Texas Federal Court Permanently Blocks Persuader Rule

Federal Judge in Texas Throws Out Obama Overtime Rules

As previously reported here, earlier this year a federal district court in Texas issued a preliminary injunction preventing the Department of Labor (“DOL”) from enforcing the new Persuader Rule, which was to go into effect as of July 1, 2016. Last week, the court issued a ruling converting its preliminary injunction into a permanent one, which now imposes a nationwide ban on implementation of the new rule.

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By way of a refresher, the new Persuader Rule, proposed in March earlier this year, sought to require employers to report highly detailed information regarding their “indirect persuader activities.” Such indirect activities potentially included attorneys advising employers on how to respond to employees attempting to unionize or what actions might discourage unionization. Several experts in the district court proceedings provided evidence that the new reporting requirements effectively restricted employers’ ability to obtain any advice concerning unionization-related issues. Prior to the new rule, employers were simply required to report “direct persuader activities,” which only included activity where there was direct contact with employees to persuade them regarding their rights to unionize.

The challenger to the Persuader Rule in the Texas District Court was the National Association of Home Builders who presented evidence that the Persuader Rule was inconsistent with the LMRDA and exceeded the DOL’s authority. In granting the preliminary injunction, the court found that the challengers were likely to succeed in its argument that the new rule exceeded the DOL’s authority under the LMRDA, since it conflicted with the plain language of that statute. The Court also found that the new rule was arbitrary and capricious and that it violated the employers’ Constitutional rights to free speech and association. The DOL appealed the preliminary injunction ruling to the U.S. Court of Appeals for the Fifth Circuit, which is now rendered moot based on the Court’s permanent injunction ruling. In its permanent ruling, the Court reviewed all the evidence and legal arguments and confirmed its prior preliminary order enjoining implementation of the rule.

The Texas federal court’s decision is a great victory for employers who would have been substantially impaired in their ability to obtain legal advice concerning unionization, had the Persuader Rule been implemented. The new rule now may not be enforced. Employers can continue to obtain legal advice regarding unionization issues without having to report the details to the DOL. It remains to be seen whether the DOL will file a new appeal concerning the new permanent injunction ruling and how similar lawsuits in other federal courts around the country will be resolved. Although the Rule is blocked for now, the story isn’t quite yet over. Employers should stay tuned as this issue continues to develop and seek legal advice on how to comply with the operative rule in the meantime.

Contributor:  Daniel C. Kim, Attorney at Law | Weintraub Tobin