Texas Federal Judge Rules in Favor of Employers by Permanently Blocking the DOL’s “Persuader Rule”

In March of 2016, the Department of Labor (“DOL”) issued a reinterpretation of the Persuader Activities Rule (The “Revised Rule”). This Revised Rule required that:

  1. employers must annually report agreements that have the object of dissuading employees from supporting unions (“persuader activities agreements”);
  2. consultants must report such persuader activities agreements within 30 days; and
  3. consultants who enter persuader activities agreements must report payments from employers for all “labor relations advice and services.” (the “LM-21 Report”).

This reinterpretation changed a long-standing rule for what qualified as “persuader activities.” Previously, if a consultant had direct contact with employees, the consultant was acting as a “persuader” and the employer and the consultant had to file reports with the DOL. However, since 1962, the DOL has not attempted to regulate consultants who offer advice and counsel, so long as their clients remain free to accept or reject the advice and so long as the consultants do not communicate directly with workers. The DOL’s reinterpretation of the rule sought to do away with this exception.

On November 16, 2016 a Texas federal judge permanently blocked the DOL from enforcing its reinterpretation of the rule. This judicial ruling is a massive win for employers. The DOL’s “persuader rule” was one of many new rules and regulations the Obama administration has implemented effectively making it easier and faster to conduct union elections, breaking the work force into smaller bargaining units, and eroding the line between employers and contractors. Critics to the reinterpretation claim it hampered the First Amendment rights of employers and encroached on attorney-client privilege.

Judge Sam R. Cummings’ opinion states that the rule “should be held unlawful and set aside” and he issued a “permanent injunction” which has the effect of indefinitely preventing the DOL from enforcing the rule nationwide. Citing several other federal courts who considered the issue, Judge Cummings stated that the Labor Department mistakenly assumed there is a clear line between “persuader” activities and legal advice when the two typically overlap. When granting a temporary injunction against the rule in July, Judge Cummings stated that the reinterpretation had “replaced a long-standing and early understandable bright-line rule with one that is vague and impossible to apply,” and that “[T]here [was] substantial risk that associations, employers, and consultants, including attorneys, [would] not be able to determine with reasonable certainty whether their actions require reporting.” Yesterday’s ruling makes the temporary injunction permanent.

There appears little doubt that the March 2016 “reinterpretation” of the original rule was a political decision, intended by the current administration to aid unions attempting to organize employees. With the election of Mr. Trump and the appointment of a new Secretary of Labor who will almost certainly be more aligned with employer interests, there is a strong likelihood that the March 2016 “reinterpretation” will be withdrawn and the DOL will revert to its prior interpretation.

The Kullman Firm will continue to closely monitor this issue and will provide updates should they become necessary.