DOL Persuader Rule Blocked by Federal Judge

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By Lawrence E. Dubé

Nov. 16 — A rule that would have increased disclosure requirements for employers that use advisers, such as law firms, to help them fight unionization drives was permanently stopped ( Nat’l Fed’n of Independent Bus. v. Perez , N.D. Tex., No. 16-cv-066, 11/16/16 ).

The Labor Department’s “persuader rule” is inconsistent with the Labor-Management Reporting and Disclosure Act and therefore unlawful, Judge Sam R. Cummings ruled Nov. 16 in a brief order. The National Federation of Independent Business and other challengers were entitled to permanent, nationwide injunctive relief, he said.

Cummings had entered a preliminary injunction against the rule in June.

Ruling Praised by Challengers, Key GOP Legislators

The DOL rule was controversial from the time it was adopted, and the court’s permanent injunction drew praise from the challengers and from Capitol Hill.

“Small business owners today are relieved that they will still have the right to seek legal advice when facing a union election,” the NFIB’s Karen Harned said in a statement issued shortly after the order. “Labor law is extremely complicated, and small business owners rely on the advice of experts to help them navigate through unfamiliar territory.” Harned is executive director of the group’s small-business legal center.

“We are very pleased that the court agreed with us today, and struck down an attempt by the DOL to tip the scale in favor of unionization,” she said.

Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Health, Education, Labor and Pensions Committee, told Bloomberg BNA Nov. 16 that it was helpful for the court to enjoin enforcement of the rule. The persuader rule is the type of regulation he would want Congress to overturn, he said. The Trump administration can and undoubtedly will move to change other rules and regulations adopted by its predecessor, Alexander said.

Rep. John Kline (R-Minn.), chairman of the House Committee on Education and the Workforce, and Rep. Phil Roe (R-Tenn.), chairman of that panel's Health, Employment, Labor, and Pensions Subcommittee, issued a joint statement applauding the decision and calling on the Obama administration “to immediately abandon this extreme and partisan rule.”

NFIB Lawyer Cites Persuasive Arguments

The court decision is a major victory for employers that resisted what they considered the DOL’s effort to favor labor unions in organizing campaigns, Jeffrey C. Londa, who represented the NFIB, told Bloomberg BNA Nov. 16. The agency wanted to restrict the ability of employers to consult attorneys and obtain advice about responding to unionization attempts, said Londa, a shareholder in Ogletree, Deakins, Nash, Smoak & Stewart P.C. in Houston.

The court based its permanent injunction ruling, like the preliminary injunction, on evidence the challengers presented earlier this year and legal arguments made in summary judgment motions by the challengers and the government, he said.

In a lengthy decision granting the preliminary injunction, the judge made it clear he was convinced the DOL rule violated the Labor-Management Reporting and Disclosure Act and the First and Fifth amendments to the Constitution, Londa said. He noted that Cummings said at the time that the rule infringed on rights of free speech and association and was vague and ambiguous enough to interfere with due process.

The LMRDA requires employers and consultants to report detailed information, including fee arrangements, about some activities designed to persuade employees to reject unions or to refrain from union organizing. However, the act exempts advice from the reporting requirements. The DOL took the position that advice isn’t exempt if its purpose is to persuade employees to reject or refrain from unionization, but the court disagreed. The statutory exemption protects employers against forced disclosure of information about their legal representation, it said.

Londa said state bar organizations pressed the argument that the agency’s restrictive view of the LMRDA advice exemption interfered with their right to regulate the practice and conduct of attorneys in their jurisdictions, and the court was clearly concerned about that fallout from the DOL rule.

Court Order Subject to Appeal

The court’s order wasn’t unexpected. In granting the preliminary injunction June 27 (2016 BL 221945, 206 LRRM 3598 (N.D. Tex. 2016)), Cummings said the NFIB and other challengers probably would prevail on the merits of their objections to the rule, which was to have been implemented effective July 1. The DOL appealed the preliminary injunction ruling to the U.S. Court of Appeals for the Fifth Circuit on Aug. 29 (No. 16-11315), but the appeals court hasn’t acted on the appeal.

The challengers, which also include the National Association of Home Builders, Texas business groups and 10 states that intervened in the lawsuit, presented evidence that the DOL’s rule change was inconsistent with the LMRDA and exceeded the department’s authority, Cummings said.

Cummings issued a nationwide preliminary injunction against implementation that was to remain in effect until the court reached a final decision on the merits of the legal challenge. In his Nov. 16 decision, he said he had reviewed legal arguments presented by the challengers and the DOL and was convinced he should rule against the agency.

“The Court’s preliminary injunction preventing the implementation of that Rule should be converted into a permanent injunction with nationwide effect,” Cummings wrote.

A DOL spokesman told Bloomberg BNA Nov. 16 that the agency had no comment on the ruling “at this time.”

The DOL can appeal the permanent injunction, but Londa said the permanent injunction moots the appeal already pending in the Fifth Circuit. If the government chooses to appeal Cummings’ new order, it would have to file a new appeal, the lawyer said.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

For More Information

Text of the permanent injunction is available at http://src.bna.com/j7L.

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