Employers Get a Break on Disclosure of Union Organizing Efforts and Advice: Texas Court Blocks Implementation of the DOL’s “Persuader Rule”

by Hirschfeld Kraemer LLP
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In this blog, we have previously covered the United States’ Department of Labor’s controversial efforts to effect a significant change to the so-called “Persuader Rule,” a regulation first proposed by the United States Department of Labor in 2011, and finally enacted in April of this year, to essentially eliminate the “Advice Exception” to the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”). (See here and here.)  The enactment of the “Persuader Rule” precipitated the filing of multiple lawsuits in federal District Courts across the country by employer-business associations and others.  In a significant victory for employers, on June 27, 2016, in the Federal District Court for the Northern District of Texas, that court granted a nationwide, preliminary injunction against the DOL and others, preventing, for the present, the enforcement of the new Persuader Rule.

The Persuader Rule modifies the “Advice Exception” under the LMRDA, in place since the Kennedy Administration, which allowed employers to receive confidential and privileged counsel from attorneys on union organizing and election efforts. The Advice Exception was and is consistent with state law interpretations of the confidential attorney-client communications privilege, and also consistent with an attorney’s duty of confidentiality to his/her client under state law and rules of professional conduct.  The only caveat to this bright line that no disclosure was required under the LMRDA was that, in providing such counsel, the attorney had no direct contact with employees and the employer was free to accept or reject any recommendations.  Although billed as a modification of the Advice Exception, in this case, Plaintiffs and notably, the American Bar Association (which filed a “friend of the court” brief), saw the Persuader Rule as creating an irreconcilable conflict: forcing lawyers to document and disclose their advice to employer-clients, in violation of their duties under state law and professional rules of conduct, in order to comply with the new DOL rule.  Plaintiffs also argued that the new Persuader Rule violates their First Amendment rights to free speech and association: specifically, that the Persuader Rule would impose a content-based burden on speech about union organizing.  They further argued that the rule was impermissibly vague and violated their right to due process under the Fifth Amendment.

In an 86 page ruling, the Court agreed with and expanded on all of these positions, but most significantly found that the changes to the Persuader Rule “effectively eliminate[ed]” the Advice Exemption to the disclosures requirements of LMRDA.

What comes next is not entirely certain, although an appeal by the DOL to the 5th Circuit would not be surprising.  The DOL could also go back to the drawing board to revise the new Persuader Rule.  Regardless of its next steps, the DOL will need to better articulate and support its rationale for any proposed change.  The DOL apparently believes that the playing field regarding union organizing and elections has somehow become unlevel, and the new Persuader Rule was supposed to address this perceived imbalance.  (Notably, however, the court here was unmoved by the DOL’s arguments and found that the DOL had provided little evidence to support such conclusions.)  Importantly, for the present, for employers who seek advice of counsel on union organizing and election matters, this injunction means that the content and other details of such advice will be kept confidential, and will not be disclosed, on the same terms that existed prior to the April 2016 implementation of the final Persuader Rule; however, employers would be well advised to stay abreast of this issue as it works its way through the courts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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