In a prior post, we discussed the Department of Labor’s issuance of a new final rule that expanded disclosure requirements for companies that hire union avoidance consultants.  The Department’s new “persuader” rule required employers to report the hiring of such consultants whenever these third parties engaged in indirect persuader activities (e.g., planning employee meetings, training supervisors to conduct meetings, and drafting or providing speeches to be made to employees), whereas the previous rule required disclosure only when the consultants engaged in direct contact with workers.

Subsequent to the DOL’s publication of the final version of the rule in late March, business groups and law firms sued to invalidate the rule.  Several states joined the case later as intervenors.  On November 16, a federal judge in Texas entered a “permanent injunction with nationwide effect,” blocking the DOL from enforcing the rule.  Judge Sam R. Cummings of the Northern District of Texas, had previously issued a preliminary injunction relating to the rule back in June.  In that earlier ruling, the Court had found that the rule effectively eliminated the Labor Management Disclosure Act’s advice exemption, was arbitrary capricious, and constituted an abuse of discretion.  In last week’s decision, the Court granted the Plaintiffs’ summary judgment motions and converted the preliminary injunction into a permanent injunction.

The Obama administration now faces the decision of whether to appeal the ruling, as they did with the Court’s preliminary injunction.  However, it is unlikely that the Fifth Circuit Court of Appeals would make any rulings on these issues prior to the inauguration of President-elect Donald Trump, after which the Department’s positions and strategy may change dramatically.  We will continue to keep you apprised of developments related to the persuader rule.

Businessmen Talking In Conference RoomOn March 23, the Department of Labor released the final version of its controversial and expansive rule that changes the disclosure requirements for labor relations consultants who aid employers with their union avoidance measures.

What Does That Mean to Employers?

Previously, a consulting firm was required to disclose activity to the DOL only when it engaged in direct contact with workers regarding labor organizing campaigns.  Now, under the Department’s new “persuader” rule, the hiring of an attorney or consultant to thwart organizing attempts must be reported whenever the third-party consultant engages in persuader activities that go beyond the plain meaning of advice, regardless of whether there is direct contact with employees.  This rule encompasses typical work conducted by outside consultants.  It includes, for example, planning employee meetings, training supervisors or employer representatives to conduct meetings, drafting or providing speeches, and other common persuader activities.

Legal Challenges Underway

At least two lawsuits have already been filed against the DOL in federal court challenging the new rule.  The National Association of Manufacturers (NAM), along with several business groups, filed suit in the Eastern District of Arkansas.  Similarly, a coalition of law firms has filed suit in the District of Minnesota.  The challengers have asserted a number of arguments, including claims that the rule: violates the First Amendment; is overbroad; exceeds the DOL’s authority; and, importantly, infringes attorney-client confidentiality protections.

What’s Next?

Only time will tell whether any of these legal attacks will prove successful in dismantling the new “persuader” rule.  For now, the rule remains in place, and employers must follow it.  However, employers should remember that agreements where a consultant merely agrees to provide “advice” are still exempt from the reporting requirement.  For example, mere recommendations regarding a company’s decision or course of conduct need not be reported.

Check back in for updates as this litigation develops, and do not hesitate to contact our firm with any specific questions on how this new rule may affect your company’s practices.