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June 27, 2016

DOL Persuader Rule To Take Effect July 1 Amid Ongoing Legal Challenges

The U.S. Department of Labor’s (DOL) persuader rule, which requires expansive disclosure of relationships between employers, third-party lawyers, and consultants when engaging in activities, even indirectly, relating to employees’ rights to join a union, will take effect this July 1. 

According to the DOL, agreements signed before July 1 are exempt from being disclosed—even if the execution of the agreement takes place after the July 1 deadline. Because the DOL is applying the rule only to agreements made on or after July 1, even multi-year or open-ended agreements should be exempt from disclosure so long as they are made before July 1. 

MSCI is working with several partners to challenge this rule in federal courts but, on June 22, the Minnesota District Court ruled against a plaintiff, Labnet, in its request for a Preliminary Injunction (PI) against the persuader rule. (A PI is used to prevent a party from taking action, i.e. to stop the persuader rule from being implemented, while the court deliberates on the merits of the case.) The court ruled against the PI because the plaintiff failed to show irreparable harm. 

Despite that disappointing ruling, the court did find that the plaintiff was likely to succeed in its challenge to the rule after it is implemented on the ground it conflicts with the Labor Management Reporting and Disclosure Act (LMRDA). That means, while the request for a PI was denied, the chances of having the rule eventually overturned by the district court are fairly high. The Minnesota decision has yet to be posted online, but will be available here when it is. 

There are three cases challenging the persuader rule, and all have requested a PI. Along with its partners at the Coalition for a Democratic Workplace (CDW), MSCI is still waiting for decisions on the requests in a Texas case filed by National Federation of Independent Business and the National Association of Home Builders and in an Arkansas case filed by CDW and the National Association of Manufacturers. 

MSCI and its partners are also pursuing a legislative solution to stop this rule. Two weeks ago, CDW sent a letter to the Senate Appropriations Committee before their fiscal year 2017 Labor Health and Human Services spending bill markup. The letter requested policy riders on the joint employer standard, ambush election rule, Specialty Healthcare decision, and persuader rule. Unfortunately, none of our requests were included in the language and the Labor HHS appropriations bill passed the committee with a 29-1 vote. (A link to the summary of the bill can be found here.) 

Also in the Senate, Sens. Jeff Flake (R-AZ) and Lamar Alexander (R-TN) recently introduced S.J. Res. 35, a resolution that would prohibit implementation of the final persuader rule. CDW will send a letter of support to the senators that will be similar to the letter it sent to Rep. Bradley Byrne (R-AL) in support of his resolution, H.J. Res. 87. Byrne’s resolution has been reported out of committee by a 22-13 vote, but while it currently has 46 cosponsors, it has not yet been considered by the full House. 

As a reminder, the persuader rule applies to indirect persuader activity only; direct activity must still always be reported. Direct persuader activity occurs where a third party directly engages with employees regarding unionization. Indirect persuader activity encompasses advice and recommendations made between a third party and an employer regarding unionization, even when the third party has no direct contact with employees.