On June 27, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction barring enforcement of the Department of Labor’s (DOL) Persuader Rule, thereby halting the regulation from being implemented until litigation over its merits can be finalized. The persuader rule was scheduled to take effect on July 1 and would have imposed substantial reporting obligations on labor lawyers and consultants advising employers on union matters.
A group of states and business associations brought the case—including the National Federation of Independent Business and National Association of Home Builders—and argued the agency lacked the statutory authority to promulgate and enforce the new rule, it is arbitrary and capricious, unconstitutional, and violates the Regulatory Flexibility Act.
The injunction is good news for employers, as well as professionals providing labor and employment law advice, as it relieves employers entering into agreements with third-party advisors who provide labor and employment law advice and services, and the advisors themselves, from reporting obligations under the Labor-Management Reporting and Disclosure Act (LMRDA) as a result of such agreements or arrangements.
Explaining the rationale behind granting the injunction, Judge Sam Cummings wrote that the “DOL exceeded its statutory authority under the LMRDA advice exemption.” The injunction will remain in effect until the District Court issues a decision on the merits of the case or a higher court overrules the injunction on appeal. DOL has not announced whether it will appeal this decision.
The court ruled that the plaintiffs also showed that the persuader rule violates the First Amendment rights to free speech and free association, was impermissibly vague, in violation of the Fifth Amendment right to due process, and had not calculated the cost to small businesses as required under the Regulatory Flexibility Act.
While the new rule remains on hold, attorneys and consultants are free to advise employers regarding union strategy without any reporting obligations, so long as they do not have direct contact with employees. Groups such as the American Bar Association have also expressed opposition to the rule claiming it would require many management-side labor lawyers to divulge confidential client information to the federal government.
Labor Secretary Thomas Perez has defended the proposed changes, stating that “full disclosure of persuader agreements gives workers the information they need to make informed decisions about how they pursue their rights to organize and bargain collectively.”
Under current law, employers and any lawyers or labor consultants they hire are required to file periodic disclosures with DOL when involved in persuading employees on union formation or membership issues. Historically, lawyers have been exempt from the rule’s reporting requirements when they merely provide advice or other legal services directly to their employer clients on these unionization issues but have no direct contact with the employees.
Supporters of the current standard—that has existed since 1959—note that if the employer is the one communicating with the employees, they are already aware the employer is the source of the information they are receiving. Most employers, attorneys, and experts over the years have found this bright-line rule as easy to interpret and apply in most situations.
Congressional Republicans have weighed in to express their opposition to the persuader rule. In March, 73 House members stated their disapproval of the new rule in a letter to the Chairman and Ranking Member of the Appropriations Subcommittee on Labor, Health and Human Services. In the letter they urged the committee to attach riders to upcoming fiscal year 2017 appropriations legislation that would prohibit DOL from spending money to implement the new rule.
In addition, both the House and Senate have introduced resolutions of disapproval that would repeal the persuader rule’s requirements should they take effect. Rep. Bradley Byrne (R-AL) has been an outspoken critic of the persuader rule and has led the charge in the House to have it repealed. Sens. Jeff Flake (R-AZ) and Lamar Alexander (R-TN) have been leading similar efforts in the Senate.
It is important to note that the court’s decision in Texas does not eliminate the possibility that the persuader rule may eventually take effect. DOL could challenge the court’s ruling creating further uncertainty regarding the rule’s fate. Nevertheless, employers should be proactive and consult with their labor attorneys and consultants if necessary, so they will be in compliance with the rule should it go into effect.