A federal appeals court in Washington has declared unconstitutional President Barack Obama’s recess appointments to a labor board in a sweeping decision that curtailed executive power and undermined the legitimacy of a high-profile, controversial appointment to the administration’s consumer financial protection agency.

The unanimous decision of a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit set up a potential showdown in the U.S. Supreme Court over the scope of the power of the president to fill vacancies through recess appointments. The court’s ruling marked a significant blow for the U.S. Justice Department, which had defended the recess appointments to the National Labor Relations Board as a valid, historical exercise of presidential authority.

The central question the D.C. Circuit confronted is whether the U.S. Senate was in recess in January 2012, when Obama appointed three people to the labor board — personnel moves that enabled the board to continue to function with a quorum. The appeals court determined that the Senate had not in fact recessed, rendering the presidential appointments an unlawful sidestep of the role of the Senate to review and vote on candidates for office.

The ruling cast doubt on the legitimacy of Obama’s appointment, also in January 2012, of Richard Cordray to lead the Consumer Financial Protection Bureau. Republicans were opposed to Cordray, whose appointment is facing a challenge in a case pending in the U.S. District Court for the District of Columbia.

The appeals court in Washington said in its January 25 ruling that the president has power to make appointments only during “the recess” of the Senate — that is, the period between the sessions of the Senate when it is not in session and therefore unavailable to assess and vote on presidential nominations.

Extending its analysis of the constitution’s recess appointments clause, two judges on the court — Chief Judge David Sentelle and Judge Karen LeCraft Henderson — also determined that the vacancy must “arise” during a recess and not merely exist at the time. (Judge Thomas Griffith agreed that the NLRB appointments were invalid; he said the analysis should have ended there, however.)A DOJ spokeswoman said in a statement that Obama’s recess appointments are “constitutionally sound.” The department didn’t immediately announce whether it will ask the full appeals court to hear the dispute.

At the time of the labor-board recess appointments, the Senate was meeting every three business days in “pro forma” sessions. Obama concluded the Senate was in recess. In announcing the recess appointments, he said: “I am not going to stand by while a minority in the Senate puts party ideology ahead of the people we were elected to serve.”

The appeals court rejected several interpretations of the words “the recess,” as they appear in the Constitution, including whether the phrase refers to “some substantial passage of time, such as a ten- or twenty-day break.” Defining “the recess” as an adjournment of more than three days, the appeals court said, “lacks any constitutional basis.”

“We will not do violence to the Constitution by ignoring the Framers’ choice of words,” Sentelle wrote.

DOJ’s Office of Legal Counsel determined in its review of presidential recess appointment authority that Obama had discretion to declare that the pro-forma sessions amounted to a Senate recess. The D.C. Circuit rejected the government’s position.

“This will not do,” Sentelle wrote. “Allowing the President to define the scope of his own appointments power would eviscerate the Constitution’s separation of powers.”

The D.C. Circuit decision flowed from a dispute between bottling company Noel Canning, a division of The Noel Corp., and the labor board. Noel Canning was challenging, on appeal, an NLRB order that required the Yakima, Wash.-based company to accept a collective-bargaining agreement. The appeals court voided the labor board’s order.The D.C. Circuit’s ruling carries the potential to have sweeping effect. For the NLRB, the decision “throws into doubt the validity of many significant NLRB decisions in the last year,” said Nelson Cary, a labor and employment partner at Vorys, Sater, Seymour and Pease.

Among them, Cary said, is the NLRB’s first decision on whether Facebook rants against co-workers are protected, concerted activity; whether an employer must continue to deduct union dues after a labor contract expires; numerous decisions holding various employee handbook provisions unlawful; and decisions impacting the confidentiality of workplace investigations.

Still, Cary noted that the reach — at least for now — of the D.C. Circuit ruling is limited. “NLRB decisions that go before different courts of appeals may be upheld if those courts disagree with the D.C. Circuit’s reasoning,” he said.In a way, it’s familiar ground for the NLRB, which from 2007 to 2009 had only two members out of five. The board’s actions were challenged for lack of a quorum, and in 2010, the U.S. Supreme Court invalided more than 600 NLRB decisions.

NLRB Chairman Mark Gaston Pearce in statement said that the board “respectfully disagrees with today’s decision and believes that the President’s position in the matter will ultimately be upheld.” In the meantime, he said that the board will “continue to perform our statutory duties and issue decisions.”At the same time that Obama made the three recess appointments to the NLRB, he also appointed Richard Cord­ray as head of the consumer protection agency. Cordray’s appointment was not directly challenged in the suit in the appeals court, but the D.C. Circuit decision will likely have a profound — if indirect — impact on the agency.In order for the CFPB to exercise its full powers under the Dodd-Frank Act, such as supervision of nonbanks, it was required by statute to have a director in place.

While Cordray, the former attorney general of Ohio, did not arouse the level of opposition from Republicans in Congress as Elizabeth Warren, the original architect of the agency, Republicans nonetheless refused to consider his nomination unless the CFPB was radically restructured. The administration solved the problem — or so it thought — with a recess appointment.

“The invalidation of Richard Cordray’s recess appointment would cause incredible disruption inside of the CFPB,” said Ronald Rubin, a partner at Hunton & Williams who previously worked as an enforcement attorney. “Although the bureau’s lawyers did a lot of internal research during 2011 into what the agency could and could not do without a director, they would have to revisit those issues and evaluate the implications for most of the work the CFPB did in 2012.”

Just one day before the D.C. Circuit decision, Obama renominated Cordray to continue as the leader of the consumer protection bureau. Cordray said in remarks then that “we all thank you and the Congress for the opportunity and the honor to serve our country in this important way.”

A reporter asked Obama during the announcement whether he’d use his recess appointment power if his nominees are not confirmed. The president did not answer.

Mike Scarcella can be contacted at mscarcella@alm.com and Jenna Greene at jgreene@alm.com.