HR Management & Compliance

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.

On November 16, the U.S. District Court for the Northern District of Texas granted summary judgment (dismissal without a trial) in favor of 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

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

The LMRDA requires, among other things, employers and their consultants to report to the DOL any “persuader activities” consultants perform. Previously, the DOL required disclosures only when consultants undertook “direct” activities such as giving presentations to employees.

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

For a full discussion of the regulation’s 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 to temporarily halt the rule. After considering the rule on its merits, the court granted summary judgment in favor of the states and business groups, which were led by the National Federation of Independent Business (NFIB). In National Federation of Independent Business v. Perez, No. 5:16-cv-00066 (N.D. Texas, Nov. 16, 2016), the court said the DOL lacked the statutory authority to issue the rule and, as the American Bar Association argued, the rule undermined the attorney-client privilege.

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,” he stated. The rule would have limited employers’ access to experienced counsel, he said, noting that perhaps that was an ulterior motive for issuing the rule. Also, unions would have been able to show workers just how much their employer spends fighting unionization efforts, he said.

The NFIB said it was relieved by 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 NFIB’s small business legal center, in a statement.

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

More last-minute pushback

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

While similar suits challenging some of the rules have been filed in other courts, experts have said 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 making last-ditch efforts to stop the rules 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 rule. 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 six months.

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

To create a way to roll back the rules and other Obama initiatives, House Republicans passed the Midnight Rules Relief Act (H.R. 5982) on November 17. If also passed by the Senate, the bill 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 . . . occupancy of the White House without reasonable and responsible oversight.”