November 01, 2016

New DOL persuader rule opposed by the ABA is blocked permanently by federal judge

A district court in Texas has permanently blocked implementation of the final persuader rule that was issued by the Department of Labor (DOL) earlier this year.

The ABA has expressed strong opposition to the new rule, which would have required many management–side labor lawyers to divulge confidential client information to the federal government.

Judge Sam Cummings of the U.S. District Court for the Northern District of Texas, who granted a preliminary injunction June 27 to prevent the rule from going into effect in July, issued the permanent nationwide injunction on Nov. 16. Ruling in National Federation of Independent Business v. Perez, the judge determined that the Obama administration exceeded its authority in issuing the rule.

The longstanding persuader rule contained in Section 203 of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) requires employers and their labor consultants, including lawyers, to file extensive periodic disclosures with the department when they engage in certain activities or enter into agreements or arrangements to persuade employees on union formation or membership issues. However, Section 203 (c) of the act has long been interpreted to exempt lawyers from the rule’s reporting requirements when they merely provide advice or other legal services directly to their employer clients on these unionization issues but have no direct contact with the employees.

The new rule would have required lawyers who provide both legal advice to employer clients and engage in any persuader activities to file periodic disclosure reports even if they have no direct contact with the employees. These reports would have required disclosure of a substantial amount of confidential information, including the existence of the lawyer-client relationship and the identity of the client, the general nature of the legal representation, and a description of the legal tasks performed. The reports could have also compelled disclosure of a great deal of confidential financial information about clients that is unrelated to persuader activities that the LMRDA is intended to monitor.

Prior to issuing the preliminary injunction in June, the Texas district court heard from eight witnesses, including ABA Past President Wm. T. (Bill) Robinson III, who testified as an expert witness regarding a number of serious flaws in the final DOL rule. In its preliminary order, the court quoted extensively from the ABA’s original 2011 comment letter to DOL and the ABA’s statement for the record of an April 27 hearing on the rule held by the House Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions.

In issuing both the preliminary and permanent injunctions, the court concluded that the new rule was unlawful and would cause the plaintiffs to suffer irreparable harm in various ways, including reducing access to legal advice and representation and creating conflicts with Texas’ and other states’ attorney ethical rules. Although the Obama administration appealed the court’s earlier ruling to the Fifth Circuit Court of Appeals, the appellate court has not yet ruled on that appeal.

There also continues to be strong opposition to the new rule in Congress, where several resolutions opposing the rule were introduced in the House and Senate and more than 70 House members urged that an amendment be attached to fiscal year 2017 appropriations legislation prohibiting DOL from spending money to implement the rule.

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