Injunction Suspends Department Of Labor’s “Persuader Rule”
June 29, 2016
On June 27, 2016, the US District Court for the Northern District of Texas issued a nationwide preliminary injunction temporarily suspending the implementation and enforcement of the US Department of Labor’s controversial “Persuader Rule.” The Persuader Rule refers to the DOL’s recent reinterpretation of a federal law known as the Labor Management Reporting and Disclosure Act. That Act governs when a company and its outside advisors must submit publicly-available reports detailing money spent or received for so-called “persuader activity.” Under the DOL’s prior interpretation of the Act, only “direct persuader” activities had to be reported. For example, if a company paid a lawyer or consultant to lawfully speak with its employees directly in an effort to influence the employees’ decisions related to union organizing, the action would be reportable. The LMRDA, however, contains an “advice exemption,” which the DOL had interpreted to exempt so-called “indirect persuader” activity typically taken by law firms and other consultants as long as the activity did not involve direct communication with employees.
Through the new Persuader Rule, the DOL significantly narrowed the advice exception. Employers, their lawyers and consultants would be required to file reports about any activity that “indirectly persuades” employees on their decisions regarding representation or collective bargaining rights. For example, if an employer hires a lawyer or consultant to train its supervisors on lawful messages to deliver to employees during a union campaign or to draft materials related to union avoidance that the company would then deliver to employees, such actions would be reportable under the new interpretation.
Several business groups and law firms filed three different lawsuits challenging the new rule on the grounds that the DOL’s action was arbitrary and capricious; the DOL’s attempted modification of the advice exemption conflicted with the express language of the LMRDA; the new rule would disrupt the attorney/client privilege; and the rule would violate employers’ First Amendment rights to free speech and free association, among other things.
The Texas federal court’s preliminary injunction applies nationwide and prohibits the DOL from implementing or enforcing “any and all aspects” of the new persuader rule until the court issues a further decision in the case, or the injunction is overturned by the US Court of Appeals for the Fifth Circuit or the United States Supreme Court. The DOL is likely to challenge the court’s decision, but for now the DOL’s new interpretation has been blocked.
Importantly, before the preliminary injunction was issued, the DOL indicated in the course of litigation that its new interpretation would apply only to services rendered pursuant to agreements entered into on or after July 1, 2016. Consequently, despite the preliminary injunction, we continue to recommend that employers who foresee a possible need for persuader services in the future enter into such an agreement with their preferred provider by June 30, 2016.