit rejected that approach, holding in Hiran Management, Inc. v. NLRB that the NLRA does not allow the Board to award compensatory damages. The court’s reasoning is important for employers:
- Statutory limits matter: The court emphasized that affirmative action under the NLRA is a legal term referring to equitable relief, not the kind of damages awarded in civil lawsuits.
- The NLRA is not a general-damages statute: Relying on Supreme Court precedent, the court explained that Congress never intended the NLRA to serve as a broad scheme for awarding full compensatory damages.
- There must be a limiting principle: The court warned that under the Thryv framework, the only real limit on remedies would be the Board’s own imagination, something the statute does not permit.
The Fifth Circuit vacated the portion of the Board’s order requiring payment of expanded pecuniary damages, firmly reestablishing the boundary between equitable labor remedies and legal damages.
A Growing Split Among the Federal Courts
The Fifth Circuit’s decision is part of a growing split among federal appellate courts.
- The Fifth, Third, and Sixth Circuits have rejected the NLRB’s expanded Thryv
- The Ninth Circuit, by contrast, has upheld the Board’s authority to award broader make-whole relief.
This divide means employers’ potential exposure can vary dramatically by geography. A business operating in Texas currently benefits from the Fifth Circuit’s limitations, while a similarly situated employer in the western United States may not. Given the widening split, many observers expect the U.S. Supreme Court to step in to resolve the issue eventually.
What This Means for Texas Employers
Because Texas falls within the Fifth Circuit, the Hiran Management decision provides meaningful protection for local employers, but it comes with important caveats.
The NLRB May Continue to Seek Expanded Damages
The NLRB often follows a policy of non-acquiescence, meaning it may continue to pursue Thryv-style remedies even in jurisdictions where courts have rejected them. Texas employers should not assume the Board will stop seeking these damages. Instead, employers may need to challenge them through the litigation and appeals process.
In 2025, the NLRB’s Acting General Counsel issued Memorandum GC 25-06, offering guidance to regional offices on seeking remedial relief in settlement agreements. While this type of guidance does not change the law or override federal court decisions, it does signal how the agency may approach remedies in practice. As a result, Texas employers should be prepared for the NLRB to continue pressing for expansive make-whole relief in settlements, even within the Fifth Circuit.
This Applies to Non-Union Workplaces
Another critical takeaway is that this ruling is not limited to unionized employers. The employees in Hiran Management were not union members. They were simply engaging in protected concerted activity, something as simple as employees acting together to raise workplace concerns. Nearly all private-sector employers in Texas are subject to these rules.
Practical Steps Employers Should Consider
In light of this decision, Texas employers may want to take proactive steps to reduce risk. While the decision provides important protection, it does not eliminate risk.
- Review termination and disciplinary practices: Ensure employment decisions are well-documented, consistent, and carefully reviewed for potential NLRA issues.
- Preserve legal defenses early: If faced with an NLRB charge, raise statutory and constitutional challenges to remedies as early as possible.
- Stay informed: With a potential Supreme Court decision on the horizon, continued monitoring of developments is critical.
Partner With Experienced Counsel
The Fifth Circuit’s rejection of the NLRB’s expanded remedial approach is a significant win for Texas employers and a reminder that administrative agencies are bound by the limits Congress set for them. Still, the NLRB remains an aggressive enforcement agency, and the legal landscape continues to evolve.
Whether your business is facing an unfair labor practice charge or wants to stay ahead of emerging risks, working with experienced counsel can make a significant difference. Our labor and employment attorneys at Fee, Smith & Sharp LLP are well-positioned to help Texas employers navigate these challenges clearly and confidently.
