Opponents of the U.S. Department of Labor’s (DOL) controversial “Persuader” Rule received their first major victory yesterday from United States Senior Judge Sam R. Cummings in the U.S. District Court for the Northern District of Texas. Judge Cummings, a Reagan appointee, ordered a temporary injunction preventing the DOL from implementing the new rule, nationwide, until the merits of the case are resolved in an upcoming trial before him.
As we reported on April 1, 2016, law firms and a number of national, state and local business groups have filed three lawsuits to block implementation of the rule, which would greatly expand the information companies must disclose to the federal government regarding counsel provided by labor relations consultants—including attorneys. The injunction order comes only days before July 1, the effective start date of the rule. If the injunction had not been ordered, employers and their labor consultants would have been required to start making public disclosures about agreements they entered into “to persuade employees about how to exercise their rights to union representation and collective bargaining,” even when the consultants were only indirectly involved in organizing campaigns.
Judge Cummings found the business groups that filed the case were likely to succeed on their claims that:
- the DOL lacks authority to issue and enforce the rule;
- the rule is arbitrary and capricious;
- the rule violates First Amendment rights to free speech and association;
- the rule violates the due process clause of the Fifth Amendment because it is vague; and
- the DOL failed to follow the rules of the Regulatory Flexibility Act concerning its impact on small businesses.
The temporary injunction will block implementation of the rule while the court decides whether to permanently prevent the DOL from implementing it. Meanwhile, federal courts in Arkansas and Minnesota are considering similar cases. Last week, the Minnesota court refused to enter a temporary injunction, but the plaintiffs in that case are attorneys, and the court determined they did not face substantial threat of irreparable harm to support a temporary injunction. The Texas court noted that the plaintiffs before it were not attorneys, but trade associations, and found that they had shown a substantial threat of irreparable harm. Judge Cummings also noted that there had not been an evidentiary hearing before the Minnesota court, while the Texas court had received testimony. The Arkansas court has not yet ruled on the request for a temporary injunction.
We expect all three cases will move forward to resolve the question of whether the rule should be permanently enjoined. Judge Cummings’ order reveals the court’s opinion that the plaintiffs in that case have strong arguments that the rule is unconstitutional and contrary to statute. Although the Minnesota court did not grant a temporary injunction, and did not find most of the plaintiffs’ arguments to be persuasive, it did note that the plaintiffs were likely to succeed in showing that the DOL lacks authority to issue and enforce the rule. If there is ultimately a split between the respective Circuits, the case could end up before the U.S. Supreme Court.
We will continue to track developments on the Persuader Rule and keep you informed.