Judge Permanently Blocks USDOL's "Persuader Rule"

A federal judge in Texas permanently enjoined the new USDOL Persuader Rule from taking effect on a nationwide basis. The new rule would have required employers and law firms to publically disclose confidential legal advice and financial information, which would have deterred employers and their counsel from conferring about the employer’s response to union organizing campaigns. Now that the rule has been permanently enjoined, employers can continue to seek confidential labor relations advice from counsel as they have done in the past, and the attempt to limit the role of employer’s counsel or invade the privilege regarding labor law advice in relation to union-organizing activities is blocked.

We described the new Persuader Rule, initially set to take effect on July 1, 2016, in a prior advisory. The Labor-Management Reporting and Disclosure Act (LMRDA) has long required those who engage in “persuasive” activity for employers in connection with union organizing or collective bargaining to file reports of their service and fees with the Department of Labor. However, the LMRDA excludes “advice” from the reporting obligations. For over 50 years, the rule has been interpreted to allow consultants or attorneys to advise employers how to craft their own message and not be subject to reporting under the LMRDA as long as the employer made the final decision.

The revised USDOL guidance issued March 24, 2016 would have dramatically narrowed the “advice” exemption to require public disclosure of indirect persuasive advice and services for both employers and their attorneys. Employer groups and law firms filed three lawsuits challenging the new rules in Minnesota, Arkansas, and Texas on several grounds, including invasion of attorney-client privilege. After issuing a temporarily injunction on June 27, the Texas judge issued a permanent injunction on November 16, 2016. The judge found that the rule was unlawful on several grounds:

• The new rule effectively eliminated the advice exemption in the LMRDA;
• The DOL failed to adequately explain why it abandoned 50 years of precedent;
• The new rule would require lawyers to violate ethical duties of confidentiality to clients;
• The new rule imposed unlawful burdens on speech, expression, and association;
• The new rule was vague and impossible to apply, while the former rule offered a bright-line test;
• The DOL understated and failed to consider the economic impact of the new rule.

With the Persuader Rule enjoined, employers and law firms have no obligation to comply with the new rules, meaning employers can continue to seek confidential labor relations advice from counsel without the threat of having to publicly disclose information about the services provided or fees paid.

While the Persuader Rule injunction lessens the urgency for employers to seek labor advice without the risk of publicly disclosing confidential information, employers should not forget about the NLRB’s quickie election rules. The election rules, which took effect in April of 2015, have largely accomplished the Board’s goal of fast-tracking union elections, with most elections scheduled within 21 days of the filing of the union’s petition. Therefore, regardless of what happens with the Persuader Rule in the future, we suggest that employers take proactive steps to prepare for union campaigns:

• Conduct a vulnerability assessment concerning vulnerability to union organizing within various departments of the organization. We often find that problems with communication are a common reason employees turn to unions. We also find that issues other than money rank high on employee concern lists.  Given the fast track election rules, having this information in hand ahead of the game can make a real difference.
• Conduct an employee satisfaction survey on various workplace concerns. The NLRB has long found this practice legal, even during unionization campaigns, if there is a history of doing such surveys on a routine basis over time.
• Review and revise your employee handbook and personnel policies for compliance with current NLRB standards, and consider a statement concerning the company’s position on unionization.
• Train managers and supervisors concerning the importance of the roles which they would play in any union campaign.