DOL’s Persuader Rule Rescinded

As we reported back in 2017, the Department of Labor (“DOL”) had promulgated a proposed rulemaking to rescind its controversial 2016 “Persuader” Rule.  Less than a year later, the Persuader Rule has been officially rescinded as of Tuesday, July 17, 2018.  In a news release announcing the Persuader Rule Rescindedrescission, Nathan Mehrens of the Office of the Deputy Assistant Secretary stated, “By rescinding this Rule, the Department stands up for the right of Americans to ask a question of their attorney without mandated disclosure to the government.”  This statement addresses one of the most significant sources of conflict over this Rule, both during and after its promulgation, and clearly identifies an important outcome of the DOL’s decision to withdraw it entirely.

The Persuader Rule, finalized in March 2016, imposed stricter reporting requirements on employers under the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”) by narrowing the advice exemption recognized in the law.  Specifically, the Rule would have required reporting of any persuader activity that “affect[s] an employee’s decisions regarding his/her representation or collective bargaining rights” even in the absence of direct contact with employees.  In the past, the “advice” exemption had permitted labor relations consultants and attorneys to provide advice to employers related to union organizing and bargaining activities without that relationship having to be reported as long as there was no direct contact with employees.  The Persuader Rule, however, would have altered that limitation and required reporting of the attorney-client relationship based on advice traditionally received from an attorney.  Additionally, both the employer and the labor consultant/attorney would have been required to file reports containing information that further threatened the confidentiality of communications normally protected by the attorney-client privilege.

Based, at least in part, on this very same concern regarding the attorney-client relationship, a U.S. District Court Judge in Texas granted summary judgement to a coalition of states and industry groups and entered a permanent nationwide injunction against implementation in one of the cases brought against the DOL as a result of this Rule.  The District Court Judge also determined the DOL had exceeded its authority under the LMRDA.  The DOL appealed this decision to the Fifth Circuit, but ultimately went the route of rescinding the Persuader Rule instead of pursuing its appeal.  Due to the permanent injunction, there is no real practical impact with the issuance of the Final Rule rescinding the applicable regulations.  Indeed, the reporting requirements in effect under the rescission are the same as they existed before the rescission because the Rule never actually took effect.

Interestingly, this is not the only DOL regulation promulgated during the Obama Administration that has resulted in push back from the courts and reevaluation by the DOL.  In August 2017, another Texas federal judge invalidated the DOL’s White Collar Exemption regulations (the “Overtime Rule”) when it granted summary judgment to business groups that had filed a lawsuit challenging the Rule.  There the judge determined that the DOL had also exceeded its authority in promulgating a rule that essentially supplanted the dual analysis established by Congress to determine exempt status – salary level AND duties – with predominantly a minimum salary level test.  In other words, the substantial hike in the threshold salary level for exempt employees was impermissible.  As a result, the DOL initiated efforts to revise the Overtime Rule and, according to its Spring Regulatory Agenda, currently expects to issue a Notice of Proposed Rulemaking in January 2019.  Unlike the Persuader Rule, the DOL has not taken action to actually rescind the Overtime Rule, but substantive modification is probable.

We have seen a number of shifts in labor and employment law and policy during the first half of the Trump Administration and there are likely more to come.  However, the Persuader Rule is one of the few regulations to be completely rescinded in the midst of the President’s focus on and efforts in deregulation.  The Final Rule implementing the rescission becomes effective on August 17, 2018.

 

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