Stop Right There: Federal Court Permanently Blocks New Persuader Rules Nationwide
In a previous alert, we notified you that the Department of Labor (DOL) had issued expansive regulations regarding what constitutes persuader activity and increased reporting obligations ("expanded persuader rule") for such activity effective July 1, 2016. At the time of that alert we predicted that legal action to block the expanded persuader rule was likely to occur. Our prediction in fact came true and last week, a federal court in Texas permanently blocked implementation of the regulations.
As explained in our prior alert, the expanded persuader rule would have substantially expanded the disclosure requirements of employers and consultants concerning their activities in union-organizing campaigns. Disclosure requirements were expanded by broadening the definition of "persuader activities" to encompass indirect persuader activities and narrowing the "advice exemption" upon which consultants, including law firms, have relied to provide effective and meaningful advice to their employer clients without having to report their activity to the DOL.
On Wednesday, November 16, 2016, a federal judge in Texas issued a nationwide permanent injunction prohibiting implementation and enforcement of the expanded persuader rule in a case filed by several trade associations, in which a number of States had also intervened. The new rule was challenged on the grounds that it: (1) exceeded the DOL’s authority by eliminating a prior advice exemption contrary to the Labor-Management Reporting and Disclosure Act’s plain language; (2) was arbitrary, capricious and an abuse of discretion in violation of the First Amendment; (3) was unconstitutionally vague in violation of the due process clause of the Fifth Amendment; and (4) violated the Regulatory Flexibility Act.
Earlier this year in June, the Texas federal court issued a preliminary injunction against implementation finding that the challengers of the rule had shown a likelihood of success on the merits and a substantial threat of irreparable harm in the absence of injunctive relief. At that time, the court also found that the expanded persuader rule had the effect of reducing access to full legal advice and representation and reducing access to training and other advice relating to unionization campaigns, as well as chilled First Amendment rights, including the right to hire and consult with attorneys.
In his November 16 decision, U.S. District Judge Sam Cummings rejected the government's motion to set aside the preliminary injunction and granted the motion for permanent injunction. Relying on the findings set forth in his preliminary injunction order, Judge Cummings stated that "[t]he Court is of the opinion that the Department of Labor's [rule] … should be held unlawful and set aside … and the Court's preliminary injunction preventing the implementation of that rule should be converted into a permanent injunction with nationwide effect."
What does this mean going forward? Procedurally, the court's preliminary injunction ruling is currently on interlocutory appeal before the Fifth Circuit, and therefore Judge Cummings' recent ruling has no effect on that appeal. If the Fifth Circuit has not ruled on the appeal prior to January 20, 2017, the Trump administration will presumably withdraw the appeal of the preliminary injunction ruling and allow Judge Cummings' permanent injunction to stand, thus invalidating the rule. With the new administration taking office in late January, it is unlikely that the DOL, under Trump's leadership, would revive the expanded rule.
From a practical perspective, the permanent injunction and change in administration means it is unlikely that the expanded persuader rule will ever be implemented. This is welcome news to employers who were facing the possibility of handling labor issues without the assistance of resources, such as attorneys and consultants, who have traditionally assisted them with such issues. As such, the inhibitions that the rule presented to consultation with counsel and consultants regarding labor management issues will not be implemented and employers will remain free to utilize these resources without facing the expanded requirements.
If you have any questions about the DOL’s persuader rules or the permanent injunction's effect, please contact Judith A. Williams-Killackey at judi.williams@quarles.com/(414) 277-5439, Michael Aldana at michael.aldana@quarles.com/(414) 277-5151, Tyler Roth at tyler.roth@quarles.com/(414) 277-5765, or your Quarles & Brady LLP attorney.