LUBBOCK, Texas (Legal Newsline) - A Texas federal judge this week issued a nationwide permanent injunction against the U.S. Department of Labor’s so-called “persuader rule,” preventing its implementation.
The persuader rule, or Persuader Advice Exemption Rule, was meant to effectively eliminate the “advice exemption” under the Labor-Management Reporting Disclosure Act, or LMRDA.
Basically, LMRDA requires employers to report each time they engage a consultant to persuade employees on how to use their collective bargaining rights.
Employers and consultants tend to engage in persuader activities during union campaigns to persuade employees not to unionize.
The new rule would have required that employers and the consultants they hire file reports not only for direct persuader activities -- i.e. consultants talking to workers -- but also for indirect persuader activities -- consultants scripting what managers and supervisors say to workers.
Senior Judge Sam R. Cummings for the U.S. District Court for the Northern District of Texas issued his two-page order striking down the rule Wednesday.
“... the Court is of the opinion that the Department of Labor’s Persuader Advice Exemption Rule should be held unlawful and set aside pursuant to 5 U.S.C. Section 706(2), and the Court’s preliminary injunction preventing the implementation of the Rule should be converted into a permanent injunction with nationwide effect,” Cummings wrote.
In the judge’s June order, in which he issued the preliminary injunction, Cummings blasted the DOL for not conducting any studies or independent analysis on the new rule, which, according to the department, took effect April 25. The rule was to be applicable to arrangements, agreements and payments made on or after July 1.
“DOL has not articulated a compelling governmental interest for its new Advice Exemption Interpretation,” the judge wrote. “DOL has only identified vaguely described, speculative benefits that it believes may result from the New Rule.”
Cummings said in his June order that the rule, which primarily applies to labor lawyers, creates “substantial potential conflicts” for attorneys, and imposes “content-based burdens” on speech and cannot survive strict scrutiny.
In May, the judge allowed 10 states, including Alabama, Arkansas, Indiana, Michigan, Oklahoma, South Carolina, Texas, Utah, West Virginia and Wisconsin, to join the lawsuit, National Federation of Independent Business v. Perez.
The states, along with three others, sent a letter to the U.S. Office of Management and Budget voicing their opposition to the proposal earlier this year. They believe the rule would place undue burdens on small businesses, which would be singled out under the rule.
The NFIB, Texas Association of Business, Lubbock Chamber of Commerce, National Association of Home Builders and Texas Association of Builders argued the persuader rule is a threat to employers’ access to legal, other advice; that it would have a negative impact on small businesses, especially; and the cost of compliance would be “significant.”
As the plaintiffs pointed out, attorneys would need to segregate every increment of time billed to each of their clients for “labor relations advice or services” even if the firm was not doing any “persuader” consulting.
The rule, the groups estimated, could cost the U.S. economy $7.5 billion to $10.6 billion during the first year of implementation, and that’s not including the indirect economic effects of raising the cost of doing business in the U.S.
But the DOL has argued workers often don’t know that their employer hired a consultant to manage its message in union organizing campaigns, including by scripting speeches by managers, talking points, letters and other documents.
Consultants, the department contends, also may direct supervisors to express specific viewpoints that don’t match those supervisors’ actual views as individuals -- something workers may find relevant in assessing the information they receive from their supervisors.
The rule, the DOL has noted, does not prohibit employers from hiring consultants or constrain them in what information they can provide; it simply ensures that employees are given more information about the source of campaign material.
“Workers should know who is behind an anti-union message. It’s a matter of basic fairness,” U.S. Secretary of Labor Thomas Perez said in an earlier statement. “This new rule will allow workers to know whether the messages they’re hearing are coming directly from their employer or from a paid, third-party consultant.
“Full disclosure of persuader agreements gives workers the information they need to make informed choices about how they pursue their rights to organize and bargain collectively. As in all elections, more information means better decisions.”
Office of Labor-Management Standards Director Michael Hayes agreed, saying the rule is about disclosure.
“More disclosure here means more peaceful and stable labor-management relations,” Hayes said in an earlier statement. “With workers having a better understanding of the true source of persuader communications, worker-supervisor and other workplace relationships are likely to proceed more smoothly no matter what is decided regarding union representation.”
The DOL could not immediately be reached for comment on Cummings’ order or what it plans to do next.
But the Washington Legal Foundation, a D.C.-based public interest law firm that has filed briefs in opposition to the persuader rule, including the Texas case, applauded the judge’s decision.
“Today’s nationwide permanent injunction is great news for workers, small businesses, and the First Amendment,” WLF General Counsel Mark Chenoweth said in a statement. “Here’s hoping it spells the end for DOL’s unconstitutional gambit to overturn longstanding bipartisan consensus and dramatically expand reporting requirements that stifle free enterprise.
“The DOL never should have cast aside First Amendment limits on compelled speech in its effort to create leverage against law firms and others who counsel the management side of labor disputes.”
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.