Ninth

The “Persuader Rule” — Brief Background

After several years of review and public comment, on March 24, 2016, the U.S. Department of Labor (DOL) issued its new interpretation of the so-called “Persuader Rule.” The new interpretation changed more than 50 years of DOL policy under which employers and consultants had no duty to report “persuasive activity,” (that is advice, memoranda, bulletins, etc. intended to persuade employees to vote against unionization) so long as there was no direct contact between the consultant and the target employees. Under the new March 2016 interpretation, employers and consultants would have been required to engage in a complex and unclear examination of the work performed in order to determine whether the consultant’s activities were “advice” (not reportable) or newly defined “persuasive activities” (reportable).

Separate groups of plaintiffs in three states — Arkansas, Texas, and Minnesota — filed suit asserting, among other things, that the DOL had exceeded its delegated authority, and that the new “interpretation” was invalid.

Status of the Cases

The judge in National Federation of Independent Business et al v. Perez filed in Lubbock, Texas was the first to act. On June 28, 2016, days before the regulation went into effect, he granted the plaintiffs’ motion for a temporary restraining order, thereby blocking the enforcement of the new interpretation nationwide. Within the past few weeks, the same judge entered final judgment, thereby “permanently” enjoining the DOL on a national basis from “implementing any and all aspects” of the March 24, 2016, interpretation.

The judge in the Arkansas case, Arkansas et al v. Perez (the Secretary of Labor), granted an indefinite stay of the court proceedings, directing the parties to file status reports by March 31, 2017. Interestingly, the DOL did not oppose this action by the court.

Finally, in the Minnesota case, Associated Builders and Contractors of Arkansas et al v. Perez, the judge denied motions for summary judgment (in which the plaintiff employers and the DOL sought to dismiss the case) stating that:

“ … the Court agrees with plaintiffs that there is significant reason to believe that the new administration will withdraw the Persuader Rule — or at least decline to defend the validity of the Persuader Rule in its current form.” The Court also noted that the Lubbock judge had already enjoined the enforcement of the rule on a nationwide basis.

While in theory the DOL could appeal these actions, given its position in the pending cases and the realities of the political change that is about to happen, such action by the DOL is exceedingly unlikely.

The Bottom Line and Looking Ahead

Effectively, the March 24, 2016, expansion of “persuasive activities” is dead and, at least for the foreseeable future, will not be revived. We caution, however, that the litigation focused entirely on the March 24, 2016, new interpretation of the rule.

The original rule, with its obligation to report activities that involve direct contact with employees, was not challenged and remains in effect. The Minnesota judge’s ruling could be interpreted as suggesting that the entire Persuader Rule had been blocked or withdrawn. However, that was not part of the court proceedings. Moreover, the original “rule” is contained in a statute (29 USC §433(b)) which means that withdrawing that rule would require Congress to repeal or revise the legislation. In these uncertain times, that is not beyond the bounds of possibility; but to date, we have heard of no advocacy for that action. However, even if the original rule is not repealed, it remains to be seen how vigorously the new administration will enforce it.