Additional litigation and appeals are likely, but for now, the DOL’s persuader rules will not take effect on July 1.
The US District Court for the Northern District of Texas imposed a nationwide injunction on June 27 that prevents the US Department of Labor (DOL) from implementing its so-called “persuader regulations” as scheduled on July 1, 2016. The regulations were issued by the DOL on March 23, 2016, and sought to broaden the scope of reportable persuader activity under the Labor-Management Reporting and Disclosure Act (LMRDA). The regulations would have had significant implications for all employers, not just those involved in union organizing, collective bargaining, or other union-related activity.
In his decision, Judge Sam Cummings found that the plaintiffs—a group of trade associations—are likely to succeed on numerous claims alleging that the persuader regulations are invalid. The court first explained that the DOL’s narrowing of the statutory advice exemption likely “exceeds DOL’s authority under the LMRDA by effectively eliminating the statute’s Advice Exemption contrary to the plain text of Section 203(c).” The court then reasoned that the regulations likely are arbitrary and capricious, given that the agency “never adequately explains” why it is departing from more than 50 years of settled interpretation and application of the LMRDA to expand persuader reporting and include a broader range of “indirect” activities by lawyers and consultants.
On the issue of attorney-client privilege, the court found that the DOL likely exceeded its authority by intruding on the attorney-client relationship governed by state law. The court recognized that the regulations expand considerably the reporting obligations for lawyers and their clients, which creates an unreasonable conflict with state rules that govern the practice of law. According to the court, the “DOL has no authority or expertise in the regulation of attorney-client relationships.”
Judge Cummings also found that the persuader regulations likely run afoul of the US Constitution, both under the First and Fifth Amendments. The court deemed the persuader regulations a “content-based” burden on employer speech under the First Amendment and, therefore, subject to a strict scrutiny test. The court predicted that the regulations would fail this test. The court also explained that the overall vagueness of the persuader regulations and uncertainty with reporting obligations made it likely that the regulations would violate due process under the Fifth Amendment, given the criminal penalties under the LMRDA for noncompliance.
With respect to the issue of irreparable harm, Judge Cummings concluded that plaintiffs had shown a substantial threat of irreparable harm in the absence of injunctive relief. The following were identified as constituting irreparable harm to justify the injunctive relief:
Judge Cummings recognized that for all these reasons, “there is a substantial likelihood that many attorneys will no longer be able and willing to offer legal advice to employers relating to union campaigns as a result of DOL’s new rule.” He went on to explain that “[o]n the national level, large and well-known firms like Morgan Lewis have already started announcing that they are making the same choices to cease providing some services to avoid the New Rule’s disclosure requirements.” Accordingly, Judge Cummings enjoined the regulations on a nationwide basis pending final resolution of the litigation on the merits.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Harry I. Johnson, III
Ross H. Friedman