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DOL Cannot Enforce its Persuader Rule Orders Texas Federal Court

Yesterday, the United States District Court for the Northern District of Texas issued a court order temporarily preventing the Department of Labor (DOL) from enforcing its new “Persuader Rule.” In his order, U.S. District Judge Sam Cummings ruled that “the new rule is defective to its core because it entirely eliminates the LMRDA’s advice exemption.” Accordingly, Judge Cummings issued a court order not only preventing the DOL from enforcing the new Persuader Rule in Texas, but anywhere in the nation.

The lawsuit was initially brought by several Texas-based business groups against the DOL in federal court to block the rule. Later, ten state attorneys general, including the Michigan Attorney General, joined the lawsuit on behalf of their respective states against the DOL.

The DOL’s Persuader Rule interprets a provision of the federal Labor-Management Reporting and Disclosure Act (LMRDA) that requires employers and consultants hired to assist in communicating and advising employees of their rights and the law during a union campaign, to report their business relationship.

The issue before the court was the DOL’s elimination of the long held general “advice exemption” and a specific attorney-client communications exemption that has been accepted for the past 54 years. These exceptions exclude advice given by attorneys to clients from being reported.

Effective this Friday, (July 1, 2016), the DOL’s new Persuader Rule would have required employers and attorneys who directly or indirectly discussed how to lawfully address and discuss issues and questions with employees during a union campaign to file comprehensive reports related to those discussions.  Prior to the new Persuader Rule, attorney advice and information given to managers and management, but not directly to employees, was not reportable under the LMRDA. That distinction was eliminated by the DOL’s new Persuader Rule.

The DOL new Persuader Rule would have threatened to narrow, if not eliminate, the attorney-client privilege with respect to not only union election campaigns, but general advice on many labor law matters. Since its publication, the Persuader Rule has been criticized by employers, employer associations, attorneys, and attorney associations as eroding the long-recognized protections of the attorney-client privilege. Generally, communications between an attorney and client are confidential and protected from disclosure, except in the rarest circumstances. The attorney-client privilege is one of the strongest privileges recognized by the law.

In light of the serious nature of the attorney client privilege, the Northern District of Texas Court questioned the Persuader Rule’s requirement that employers publish its relationship with its attorney, payments made to its attorney, the name and position of the attorney providing advice, and “a full explanation of the circumstances of all such payments, including the terms of any agreement.”

Judge Cumming’s order will remain in effect until the Court can hold a trial. Until then, the DOL is not permitted to enforce its new Persuader Rule. However, employers should retain adequate records in the event the order is later lifted by the Court, or the Court’s order is overturned on appeal. If that happens, employers will once again be subject to the DOL’s Persuader Rule.

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