DOL Takes Another Beating: Court Blocks Persuader Rule

A federal district court has permanently blocked a U.S. Department of Labor (DOL) regulation that would have created new requirements for employers looking to keep unions out of their workplaces.

The U.S. District Court for the Northern District of Texas on November 16 granted summary judgment to business groups and states challenging the so-called persuader rule, finding it “unlawful.” The ruling is the latest in a line of judicial and legislative actions aimed at undoing recent labor and employment initiatives from the Obama administration.

The Persuader Rule

DOL finalized its persuader rule in March; the regulations were issued under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) and would have created new requirements for employers facing unionization efforts.

That law requires, among other things, that employers and their consultants report to DOL on any “persuader activities” the consultants perform. DOL previously only required these disclosures when consultants undertook “direct” activities, such as giving presentations to employees.

The new rule would have added reporting requirements for indirect persuader activities, meaning that employers would have to disclose when consultants suggest what managers should say to workers, among other things. This also would have applied when, for example, a company retains a lawyer to review materials for their compliance with the National Labor Relations Act, according to Kevin McCormick, a partner at Whiteford, Taylor & Preston and an editor of the Maryland Employment Law Letter. “Almost everything that lawyers do would have been reportable,” he told BLR^®.

For a full discussion on the regulations’ requirements, see McCormick’s article: What do DOL’s final ‘persuader’ rules mean for employers?

Court Steps In

The district court first issued an injunction, temporarily halting the rules. After considering the rules on their merits, it granted summary judgment for the plaintiffs, who were led by the National Federation of Independent Business (NFIB). The court said that DOL lacked statutory authority to issue the rule and, as the American Bar Association had argued, it undermined attorney-client privilege. (National Federation of Independent Business v. Perez, No. 5:16-cv-00066 (N.D. Texas, Nov. 16, 2016))

The ruling is good news for both employers and their attorneys, McCormick said. “In the real world, these rules created a significant impact. Firms were trying to decide [whether they wanted] to do this work anymore.” This would have limited employers’ access to experienced counsel, McCormick said, noting that perhaps that was an ulterior motive for the rule. Unions also would have been able to show workers just how much their employer spent fighting the unionization effort, he said.

NFIB said it was relieved at the court’s ruling. “Labor law is extremely complicated, and small business owners rely on the advice of experts to help them navigate through unfamiliar territory,” said Karen Harned, executive director of the organization’s small business legal center, in a statement.

DOL can appeal the ruling to the 5th U.S. Circuit Court of Appeals but McCormick said it would take months for anything to happen. And by then, Trump’s DOL will be in place. “This is not the type of regulation I think the Trump administration would foster or put forward,” he said.

More Last-Minute Pushback

The persuader ruling came less than a month after a judge in Texas’ eastern district granted a temporary injunction against DOL’s blacklisting rule, which would have required prospective federal contractors to disclose employment law violations when applying for contracts. The eastern district also is considering an injunction against the agency’s new Fair Labor Standards Act overtime rule; an order is expected November 22. And back in the northern district, the court will soon review DOL’s fiduciary rule.

While similar suits challenging at least some of these rules have been filed in other courts, experts have said that the plaintiffs—largely business groups and states—may have chosen Texas because some of its courts are known for acting quickly. Or maybe they believed appeals would have the best chance of success in the conservative 5th Circuit. Either way, they’re having some success.

At the same time, Congress is taking some last-ditch efforts to stop these and other Obama initiatives.

Lawmakers are considering several pieces of legislation aimed at pulling back the overtime rule. Republicans in the Senate are perusing a bill that would slow the rules. The “Overtime Reform and Review Act” (S. 3464) would require that the new salary threshold be phased in and void the rule’s automatic updates. The House passed a different bill last month that, if adopted by the Senate, would delay the rule by 6 months.

If the overtime rule survives these judicial and legislative challenges, it would be difficult for the Trump administration to undo, experts say. DOL could choose not to enforce the rules, but there’s a private right of action for employees to sue employers themselves, McCormick noted.

To create a way to roll back these and other Obama initiatives, House Republicans on November 17 passed the “Midnight Rules Relief Act” (H.R. 5982), which, if also passed in the Senate, would amend the Congressional Review Act to allow Congress to void any regulations issued during a president’s final year in office with a joint resolution.

“Lack of scrutiny, flawed cost-benefit analysis, and lack of transparency and public participation have defined the skewed rulemaking process embraced by President Obama and his agencies,” said Rep. Pete Sessions (R-Texas) in a statement announcing the bill. “We have a responsibility to the American people to ensure the Obama Administration cannot further cripple our economy by pushing through costly and political regulations at the last hour of their occupancy of the White House without reasonable and responsible oversight.”