April 01, 2016

Not So Fast! Business Groups Sue to Block DOL "Persuader" Rule

On March 30, 2016, one week after the U.S. Department of Labor (DOL) published its final “Persuader” Rule, the National Association of Manufacturers and other national, state and local business groups sued the DOL to block implementation of the controversial Rule. 

Unless the courts enjoin it, the Persuader Rule will change the DOL’s interpretation of the Labor Management Reporting and Disclosure Act of 1959. Congress included an exemption in that law to protect “advice” given to employers from the law’s public disclosure requirements. However, as revised,  employers and their consultants will now need to publicly disclose information (including financial) related to activities intended to persuade employees about their rights to union representation and collective bargaining whether the consultant has contact directly with employees or not. The suit claims that the new Rule “infringes on the rights of employers … to communicate with and receive advice from expert advisors on labor relations issues, including trade associations, attorneys, and other third party consultants.”

The lawsuit alleges that the Persuader Rule is unconstitutional and violates statutory rights. Specifically, the suit claims that the Rule:

  • Violates First Amendment rights — Freedom of Speech and Freedom of Association; 
  • Violates the Fifth Amendment’s Due Process clause;
  • Violates the National Labor Relations Act’s (NLRB) provisions upholding employers’ rights to free speech;
  • Violates regulatory impact laws by not properly considering the significant regulatory burdens it imposes;
  • Infringes on protections for attorney-client communications and relationships;
  • Exceeds the DOL’s statutory authority; and
  • Is arbitrary and capricious.

The U.S. District Court for the Eastern District of Arkansas, where the lawsuit was filed, has assigned the case to a district judge who was appointed by President Obama. Before she was appointed, Judge Kristine G. Baker practiced at law firms that typically represent employers and was recognized by Best Lawyers in America for her work in the areas of Commercial Litigation, First Amendment Law, and Labor and Employment Law.

The suit asks the court to temporarily enjoin the Persuader Rule pending the court’s ruling on the lawsuit, declare the Rule to be invalid, vacate the Rule and permanently enjoin the DOL from implementing it. Unless the court intervenes, the Rule will go into effect on April 25, 2016, and apply to agreements entered into on or after July 1, 2016. The DOL’s response to the Complaint is currently due on or about April 30, 2016.

We will continue to monitor developments related to the DOL’s Persuader Rule and keep you informed.

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