DOL Persuader Rule Blocked by Federal Judge

DOL Persuader Rule Blocked by Federal Judge

DOL, USDOL
November 21, 2016

On November 16, 2016, a District Judge in the Northern District of Texas permanently blocked the U.S. Department of Labor from enforcing a new regulation  that would have increased disclosure requirements for employers that use advisors, including  law firms, to help in union avoidance and organizing campaigns. Nat’l Fed’n of Independent Bus. v. Perez, No. 16-cv-066 (N.D. Tex. Nov. 16, 2016). The DOL’s new rules interpreting the Labor Management Reporting and Disclosure Act (LMRDA) “persuader rule” would have provided employees with information about their employers’ use of third-party labor relations consultants by expanding the types of reportable conduct to include indirect activities done with an intent to persuade employees in the exercise of their organizing/bargaining rights; and by limiting the scope of the  “advice exemption”. . .

The suit was brought by the National Federation of Independent Businesses and other business trade groups alleging that the DOL’s regulation violated the First and Fifth Amendments, the Administrative Procedure Act, the LMRDA, and the Regulatory Flexibility Act. Texas and nine other states later joined the case as intervenors. Many law firms had expressed concern that the rules would chill attorney-client communications.The business groups and states asked the court for summary judgment and a permanent injunction, primarily arguing that the DOL’s rule was arbitrary and capricious and would impinge on the right of states to regulate the attorney-client relationship. 

The court ruled in a brief order that the DOL’s “persuader rule” was inconsistent with the LMRDA and therefore unlawful, citing the reasoning in the Plaintiff’s briefs.   In granting summary judgment, Judge Cummings converted a preliminary injunction he issued in June into a permanent order blocking the rule’s implementation with nationwide effect.   

This ruling is a favorable decision for employers because it restores the former interpretations that rarely required reporting of the use of consultants and law firms  during union organizing campaigns.The Department of labor has not indicated whether it intends to appeal the decision.  

The permanent injunction is available here.