Texas Federal Court Permanently Enjoins DOL “Persuader Rule”

by Hirschfeld Kraemer LLP
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It has been a busy month for the federal courts in Texas, and a long one for the United States Department of Labor (the “DOL”). As we blogged here last week, on November 21, 2016, the United States District Court for the Eastern District of Texas blocked implementation of the DOL’s rule that would have nearly doubled the minimum salary level for the “white collar” exemptions. That ruling somewhat overshadows the fact that, just 6 days earlier, the United States District Court for the Northern District of Texas permanently enjoined enforcement of the DOL’s so-called “Persuader Rule,” leaving the viability of this rule in grave doubt, in light of the likely policy shifts in the administration of President-Elect Donald J. Trump. (See here for our blog entry of potential policy shifts under the new administration.)

As we previously blogged here, here, and here, the thrust of the “Persuader Rule,” a regulation first proposed by the DOL in 2011, and enacted in April of this year, is to essentially eliminate the “Advice Exception” to the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”). 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, the Court granted a nationwide, preliminary injunction against the DOL and others, preventing the enforcement of the new Persuader Rule. With the Court’s November 16 ruling, that permanent injunction is now permanent.

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 violated 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 the Court’s 86-page ruling of June 16, 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 disclosure requirements of LMRDA. On November 16, 2016, in a mere two pages, the Court referred to and incorporated the reasoning of its preliminary injunction order, and ruled that the Persuader Rule “should be held unlawful and set aside.”

What comes next is not certain, but the chances of the Trump Administration adopting the Obama Administration’s position on the Persuader Rule seem remote. The DOL has appealed the preliminary injunction order to the 5th Circuit, and it may well be that the DOL abandons that appeal in the next administration. Importantly, for the present, for employers who seek advice of counsel on union organizing and election matters, this permanent 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 over the coming months.

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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