Less than a week after a federal judge in Minnesota refused to enjoin the Department of Labor’s new Persuader Rule, and three days before the rule is set to take effect, a federal district judge in Texas has issued a sweeping order prohibiting the DOL from implementing its new rule.
We discussed last week how the DOL released new rules in March expanding the circumstances in which employers and their consultants may be bound by reporting requirements under the Labor-Management Reporting and Disclosure Act (“LMRDA”). These “persuader” rules require that employers, lawyers and consultants report to the DOL the fee arrangement and expenditures associated with it for any activity that was aimed directly at persuading employees regarding unionization.
In June, the Department announced that the rule would not apply to any agreements in effect before July 1, 2016, but business groups and legal associations around the country filed several suits in an attempt to block the rule from taking effect at all.
On June 22, a federal judge in Minnesota refused to issue a temporary restraining order blocking implementation of the rule in response to a lawsuit filed by an association of law firms and groups representing management in labor and employment matters, but noted that the plaintiffs were likely to succeed on the merits.
The case decided today in the U.S. District Court for the Northern District of Texas was brought by five business groups and 10 states against the DOL. In finding that the plaintiffs are likely to prove the new rule is arbitrary, capricious and an abuse of discretion, Judge Sam R. Cummings found, “DOL, despite a very lengthy Final Rule, never adequately explains why it is abandoning the prior, longstanding Advice Exemption now. DOL’s alleged interest in fostering ‘transparency’ would have existed ruing the entire lifetime of the LMRDA.” Judge Cummings also faulted the DOL for not conducting any studies or independent analysis to support its rule change.
Judge Cummings also indicated the plaintiffs are likely to succeed on their First Amendment claims, which stem from employers’ rights to express opinions regarding union organizing, and to hire and consult with an attorney; and their Fifth Amendment claims, which allege that the new rule is too vague to provide due process. (The new rule carries criminal penalties for violations.)
The ruling today, though good for employers and labor attorneys, throws the persuader rule into an even greater state of confusion. While it is likely the DOL will appeal Judge Cummings’ ruling, it’s not at all clear whether we will actually be operating under the new rule come July 1.