CLIENT UPDATE

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June 27, 2016

United States District Court Grants Preliminary Injunction Against Department of Laborís Persuader Rule

On June 27, 2016, the United States District Court for the Northern District of Texas granted a motion to enjoin the United States Department of Labor (the “DOL”) from enforcing its recently revised “Persuader Rule.”† National Federation of Independent Business. v. Perez, Case No. 5:16-cv-00066-C (N.D. Tex. 2016). The revised Persuader Rule would have essentially required employees and third party consultants (including attorneys) to the DOL arrangements to “persuade” employees regarding their right to union representation and collective bargaining.† For more information about the Department of Labor’s Persuader Rule, please see our alert dated June 23, 2016, at http://putneylaw.com/cu_062316.html.

The District Court held that the plaintiffs demonstrated a substantial likelihood of success on the merits on all of their claims. Specifically, the District Court found that the DOL’s Persuader Rule exceeds the DOL’s authority under the Labor-Management Reporting and Disclosure Act of 1959 by effectively eliminating the statute’s “Advice Exemption.” As such, the DOL lacked statutory authority to promulgate and enforce this new Advice Exemption interpretation. The District Court also found that the plaintiffs were likely to succeed on their claims that the DOL’s new Advice Exemption interpretation (1) is arbitrary, capricious and an abuse of discretion; (2) violates free speech and association rights protected by the First Amendment; (3) is unconstitutionally vague in violation of the due process clause of the Fifth Amendment; and (4) violates the Regulatory Flexibility Act. The District Court further concluded that the plaintiffs demonstrated a substantial threat of irreparable harm and that the balance of hardships weighs in plaintiffs’ favor and will not disserve the public interest. Thus, the District Court determined that a nationwide injunction is appropriate, pending a final resolution of the merits of the case.

Takeaway for Employers

Barring a reversal by the United States Court of Appeals for the Fifth Circuit, or the United States Supreme Court, it is unlikely that the DOL’s Persuader Rule will be implemented as intended. Regardless of this ruling, employers may wish to try and take advantage of the DOL’s statement that it will not enforce the new rule to open-ended or multi-year agreements entered into prior to July 1, 2016, even if activities undertaken (and payments made) pursuant to such an agreement occur after July 1.† We will continue to provide updates in the event of any developments.