The United States District Court for the Northern District of Texas has made permanent its June 27, 2016 nationwide preliminary injunction against the Department of Labor’s March 2016 Persuader Rule. The rule would, among other things, require financial reporting and disclosure by employers and their consultants of any agreement or arrangement by which the consultant will undertake activities, directly or indirectly, to persuade employees whether or not to exercise their right to organize and bargain collectively. Contrary to decades of precedent, and the sanctity afforded the attorney-client relationship, the new rule would require extensive reporting by employers and their lawyers regarding the nature of their relationship and the content of the legal services provided. The June 2016 temporary injunction branded this new rule “not merely fuzzy around the edges,” but rather, “defective to its core….” National Federation of Independent Businesses et al. v. Perez, 5:16-cv-66 (N.D. Tex. June 27, 2016).
The Department of Labor filed an interlocutory appeal to the Fifth Circuit challenging the preliminary injunction order. On August 22, 2016, Plaintiffs, consisting of business federations, national trade associations, and other employer organizations, filed for summary judgment, seeking a judgment declaring the new Persuader Rule unlawful and a permanent injunction against Defendants on a nationwide basis preventing them from enforcing the rule. Then, on September 28, 2016, ten states, who intervened as Plaintiffs in the action, also filed a motion for summary judgment seeking a permanent injunction against the rule. In their motion for summary judgment briefing, the states argue that the new rule unconstitutionally invades a state’s right to regulate the practice of law:
[T]he New Rule goes well beyond what Congress ever envisioned and presents the classic case of an administrative diktat in search of a problem that the law never sought to solve. In a time of labor relations far removed from the 1950’s, the New Rule turns LMRDA on its head and now functionally enjoins the guarantees of confidentiality, loyalty, and candor that are central to the very existence of attorney-client relationships. Though LMRDA expressly exempts from its scope an intent to interfere with the attorney-client relationship, the New Rule breaches that accord by classifying as public the information shared only between attorney and client, creating impossible circumstances of conflict, and transforming lawyers into vending machines of law rather than the confidants, counsellors, and advisors required by the canons.
In its quest for “transparency,” the New Rule runs roughshod over the foundations of the legal profession and the fundamental right of everyone to be able to confidentially consult with counsel about anything….
In a brief Order, dated November 16, 2016, the Court has denied the Government’s motion, and has granted summary judgment to the Plaintiffs and Intervenors. Incorporating its Preliminary Injunction Order by reference, the Court has ruled that the March 24, 2016 “Persuader Advice Exemption Rule” should “be held unlawful and set aside,” and has converted the injunction into “a permanent injunction with nationwide effect.” Presumably withdrawal of all appeals by the incoming administration would effectively terminate the rule once and for all, but either way, for the time being, there is no need for employers – or their counsel – to comply with the enjoined regulations.