A federal judge in Texas has granted a permanent injunction against a Department of Labor rule that would have required all union-related communications between an attorney and an employer to be publicly disclosed.
On Nov. 16, U.S. Senior District Judge Sam Cummings of the U.S. District Court for the Northern District of Texas granted the permanent injunction and a motion for summary judgment by plaintiffs challenging the rule. He had previously, in June, granted a preliminary injunction blocking the requirements that were intended to become effective on July 1.
The case, National Federation of Independent Business v. Perez, was filed by the named plaintiff along with the Texas Association of Business, Lubbock [Texas] Chamber of Commerce, National Association of Home Builders, and the Texas Association of Builders. State attorneys general of Texas, Arkansas, Alabama, Indiana, Oklahoma, South Carolina, Utah, West Virginia, and Wisconsin were later added to the lawsuit.
According to a Department of Labor statement at time the so-called “persuader” rule was issued, employers commonly engage third-party consultants in crafting and delivering anti-union messages to workers. “Workers often do not know when employers engage consultants behind the scenes to influence their decisions,” it said. The rule, had it been implemented, would have required reporting of certain employer-consultant agreements, including labor attorneys and other legal counsel in the latter category.
The rule, approved in March, applied to Section 203 of the Labor Management Reporting and Disclosure Act. It requires that labor organizations, consultants, and employers file reports and disclose expenditures on labor-management activities. The law is intended to prevent abuse, corruption, and improper practices by all parties.
What the Labor Department termed “a longstanding loophole,” however, allows employers to hire consultants to create materials, strategies and policies for organizing campaigns—and even to script managers’ communications with employees—without disclosing those arrangements, as long as the consultant does not directly contact employees.
The “persuader” rule was intended to close that loophole by requiring reporting on “actions, conduct or communications that are undertaken with an object, explicitly or implicitly, directly or indirectly, to affect an employee’s decisions regarding his or her representation or collective bargaining rights.”
“Workers should know who is behind an anti-union message. It’s a matter of basic fairness,” Secretary of Labor Thomas Perez said at the time the rule was finalized. “This new rule will allow workers to know whether the messages they’re hearing are coming directly from their employer or from a paid, third-party consultant. Full disclosure of persuader agreements gives workers the information they need to make informed choices about how they pursue their rights to organize and bargain collectively.”
Plaintiffs argued that the rule violated their First Amendment rights, the Due Process Clause of the Fourteenth Amendment, and the Regulatory Flexibility Act.
Judge Cummings’ final, nationwide injunction sided with those concerns and reiterated opinions expressed in the earlier, temporary injunction.
“The Department of Labor’s new rule is not merely fuzzy around the edges,” he wrote in the preliminary injunction. “It is defective to its core because it entirely eliminates the LDMA’s Advice Exemption.”
That concern was detailed in an amicus brief and expert testimony by the American Bar Association. It claimed that a departure from the longstanding definition of what constitutes “advice,” would undermine the confidentiality of client-lawyer relationships, depriving management of its right to counsel.
“Lawyers and trade associations want to avoid engaging in activities that trigger reporting under the LMRDA for various reasons, including due to their ethical obligations and their Privacy Concerns,” Cummings wrote. “Moreover, as a criminal statute, LMDRA must provide fair notice of what conduct is required and prohibited. The new rule, which is contrary to the LMRDA, completely fails to do that. It leaves employers, lawyers, consultants, and trade associations—not to mention union, employees, Department of Justice prosecutors, Labor Department investigators, and other interested parties—to guess what activities with an objective to persuade fall under the LMDRA’s advice exemption
“The chilling of free speech protected by the First Amendment is, in and of itself, an irreparable injury,” he added.
The National Federation of Independent Business praised the decision. “Small business owners today are relieved that they will still have the right to seek legal advice when facing a union election,” it said in a statement. Labor law is extremely complicated, and small business owners rely on the advice of experts to help them navigate through unfamiliar territory.”
Michael Lotito,co-chair of the law firm Littler Mendelson’s Workplace Policy Institute described the ruling as “a great result for an inherently defective rule.”
“The decision makes moot the government’s appeal from the preliminary injunction,” he said. “Now all that is left is for the government to accept this decision as the law of the case and drop the flawed rule to avoid more needless expense.”