In a ruling that will constrain future presidents, the court held on a 9-0 vote that the three appointments Obama made to the U.S. National Labor Relations Board (NLRB) in 2012 were unlawful. The decision limits the ability of presidents to make so-called recess appointments without Senate approval.
Although the court was unanimous on the outcome, the nine justices were divided 5-4 on the legal reasoning. Justice Antonin Scalia wrote a fiery opinion, joined by his conservative colleagues, saying he would have gone further in limiting the recess appointment power. Justice Anthony Kennedy, the court's regular swing vote, joined liberal colleagues in the majority.
The ruling comes at a time of partisan political fighting in Congress between Republicans and Obama. Republicans have fought virtually every major Obama initiative since he took office in 2009 and they have accused the Democratic president of overstepping his constitutional authority.
The Supreme Court upheld the president's power to make recess appointments in between Senate sessions or recesses during a legislative session. Its narrow ruling said only there is no recess when the Senate holds so-called pro-forma sessions during which no business is conducted but the Senate is not formally adjourned.
Thursday's majority decision, written by Justice Stephen Breyer, could especially hamper the Obama administration if Republicans win control of the Senate in Nov. 4 elections. They already control the House of Representatives.
The ruling has little immediate impact because Democrats, who currently control the Senate, pushed through a rule change in November 2013 that made it harder for Republicans to block the president's nominees.
Senate Majority Leader Harry Reid, a Democrat from Nevada, said the ruling "underscores the importance" of the Senate rule change last year.
"Without that reform and with today's ruling, a small but vocal minority would have more power than ever to block qualified nominees from getting a simple up-or-down vote," he said.
Kentucky Republican Mitch McConnell, the Senate minority leader, said: "All Americans should be grateful for the court's rebuke of the administration." Republican senators had filed papers urging the court to rule against the administration.
Senators have the ability to delay or block altogether a president's nominees, meaning they might never be confirmed.
Presidents of both parties have regularly used recess appointments. For example, Obama's predecessor, Republican George W. Bush, used this power to appoint John Bolton - a hero to many conservatives - as his U.N. ambassador in the face of staunch Democratic opposition in the Senate.
'SERIOUS INSTITUTIONAL FRICTION'
Breyer wrote that the recess appointment power is only triggered once the Senate has been in recess for 10 days. He rejected the Obama administration's argument that the appointment power needed to be expansive to overcome political differences between branches of government that prevent nominees from being confirmed.
The recess appointments clause "is not designed to overcome serious institutional friction," Breyer wrote. The majority was hesitant to issue a broader ruling because it would have brought into question hundreds of appointments made over the years, Breyer said.
Reading from the bench, Scalia was insistent that the court should have gone further, saying that presidents have over the years treated the need to have nominees confirmed by the Senate as an "unreasonable burden."
Scalia would have favored ruling that the president could only make recess appointments in formal recesses between Senate sessions when vacancies arose during that recess.
Scalia said the majority "sweeps away the most important limitations the Constitution places on the president's recess appointment power."
The court ruled in a case in which soft drink bottler Noel Canning Corp challenged an NLRB ruling against it. The company argued the ruling was invalid because some of the NLRB board members on the panel that issued it were recess appointees improperly picked by Obama.
The U.S. Chamber of Commerce and other business interests has intervened in the Yakima, Washington-based company's case.
Obama used his recess appointment power to name three members to the five-member NLRB in January 2012. The appointments are valid for up to two years.
A Senate deal in July 2013 paved the way for the confirmation of five NLRB members, which limits the practical impact of the decision. The board will, however, have to reassess all the decisions that were made when the temporary appointees were in office.
The Obama administration said it was following the long-established interpretation of the recess appointments clause of the U.S. Constitution, dating back to President George Washington.
Noel Canning and its backers contended that Obama ignored the original intent of the Constitution's drafters, who included the recess appointments clause to ensure the government could continue to function when the Senate was in recess for months at a time and senators would travel to Washington on horseback.
The case is NLRB v. Noel Canning, U.S. Supreme Court, No. 12-1281.