We are pleased to report that a federal court in Nat’l Fed’n of Indep. Bus. v. Perez issued a nationwide injunction permanently enjoining the United States Department of Labor’s new persuader rule last week. The decision is a major victory for the business community because the new rule placed employers’ abilities to freely seek labor counsel in jeopardy by expanding their obligations to publicly disclose arrangements into which they entered with the labor consultants, including their attorneys.
The “persuader rule,” which has been in place for over 50 years, generally requires employers and their labor consultants to disclose arrangements into which they enter to persuade employees regarding unionization. Significantly, the rule has an advice exemption that historically has protected these arrangements from disclosure provided that the labor consultants do not directly communicate with employees. Earlier this year, the USDOL issued a rule that effectively eliminated the advice exemption by requiring employers to disclose arrangements even if their consultants never make direct contact with their employees. The new rule led to a justifiable backlash from the business and legal communities. Critics of the rule saw it as a blatant attempt by the USDOL to discourage employers from retaining labor consultants and, in turn, facilitate union organizing drives particularly in light of recent pro-union actions by the National Labor Relations Board, including its new expedited union election rules.
Various business groups filed lawsuits throughout the country seeking to enjoin the new rule. One such lawsuit was Nat’l Fed’n of Indep. Bus. v. Perez, which was filed in the United States District Court for the Northern District of Texas. This summer, the Northern District of Texas preliminarily enjoined the new rule just days before it was scheduled to take effect. In so ruling, the court explained that the business groups and several states challenging the new rule were likely to prevail on the merits of their arguments, including that the rule effectively eliminates the advice exemption, is arbitrary and capricious, infringes upon the attorney-client privilege, and violates the United States Constitution. The USDOL appealed that decision to the United States Court of Appeal for the Fifth Circuit.
With the appeal to the preliminary injunction pending, the Northern District of Texas permanently enjoined the rule last week. In a two-page order, the court explained that it was permanently enjoining the rule because the plaintiffs (business groups and several states) had demonstrated that the rule was invalid. The decision is a major win for the business community who can continue to seek labor counsel without having to worry about publicly disclosing their relationships with labor consultants provided that the consultants do not directly communicate with their employees. Employers still, of course, have a duty to publicly disclose their relationships with labor consultants where the consultants directly communicate with their employees.
We will keep you posted on any further developments regarding the new persuader rule, including the Nat’l Fed’n of Indep. Bus. v. Perez matter. In the meantime, members of the Gibbons Employment & Labor Law Department are available to answer any questions your company may have about the persuader rule and other recent labor law developments.