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June 23 — A federal district court in Minnesota said a Labor Department's rule change covering “persuader” activity under the Labor-Management Reporting and Disclosure Act is inconsistent with the statute, but the court refused to block the agency from enforcing the measure ( Labnet Inc. v. DOL, 2016 BL 200241, D. Minn., No. 16-CV-0844, 6/22/16 ).
Judge Patrick J. Schiltz of the U.S. District Court for the District of Minnesota said a coalition of law firms has “a strong likelihood of success” on their claim DOL has adopted an interpretation of LMRDA-exempt “advice” that conflicts with the plain language of the federal statute.
However, Schiltz denied the challengers' bid for injunctive relief from the DOL rule, saying it's preferable for the law firms to press their legal arguments in enforcement actions brought under the rule.
Douglas P. Seaton, a partner in Seaton, Peters & Revnew, P.A. in Minneapolis, who represented the plaintiffs, told Bloomberg BNA June 23 the decision was “not as positive as we'd hoped for” because the court wouldn't issue an injunction, but the lawyer said the judge's comments signaled the new DOL rule “will fall.”
The LMRDA, 29 U.S.C. § 433(a), requires employers to make disclosures and reports concerning agreements with labor relations consultants or other providers concerned with efforts to “persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing.”
The act, 29 U.S.C. § 433(b), exempts arrangements for “giving or agreeing to give advice” to an employer from the reporting requirements. According to the DOL, the act was interpreted until recently as requiring reports only when a labor consultant communicated directly with employees.
On March 24, the DOL Office of Labor-Management Standards adopted a final rule (RIN 1215-AB79; 1245-AA03) that interprets the statutory exemption for advice more narrowly. Stating that its goal was to eliminate a “reporting gap” that had been overlooked, the revised rule requires employers and consultants to report agreements for “indirect persuader activities.”
The final rule became effective April 25, but DOL has said it will be applied only to agreements or arrangements for persuader activities that are made on or after July 1.
Labnet Inc., a law firm network, which now does business as Worklaw Network, and 11 law firms filed their lawsuit March 31. The case is one of three challenges filed in different federal courts.
The plaintiffs asked the District of Minnesota to issue a temporary restraining order or a preliminary injunction to block enforcement of the DOL rule, but the court denied the plaintiffs' request for injunctive relief.
Schiltz said the plaintiffs are unlikely to succeed on a number of challenges, including objections that the rule violates the First Amendment and that it is vague, overbroad, arbitrary and capricious.
However, he agreed with the law firms that the new rule conflicts with the LMRDA, 29 U.S.C. § 433(c), which provides that reporting under the act is not required “by reason of giving or agreeing to give advice” to an employer.
Schiltz said the DOL insists that LMRDA-covered persuader activity and exempt advice are mutually exclusive categories.
“DOL ends up struggling mightily to define as non-advice activity that any reasonable person would define as advice,” Schiltz wrote. “[I]n the course of that struggle,” he said, “DOL ends up drawing lines that are simply incoherent.”
The court said DOL had difficulty answering the court's questions about applying the rule to “the sort of bread-and-butter work that lawyers perform for clients every single day,” and he said the plaintiffs will likely succeed in their argument that the rule change is inconsistent with the LMRDA exemption for advice.
However, the court wrote that there's “an inherent harm in enjoining an agency from enforcing a regulation that has been promulgated pursuant to authority delegated from Congress.”
Schiltz said the plaintiffs have made only a “minimal showing of irreparable harm” from the DOL rule, and he concluded they can effectively raise their arguments “in the context of actual enforcement.”
The court denied the motion for injunctive relief.
Worklaw Network provided Bloomberg BNA a statement by the group's president, Millicent Sanchez, who is also a partner at Swerdlow Florence Sanchez Swerdlow & Wimmer in Beverly Hills, Calif.
Sanchez said, “Our lawsuit sought to protect employers’ right to seek counsel and get advice on sensitive and complicated labor matters. We appreciate the Court’s careful consideration of the facts and of the harm that employers would face if they lost these essential rights.”
Seaton told Bloomberg BNA that the Minnesota lawsuit will proceed before Judge Schiltz and he is hopeful the plaintiffs will win a final ruling when the court considers declaratory judgment or summary judgment in the case.
Counsel representing the Labor Department weren't available June 23 to respond to Bloomberg BNA's requests for comment on the decision.
Seaton, Peters & Revnew P.A. and Shawe & Rosenthal LLP in Baltimore represented the plaintiffs. The Justice Department in Washington and the U.S. attorney's office in Minneapolis represented the Labor Department.
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Text of the order is available at http://www.bloomberglaw.com/public/document/Labnet_Inc_v_DOL_No_16CV0844_PJSKMM_2016_BL_200241_D_Minn_June_22
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