Federal Court Blocks DOL’s ‘Persuader’ Rule

October 11, 2016

A federal judge in Texas recently issued a nationwide injunction against the U.S. Department of Labor’s (DOL) “persuader” rule. The rule sought to provide unions more information regarding discussions between employers and legal counsel regarding union-organizing campaigns. The injunction prevents the DOL from enforcing the rule anywhere in the United States unless the court’s decision is overturned by the 5th Circuit or the U.S. Supreme Court. 

Background

The persuader rule alters the DOL’s interpretation of the Labor Management Reporting and Disclosure Act of 1959 (LMRDA). (For more information, see “New persuader rules create problems for employers and consultants” on pg. 1 of our June 2016 newsletter.) Congress included an exemption in the LMRDA protecting “advice” given to employers from the Act’s public disclosure requirements. However, under the persuader rule, employers and their consultants would be required to disclose information related to activities that are intended to inform employees of their right to union representation and collective bargaining, regardless of whether a consultant has direct contact with employees.

The persuader rule would apply to “persuader arrangements” made on or after July 1, 2016. If the rule had taken effect, employers and their labor attorneys and consultants would have been required to disclose agreements they entered into to persuade employees on how to exercise their right to union representation and collective bargaining, even if the attorneys or consultants were only indirectly involved in the campaign.

Court’s Decision

On June 27, just days before the persuader rule was set to take effect, the U.S. District Court for the Northern District of Texas granted an injunction preventing the DOL from enforcing the rule. The lawsuit was filed by the National Federation of Independent Business and several other probusiness groups. The court found that the persuader rule exceeded the DOL’s authority under the LMRDA because it effectively eliminated the advice exemption and was therefore “defective to its core.”

The court also found that the rule’s reporting requirements undermined the attorney-client relationship and employers’ ability to obtain confidential legal advice on union-organizing issues. The fact that the DOL reversed its long-standing position on the advice exemption (which it held for more than 50 years) without conducting studies or an independent analysis to support such a drastic change in course also troubled the court.

Additionally, the court found that the persuader rule would cause irreparable harm because it would reduce employers’ access to full and complete legal advice and representation. Citing an example of the potential harm, the judge wrote, “There is a substantial risk that attorneys will cease providing certain advice, including some legal advice, and that employers [will] cease to seek it.” The court noted that such an outcome “burdens and ‘chills’ employers’ First Amendment rights.” The court ruled that a preliminary injunction would benefit the public interest since it would ensure employers have access to necessary legal counsel and protect confidential relationships.

Bottom Line

The court’s decision is a significant victory for employers and attorneys and consultants who provide advice on labor and employment issues. Employers and their attorneys and consultants are no longer required to report agreements or arrangements related to indirect persuader activity. However, the court’s ruling is probably not the final word on the persuader rule. Many commentators believe the DOL will appeal the court’s ruling given the importance of the issue. There are similar lawsuits pending in federal courts in Arkansas and Minnesota. In those cases, courts found similar problems with the rule but refused to issue preliminary injunctions. It’s important for employers to stay abreast of developments regarding the persuader rule.

For more information about "Federal Court Blocks DOL’s ‘Persuader’ Rule," contact Justin H. Lessner at jlessner@axley.com or 608.283.6761.