United States: Federal Court Permanently Enjoins DOL's New "Persuader" Rule

On Wednesday, November 16, 2016, the U.S. District Court for the Northern District of Texas issued a permanent nationwide injunction striking down the DOL's efforts to vastly expand the type of "persuader" activities subject to public reporting under the Labor-Management Reporting and Disclosure Act (LMRDA).  See Nat'l Fed'n of Independent Bus. v. Perez, No. 5:16-cv-066 (N.D. Tex. Nov. 16, 2016).  While the court's decision was not unexpected in light of the preliminary injunction it already granted against the DOL's highly controversial persuader rule, it nevertheless represents a significant victory for employers who rely on attorneys and consultants for advice in the face of union organizing campaigns.

Along with requiring employers to file public reports on payments made to unions and union officers, Section 203 of the LMRDA, 29 U.S.C. § 433, requires employers and consultants (including lawyers) to file reports on agreements or arrangements to perform activities with an object to persuade employees to exercise (or not exercise) their right to organize and bargain collectively, or to supply employers with information about employees' activities in connection with a labor dispute.

Engaging in the above "persuader" activities triggers significant obligations under the LMRDA.  Not only are both the consultant and the employer required to file reports on the persuader services, but the consultant is additionally required to report on all "labor relations advice or services" that the consultant performed for any employers during that same year—regardless of the purpose of the advice or services.  These reports are public information and available online at the Department of Labor's Office of Labor-Management Standards website.  Violations of the LRMDA's reporting obligations is punishable by criminal penalties, including fines up to $10,000 and imprisonment.

Section 203(c) of the LMRDA, however, contains an important exemption to these reporting obligations.  Under the "advice exemption," no reporting obligation is triggered when a consultant (such as an attorney) merely provides "advice" or materials to an employer that employer is free to accept or reject and when the consultant has no direct contact with the employer's non-management employees.  Typical examples of historically exempt "advice" have included the preparation of documents and speeches for employers to use during an organizing campaign, the development of personnel policies, and the training of managers and supervisors, among others.

Had the DOL's new interpretation of the "advice" exemption gone into effect, the above definition of exempt "advice" would have been significantly narrowed.  Under the DOL's new persuader rule, certain advisory activities would have been reportable if they had a direct or indirect object to affect an employee's decisions regarding representation or bargaining rights—even if the consultant (such as an attorney) had no direct contact with employees.   Consultants (including attorneys) who drafted speeches or written materials for the employer to present to employees, conducted seminars for supervisors, planned employee group meetings, or developed personnel policies (such as employee handbooks) would have engaged in reportable persuader activity under the DOL's new rule if they did so with an object to persuade employees regarding representation or bargaining rights—subjecting them to the broad reporting obligations (and criminal penalties for failing to comply) described above.

The new interpretation of the "advice" exemption was set to apply to all arrangements and payments made on or after July 1, 2016.  On June 27, 2016, however, the Northern District of Texas issued a nationwide preliminary injunction against the new rule.  The court held that the plaintiffs were likely to succeed in showing that the DOL's revised interpretation of the "advice" exemption contradicted the LMRDA's plain language, was arbitrary and capricious, was unconstitutionally vague, imposed an undue burden on employers' First Amendment right to hire and consult an attorney, and violated the Regulatory Flexibility Act.  The DOL appealed the order (see Nat'l Fed'n of Indep. Bus., et al. v. Perez, et al., No. 16-11315 (5th Cir. Aug. 29, 2016)), arguing that its new interpretation of the "advice" exemption was a permissible exercise of its regulatory authority and consistent with the First Amendment, and that nationwide relief was inappropriate in light of other similar suits pending in Minnesota and Arkansas.

The court's November 16, 2016 order issuing a permanent, nationwide injunction against the rule offered no additional analysis, instead referring to the parties' briefing and its previous preliminary injunction order.  While the DOL's appeal of the preliminary injunction will likely become moot once the district court enters its final judgment in the case, it remains to be seen whether the Department of Labor will appeal the permanent injunction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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