Employers and their legal counsel are applauding the November 16 decision from a federal judge in Texas that granted a motion for summary judgment filed by a group of business associations and law firms against the Department of Labor’s (DOL) new interpretation of the so-called “persuader rule,” and entered a nationwide permanent injunction barring the rule’s application. Judge Sam R. Cummings previously granted a preliminary injunction on June 27, 2016, and has now permanently enjoined the DOL from enforcing this rule’s new requirements, which were announced in a final rule publication and set to take effect July 1, 2016. The case is National Federation of Independent Business et al. v. Perez et al., case number 5:16-cv-00066, in the U.S. District Court for the Northern District of Texas.
As we reported in March, the DOL’s new interpretation of the persuader rule would have required employers to disclose any agreement or arrangement with third-party consultants — including attorneys — that is aimed at persuading employees to vote a certain way in a union election. Attorneys hired to provide indirect persuader services would have new reporting requirements as well. Attorneys so engaged could be required to file public reports disclosing their clients, the object and terms and conditions of the persuader agreement and the activities performed under that agreement, along with the financial receipts and payments made under the agreement. This rule had the potential to require disclosure for a wide variety of lawyer-guided consulting services, such as planning, directing, or coordinating supervisors in the context of an anti-union campaign; providing persuader materials; conducting training or seminars for employer representatives with the aim of union avoidance; and assisting to develop and implement personnel policies, the goal of which is to help persuade employees not to unionize.
The lawsuit presented to Judge Cummings was initiated by a number of business trade groups and joined by the state of Texas and nine other states as intervenors. In its motion for summary judgment, the plaintiffs argued that the DOL’s rule was arbitrary and capricious, violated the First and Fifth Amendments, and impinged upon states’ rights to regulate the attorney-client relationship. Judge Cummings agreed, thereby converting a preliminary injunction he issued in June into a permanent order blocking the rule nationwide.
This decison is welcome news to employers, given that rule as issued by the DOL had the potential effect of chilling employers’ ability to retain counsel to assist it with lawful union avoidance measures. Whether the permanent injunction ultimately stands will be decided by the U.S. Court of Appeals for the Fifth Circuit, which accepted an interlocutory appeal of the preliminary injunction order on August 29 and will decide the fate of the DOL’s persuader rule sometime after President-elect Trump has assumed office. Under the new presidential administration, the government might choose not to prosecute the appeal, might choose not to enforce the enjoined rule even if allowed after appeal, or the DOL could undertake rulemaking activities, any of which would mean the new persuader rule is highly unlikely to be implemented in its current form.
Cozen O’Connor’s Labor & Employment attorneys are available to provide counsel and guidance on the issues discussed in this Alert.