Employers and their attorneys can breathe a collective sigh of relief, at least for the time being. On Monday, a Texas judge issued a nationwide injunction against the Department of Labor (DOL), preventing it from enforcing its new Persuader Rule after finding that the rule was “defective to its core.”

As we previously reported [see Closing the Loophole: Department of Labor Issues Final “Persuader” Rule], under the contested Persuader Rule (which would have become effective July 1, 2016 if not for the Texas injunction), any agreement between a consultant or attorney and a client, with an object to persuade employees as to their organizational or collective bargaining rights, would need to be reported under the Labor Management Reporting and Disclosure Act. This has caused significant concern amongst employers and counsel alike, because it is anticipated that disclosure would be required in a broad range of circumstances, and potentially sensitive information about advice given and fees charged – previously protected by attorney-client privilege or otherwise not subject to disclosure – would be required.

In contrast, under the longstanding rule that is currently on the books, attorneys and consultants hired by an employer are not obligated to report advice provided during the course of a union organizing campaign unless there is direct contact with the employer’s employees.

In his order, Judge Cummings of the U.S. District Court for the Northern District of Texas, Lubbock Division, concluded that the plaintiffs, all business groups, would likely succeed on the merits of their claims that:

  • the DOL lacked statutory authority to promulgate and enforce the rule;
  • the rule is arbitrary, capricious and an abuse of discretion because (1) the DOL failed to provide an explanation for the rule, (2) the DOL failed to conduct any studies or independent analysis showing a need for the rule, and (3) the rule conflicts with state laws governing the practice of law;
  • the rule violates free speech and association rights protected by the First Amendment, including the First Amendment right to hire and consult an attorney;
  • the rule is “vague and impossible to apply”, thus violating the due process clause of the Constitution; and
  • the rule violates the Regulatory Flexibility Act because of the DOL’s failure to conduct an analysis of the impact of the rule on small entities prior to issuance.

The court also concluded that the plaintiffs established a substantial threat of irreparable harm because the rule would:

  1. reduce access to “full, complete, un-conflicted legal advice and representation during unionization campaigns”
  2. reduce employer access to trainings and seminars; and
  3. burden the First Amendment right to express opinions regarding a union organizing campaign.

The injunction will remain in effect until a final resolution of the merits is reached or there is further order of the court, the Fifth Circuit or the United States Supreme Court.

Because this is was only a preliminary injunction, employers are not out of the woods yet and the possibility remains that the rule may still be enforced as written. Significantly, even if the rule is ultimately upheld, agreements between lawyers and clients to provide services that might otherwise be subject to the rule will not be subject to the rule if the agreement is executed before July 1, 2016.

For further discussion on the effect of the injunction, and on how to proceed in light of this rapidly developing area of the law, please contact any member of Schiff Hardin’s Labor & Employment Group.