Prospects for the New Persuader Rule are Increasingly Dim

A federal judge in Texas has permanently enjoined implementation of the so-called Persuader Rule. The Rule would have required lawyers to disclose to the U.S. Department of Labor legal advice given to an employer, as well as fees received, when the employer sought legal advice during a union organizing campaign. No such disclosure had been previously required as long as legal counsel refrained from direct employee contact.

Opponents of the Rule, including various business associations and the American Bar Association, argued it would force attorneys to choose between providing advice and violating their ethical obligations of confidentiality, and that, as a practical consequence, most law firms would stop providing such advice.

The Department of Labor claimed that the Rule ensures employees would understand the sources of information behind anti-union campaign material, enabling them to make informed choices about union elections.

A major concern voiced by opponents of the Rule was the difficulty in applying it to actual situations in which employers were likely to seek advice about an organizing campaign.  Although the Department of Labor argued that attorneys could easily discern the difference between the clarification of an employer’s rights to oppose an organizing drive and suggestions on how to oppose such a drive, business groups and attorneys argued that the absence of a bright line rule would create uncertainty, exposure and ongoing litigation.

U.S. District Court Judge Sam R. Cummings had already issued a temporary injunction against the Rule on June 27, 2016. On November 16, he ruled that it violated the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) and was unconstitutionally vague, replacing the temporary injunction with a nation-wide permanent injunction.

He also found that the DOL had not adequately defended the need for the Rule.  Although an appeal of this final judgment is inevitable, the new Administration may distance itself from the Rule and ensure that the appeal does not progress beyond the briefing stage.

Judge Cummings’ temporary injunction is remains under appeal in the United States Court of Appeals for the Fifth Circuit.  That appeal will more than likely be dismissed as moot, however, once the Department of Labor files an appeal of the permanent injunction and final order declaring the new Rule unlawful and unenforceable.  So, from a practical perspective, briefing on the case will not be complete for several months, meaning a decision is unlikely to be rendered until late 2017.  A more likely scenario, however, is that the Department of Labor’s priorities will change with the new administration.

The new Secretary of Labor will presumably review all pending litigation, including the appeal of this Rule.  In light of the controversy surrounding the Rule, and the Administration’s public statements supporting business interests, it is likely to delay further prosecution of the appeal, and then dismiss it altogether.


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