Judge Halts Labor Department Persuader Rule for Now

A federal judge in Texas yesterday issued a preliminary injunction blocking the Department of Labor (DOL) from implementing its “persuader rule,” under which employers would be required to report hiring labor relations consultants for advice on how to respond to union organizing campaigns. Currently, employers only have to report hiring consultants when the latter communicate directly with employees.

U.S. District Judge Sam Cummings in Lubbock, Texas, enjoined DOL’s implementation of the rule, which went into effect on April 25, pending the outcome of a lawsuit filed by the National Federation of Independent Business and other business associations.

The rule, which is supported by organized labor, would make it much more difficult for medium-sized businesses to respond to union organizing efforts. In other words, the rule would most negatively affect those businesses that are just large enough to make it worth it for unions to try to organize them, yet are too small to employ in-house counsel.

Some law firms, facing much more intrusive reporting requirements for providing labor advice, would likely get out of that area of business altogether.

As Judge Cummings wrote in his order:

… Plaintiffs have shown that there is a substantial likelihood that many attorneys will no longer be available and willing to offer legal advice to employers relating to union campaigns as a result of DOL’s New Rule. For example, Don Graf, who is the only management-side attorney in the Lubbock, Texas area with union election experience, states that he will cease providing such services under the DOL’s New Rule. On the national level, large and well-known firms such as Morgan Lewis have already started announcing that they are making the same choice to cease providing some services to avoid the New Rule’s disclosure requirements.

[…] The evidence at the hearing shows that employers need such advice. For example, employers often require legal advice to respond to union election petitions, which impose numerous legal obligations on employers. Many employers—especially, smaller employers—lack in-house counsel, human resources staff, or other expertise in such matters. Under the NLRB’s [National Labor Relations Board’s] current election rules, which impose numerous relatively short deadlines, and employer’s ability to quickly access competent legal counsel is vital to ensuring legal compliance.

[…] By threatening Plaintiffs’, their members’, and other employers’ access to legal and other advice, the New Rule threatens irreparable harm by interfering with First Amendment rights, as set forth above. (p. 79)

Thus, the rule may have a chilling effect on employer speech, as small to mid-sized businesses become wary of communicating their side of the story with employees about unionization without legal advice.

The American Bar Association (ABA) opposes the new DOL rule because of this likely negative effect on access to legal to legal counsel. ABA President Paulette Brown told the House Education and the Workforce Committee in April 27 testimony:

[T]he ABA believes that the [Labor] Department’s original broad interpretation of the advice exemption in effect for over 50 years—which excluded lawyers from the Act’s “persuader activities” reporting requirements when they merely provide persuader related advice or other legal assistance directly to their employer clients but have no direct contact with the employees—should be retained with respect to lawyers and their employer clients for several important reasons. In particular, the Department’s previous interpretation provides a useful, bright-line rule that is consistent with the actual wording of the LMRDA [Labor Management Relations and Disclosure Act] and congressional intent, while the new interpretation will essentially nullify the Act’s advice exemption, undermine the related attorney-client communications exemption, and hence thwart the will of Congress. The Final Rule will also conflict with lawyers’ existing state rules of professional conduct regarding client confidentiality and will seriously undermine both the confidential lawyer-client relationship and the employers’ fundamental right to effective counsel.

That the persuader rule would so blatantly favor Big Labor at the expense of employers’ right to counsel may be distressing, but isn’t at all surprising. In fact, it’s part of the Obama administration’s broader efforts to reward its union allies, alongside DOL’s proposed overtime rule and the NLRB’s joint employer and “ambush” election rules.

For more on the administration’s pro-union efforts, see here. For more on the persuader rule, see here.