July 5, 2016

In Major Victory For Employers Judge Stays DOL Persuader Rule

Under its “persuader” rule, which took effect earlier this year and was set to apply to companies’ communications about labor union organizing starting July 1, the U.S. Department of Labor (DOL) narrowed the scope of its “advice” exemption for third parties so that virtually all interaction between employers and labor lawyers or consultants would be subject to the department’s disclosure requirements. 

The Metals Service Center Institute (MSCI) believes this rule is unconstitutional and, as such, has worked with its partners at the Coalition for a Democratic Workplace to oppose it, both in the courts and in Congress. Other business trade associations also have launched lawsuits challenging the rule and, last week, one of those suits was successful. Last Monday, a federal court in the Northern District of Texas granted a preliminary injunction that halted nationwide implementation of the persuader rule pending a determination of the merits of lawsuits challenging it. 

As part of his decision, Judge Sam Cummings found the National Federation of Independent Business, the National Association of Home Builders and the other plaintiffs that had brought this particular lawsuit were likely eventually to be able to get the rule thrown out on the merits. Indeed, Judge Cummings said he acted because, “The new rule is defective to its core because it entirely eliminates the … advice exemption.” (The full decision is available here.) 

This is the second court to make such a determination. As Connecting the Dots reported last week, while the U.S. District Court for Minnesota last month ruled against a plaintiff, Labnet, in its request for an injunction against the rule because Labnet could not yet show irreparable harm stemming from the rule, it did find Labnet is likely to ultimately succeed in its challenge to the rule after it took effect and the company could show the ill effects of the rule. 

While the Coalition for a Democratic Workplace, (CDW) which MSCI is a member of, was not involved in either of these cases, it is involved in a third case that is challenging the persuader rule, this one in the U.S. District Court in Arkansas. The coalition’s motion for a preliminary injunction in that case is still pending. Whether the court issues a decision on CDW’s request for the preliminary injunction may depend on whether the DOL appeals the Texas court's injunction. If the DOL chooses not to appeal, CDW’s motion may be moot. 

The coalition and MSCI have argued that, as a result of this rule, employers and their advisers would have no way to tell what forms of communication and outreach are considered reportable, except by wading through the quagmire of the DOL enforcement process. Because of this burden, rather than risking criminal penalty from lack of reporting, many will choose to forgo all communications with workers. The DOL rule also would make it harder for employers to train supervisors on how to communicate with employees about labor issues without violating the law. All of these repercussions make it less likely employers would exercise their federally protected free speech rights to discuss the pros and cons of unionization with employees.