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Texas Federal Court Issues Nationwide Injunction Against DOL Persuader Rules

Additional litigation and appeals are likely, but for now, the DOL’s persuader rules will not take effect on July 1.

The US District Court for the Northern District of Texas imposed a nationwide injunction on June 27 that prevents the US Department of Labor (DOL) from implementing its so-called “persuader regulations” as scheduled on July 1, 2016. The regulations were issued by the DOL on March 23, 2016, and sought to broaden the scope of reportable persuader activity under the Labor-Management Reporting and Disclosure Act (LMRDA). The regulations would have had significant implications for all employers, not just those involved in union organizing, collective bargaining, or other union-related activity.

In his decision, Judge Sam Cummings found that the plaintiffs—a group of trade associations—are likely to succeed on numerous claims alleging that the persuader regulations are invalid. The court first explained that the DOL’s narrowing of the statutory advice exemption likely “exceeds DOL’s authority under the LMRDA by effectively eliminating the statute’s Advice Exemption contrary to the plain text of Section 203(c).” The court then reasoned that the regulations likely are arbitrary and capricious, given that the agency “never adequately explains” why it is departing from more than 50 years of settled interpretation and application of the LMRDA to expand persuader reporting and include a broader range of “indirect” activities by lawyers and consultants.

On the issue of attorney-client privilege, the court found that the DOL likely exceeded its authority by intruding on the attorney-client relationship governed by state law. The court recognized that the regulations expand considerably the reporting obligations for lawyers and their clients, which creates an unreasonable conflict with state rules that govern the practice of law. According to the court, the “DOL has no authority or expertise in the regulation of attorney-client relationships.”

Judge Cummings also found that the persuader regulations likely run afoul of the US Constitution, both under the First and Fifth Amendments. The court deemed the persuader regulations a “content-based” burden on employer speech under the First Amendment and, therefore, subject to a strict scrutiny test. The court predicted that the regulations would fail this test. The court also explained that the overall vagueness of the persuader regulations and uncertainty with reporting obligations made it likely that the regulations would violate due process under the Fifth Amendment, given the criminal penalties under the LMRDA for noncompliance.

With respect to the issue of irreparable harm, Judge Cummings concluded that plaintiffs had shown a substantial threat of irreparable harm in the absence of injunctive relief. The following were identified as constituting irreparable harm to justify the injunctive relief:

  • Reducing access to full, complete, and unconflicted legal advice and representation relating to unionization campaigns

  • Reducing access to training, seminars, information, and other advice relating to unionization campaigns

  • Burdening and chilling First Amendment rights, including the right to express opinions on union organizing and to hire and consult with lawyers

  • Creating conflicts with lawyer ethical rules by requiring the disclosure of advice, including legal advice from lawyers to clients, and the disclosure of attorney-client relationships and arrangements

Judge Cummings recognized that for all these reasons, “there is a substantial likelihood that many attorneys will no longer be able and willing to offer legal advice to employers relating to union campaigns as a result of DOL’s new rule.” He went on to explain that “[o]n the national level, large and well-known firms like Morgan Lewis have already started announcing that they are making the same choices to cease providing some services to avoid the New Rule’s disclosure requirements.” Accordingly, Judge Cummings enjoined the regulations on a nationwide basis pending final resolution of the litigation on the merits.

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VI, Number 180
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About this Author

Harry I. Johnson III, Morgan Lewis, labor and employment attorney
Partner

Harry I. Johnson, III serves clients as a management-side defense lawyer, with more than 20 years of experience in traditional labor matters before the National Labor Relations Board (NLRB) and federal courts. Harry practices across the entire traditional union/labor field, including in NLRB unfair labor practice and representation proceedings, union representation campaigns, union corporate campaigns, labor arbitrations, collective bargaining, labor-management relations, labor-related advice for mergers and acquisitions, and federal and state labor injunction cases,...

310.255.9005
Joseph Ragaglia, Morgan Lewis, labor and employment lawyer
Partner

Joseph C. Ragaglia partners with many of the largest national and multinational corporations, serving as the primary counsel in the development of strategic business and legal solutions to complex labor and employment issues. As the leader of the firm’s US labor/management relations practice, Joe provides employers with strategic representation related to high risk union organizing campaigns, corporate campaigns, contract negotiation and administration (collective bargaining and arbitration), and matters before the US National Labor Relations Board (NLRB). He also...

215.963.5365
Daniel Bordani, labor attorney, Morgan Lewis
Partner

Daniel P. Bordoni counsels clients on labor law issues, focusing his practice on collective bargaining and matters arising under the National Labor Relations Act (NLRA). He represents clients in administrative proceedings before the National Labor Relations Board (NLRB), labor arbitration proceedings, and collective bargaining negotiations. Clients from a range of industries, including defense, manufacturing, and trucking, turn to Dan for guidance on a wide variety of labor law and labor relations issues.

202.739.5249
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