PERSUADER RULE TEMPORARILY STOPPED

During March of 2016, the U.S. Department of Labor (DOL) issued a rule requiring employers to file public reports with the DOL when they use consultants (including lawyers) to provide labor relations advice that had the purpose of persuading employees regarding union organizing or collective bargaining.  The definitions were so broad as to potentially include the revision of certain personnel policies.  The consultants themselves were also required to file similar reports containing the details of the advice provided and the amount of payment received.  The previous policy had always been there were no reporting obligations unless the consultant engaged in direct dealing with employees, such as giving a speech to employees.  The new rule changed the advice exemption, requiring both the consultant and client to report all arrangements in which “an object” was to persuade employees in the exercise of their rights, irrespective of whether direct dealing with employees has taken place.  The new rule was to take effect on July 1, 2016. 

On June 27, 2016, a federal judge in Texas issued a preliminary injunction barring enforcement of this so-called “persuader rule” nationwide.  Nat’l Fed’n of Ind. Bus. V. Perez, No. 15-674.  In the order, the DOL is prohibited from implementing the rule until the case is resolved by the courts.  The judge indicated that the new rule infringed upon the First Amendment rights of employers and their counsel and constituted irreparable injury.  The National Association of Manufacturers, which filed the lawsuit with other groups, argued the rule would prevent employers from speaking on labor issues or seeking legal counsel. 

Meanwhile, an interesting exchange occurred in a similar case in federal court in Arkansas, in which the DOL filed a status report indicating that “the Department will not apply the rule to arrangements or agreements entered into prior to July 1, 2016, or payments made pursuant to such arrangements or agreements.”  Follow up conversations with DOL revealed that “services and payments made pursuant to a multi-year agreement, even if they occur after July 1, are not required to be reported on the new form LM-20, so long as the agreement was signed prior to July 1.” 

The DOL position in the Arkansas litigation triggered a nationwide move by legal counsel and labor consultants to enter into multi-year agreements to provide such services prior to July 1.  The fact that the “persuader rule” is temporarily enjoined did not remove the potential advantage of entering into such an arrangement prior to July 1, should the DOL ultimately prevail in its position concerning the validity of the new rule.  Some employers found no downside to entering into such an arrangement prior to July 1 and did so.