On Monday, June 27, 2016, Judge Sam Cummings, a Senior District Judge for the Northern District of Texas, issued an order that places a temporary hold on the Department of Labor’s (DOL) new “Persuader Rule.” In an 86-page order, Judge Cummings granted a preliminary injunction requested by the National Federation of Independent Business (NFIB), prohibiting the DOL from implementing its new rule, which would have expanded the information that companies must report to the DOL when they hire consultants to fight against union organizing campaigns.
The Persuader Rule
In July 2011, the DOL proposed a new rule, referred to as the “Persuader Rule,” that would require more expansive reporting requirements for employers, their attorneys and labor consultants. For several years, the DOL continued to postpone its target date to finalize and publish the rule, leading to an indefinite postponement in March 2014. However, in November 2015, the DOL finally announced March 2016 as the target for issuance of the new rule.
The Labor Management Reporting and Disclosure Act (LMRDA) requires employers and legal consultants to report any arrangement to persuade employees directly or indirectly regarding their right to organize or bargain collectively through a labor union, which is referred to as “persuader activity.” Failure of an employer to comply with this requirement could mean jail time and a substantial fine. However, the LMRDA excludes arrangements between employers and attorneys or consultants who merely provide advice, as long as counsel has no direct contact with the employees and the employer may choose to accept or reject its counsel’s recommendations.
The DOL published its long-anticipated Persuader Rule on March 24, 2016. The new rule’s effective date was April 25, 2016, and the rule was intended to apply to any arrangements and agreements made on or after July 1, 2016.
In its interpretation and rule, the DOL estimated that between 71 and 87 percent of employers hire consultants to help fight against union organizing campaigns. The DOL stated, however, that it actually receives “very few” reports on such activities because the employer characterizes the action as falling under the “advice” exemption to the LMRDA’s disclosure requirements.
The new rule would significantly narrow the scope of the exception for these activities and require many more employers who engage attorneys to provide assistance during union organizing campaigns to file publicly available reports with the DOL describing all the labor work the law firm performs for the employer. This would reach any activities that go beyond the plain meaning of “advice,” even if there is no direct contact between the consultant and any workers. Under the new rule, an employer and consultant must report to the DOL’s Office of Labor-Management Standards when they are engaged in the following activities:
- planning or conducting employee meetings;
- training supervisors or employer representatives to conduct meetings;
- coordinating or directing the activities of supervisors or employer representatives;
- establishing or facilitating employee committees;
- drafting, revising or providing speeches;
- developing personnel policies designed to persuade employees;
- identifying employees for disciplinary action, reward or other targeting.
The Persuader Rule has been praised by labor advocates for increasing transparency during organizing campaigns.
Criticism and Challenges to the Rule
The new rule has also been criticized by several groups as an improper invasion of the attorney-client privilege. Several groups, including the American Bar Association, have cautioned that the rule threatens client confidentiality by requiring attorneys to disclose confidential client information, including the existence of the attorney-client relationship and the identity of the client, the general nature of the legal representation and a description of the legal tasks performed.
On March 31, 2016, the NFIB and other business groups filed a suit in the Northern District of Texas, Lubbock Division, seeking preliminary and permanent injunctions against the new rule on several grounds, including constitutional grounds. National Federation of Independent Business v. Perez, Case No. 16-cv-66 (N.D. Tex.).
In his June 27 order, Judge Cummings enjoined the new rule pending the outcome of the NFIB’s lawsuit. Cummings wrote: "The new rule is defective to its core because it entirely eliminates the . . . advice exemption”. The judge found that the potential chilling effect on speech protected by the First Amendment is in and of itself an irreparable injury, therefore justifying entry of a preliminary injunction.
Just a week ago, a federal judge in the District of Minnesota had denied a similar request for injunctive relief against the Persuader Rule, finding that there was no showing that the parties seeking injunctive relief would be irreparably harmed if the rule were allowed to take effect on schedule. Worklaw Network v. United States Department of Labor, Case No. 16-cv-0844 (D. Minn. June 22, 2016).