Client Bulletin #615

The Trump Administration has begun the process to rescind the “2016 Persuader Rule,” one of the most contentious employment-related regulations issued during the Obama Administration. Earlier this week, the U.S. Department of Labor notified the White House Office of Management and Budget that it seeks to commence new rulemaking that would result in rescission of the rule, which was issued in March 2016 but has never become applicable.

As we previously reported, the rule was challenged last year in at least three federal lawsuits by employers and employer organizations on various legal grounds. Before the rule would have taken effect in July 2016, a federal court in Texas granted a temporary injunction, followed by a permanent injunction, against enforcement of the regulation. The Obama DOL, headed by Secretary Thomas Perez, appealed the decision to the U.S. Court of Appeals for the Fifth Circuit. After President Trump took office, the DOL asked for a delay in the briefing schedule (the current deadline is June 21), and most observers expect the Trump DOL to withdraw the appeal entirely. In an opinion piece in the May 22, 2017, edition of The Wall Street Journal, current Secretary of Labor Alexander Acosta wrote that the Obama Administration rule would “make it harder for businesses to obtain legal advice.” (A link to Secretary Acosta’s op-ed is here, but a paid subscription is required for access.)

For an overview of the Trump Administration’s proposed budget and its impact on labor and employment issues, please visit our blog, Employment & Labor Insider.

The 2016 regulation adopted an interpretation of the Labor-Management Reporting and Disclosure Act that was inconsistent with many years of DOL interpretation and enforcement. The longstanding prior rule (which is still in effect because of the injunction) requires private sector employers and their labor consultants to report on so-called “persuader activity.” But an “advice exemption” excludes the activities of attorneys and consultants that are “advisory” to the employer (in other words, as long as the attorneys and consultants do not communicate directly with employees, their activities are generally covered by the exemption).

Under the 2016 regulation, “reportable” persuader activity would have included all outside consultant and lawyer activity for covered employers that had a “direct or indirect object” of persuading employees in the exercise of their union organizing rights. Employers, labor consultants, and lawyers, subject to limited exemptions, would have been required to report persuader activities and monies for such activities on three government forms. The 2016 regulation limited the advice exemption to (1) advice that did not have persuasion of employees as its “object,” and (2) representation in collective bargaining, and legal and administrative proceedings. Any otherwise covered labor-related activity that did not fall into one of these categories would have been labeled by the DOL’s interpretation of the LMRDA as indirect or direct persuader activity that required reporting to the DOL and not “advice.” Accordingly, there were concerns that the 2016 regulation infringed on the privileged relationship between employers and their attorneys, possibly deterring employers from getting advice on labor law issues. If employers were deterred from seeking legal advice because of the reporting requirements, they might actually unknowingly commit more unfair labor practices. They might also be muted during organizing campaigns. Indeed, many commentators contended that that was the purpose of the 2016 regulation.

Fortunately, it now appears that the older rule will remain in place. The OMB will review the DOL proposal. Assuming that the OMB approves it, the proposed rule will then be published in the Federal Register, subject to comments from employers, unions, trade associations, and the general public. The DOL will consider the comments and is likely to publish a “Final Rule” that will end the 2016 version for good.

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