Business owners will be relieved to learn that the U.S. District Court for the Northern District of Texas has issued a permanent injunction prohibiting enforcement of the U.S. Department of Labor’s new “Persuader Rule,” which took effect on April 25, 2016.
Since 1959, the Labor-Management Reporting and Disclosure Act of 1959 (“LMRDA”) has required the disclosure of certain arrangements made between employers and labor consultants to persuade workers to oppose unionization or collective bargaining. It has, however, generally only applied when a lawyer or consultant dealt directly with employees in an attempt to affect their support during the course of a union organizing campaign. As a result of the "advice exemption,” the reporting requirement has not been applied to lawyers offering advice to employers about their rights and obligations under federal labor law provided that (1) the client has been free to accept or reject the advice, and (2) the lawyer avoids direct communication with employees.
The DOL’s new rule, however, significantly narrowed the advice exemption. It required employers, third-party lawyers and other labor consultants to disclose to the DOL any arrangement to persuade employees directly (lawyers/consultants talking to workers) or indirectly (lawyers/consultants scripting what managers and supervisors say to workers) concerning their right to organize or bargain collectively. For example, it could have required an employer to file a financial disclosure report if the employer hired a law firm to review and revise an employee handbook.
The expanded reporting obligation under the new rule would have given labor organizations access to information about the money paid to attorneys and labor consultants on a broad variety of employment-related activities. Not surprisingly, the new rule faced significant opposition from employers and other business organizations that objected to the burdensome reporting obligations. The new rule was also opposed by bar associations, which argued that the new rule could threaten attorney-client relationships and cause attorneys to run afoul of ethical obligations.
In a November 16, 2016 order, Judge Sam Cummings stated that, “The court is of the opinion that the Department of Labor’s persuader advice exemption rule…should be held unlawful and set aside.” The DOL had earlier appealed a preliminary injunction issued by the court to the Fifth Circuit Court of Appeals. It is not clear whether the DOL will continue to pursue that appeal or whether it will appeal the permanent injunction. It is, however, possible that the Trump administration will take steps to withdraw the appeal and possibly eliminate the rule altogether, after Inauguration Day.