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First lawsuit filed against DOL’s new “persuader” rule

April 7th, 2016  |  David Stephanides

The Arkansas Chapter of the Associated Builders and Contractors, Inc. and a coalition of other groups including the National Association of Manufacturers, have launched what is reportedly the first lawsuit challenging the Department of Labor’s controversial final “persuader rule.” The final rule narrows the “advice” exemption from reporting requirements under Labor-Management Reporting and Disclosure Act Section 203 when an employer uses an outside consultant to push back against a union organizing campaign. According to the complaint, the final rule upends 50 years of settled law on the meaning of “advice” and is contrary to “the plain language and stated intent of Congress to broadly exempt such advice from the reporting requirements of the LMRDA.” Among other challenges, the plaintiffs assert that the final rule violates the First and Fifth Amendment rights of their memberships.

The final rule, which is effective April 25 and applies to arrangements, agreements, and payments made on or after July 1, 2016, mandates certain disclosures related to third-party consultants (including attorneys) used by employers in crafting and delivering anti-union messages to workers. The DOL’s revised Form LM-10 (employer report) and Form LM-20 (agreement and activities report), with some exceptions, must be filed when an employer and a labor relations consultant make an arrangement or an agreement that the consultant will undertake efforts to persuade the employer’s workers to reject an organizing campaign or collective bargaining effort by a union.

Expanded reporting requirement. The Labor Department’s final rule revisions now require reporting of consultant activities involving both direct contact with employees with an object to persuade them, as well as the following categories of indirect consultant activity undertaken with an object to persuade employees:

  • Planning, directing, or coordinating activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees.
  • Providing material or communications for dissemination to employees.
  • Conducting a union avoidance seminar for supervisors or other employer representatives.
  • Developing or implementing personnel policies, practices, or actions for the employer.

Exempt “advice” activities which do not trigger the reporting requirement are now limited to what the DOL called “those activities that meet the plain meaning of the term”: an oral or written recommendation regarding a decision or course of conduct.

Challenges to the final rule. The plaintiffs raise First and Fifth Amendment challenges under the U.S. Constitution, alleging that the final rule violates their members’ free speech and free association rights, and that it is void for vagueness under due process requirements. The final rule also infringes on the confidentiality of attorney-client communications and impermissibly invades the attorney-client relationship, which, according to the complaint, is “supposed to be protected” under LMRDA Sections 203(c) and 204. In addition, the Labor Department failed to “properly acknowledge the significant regulatory burdens associated with the challenged Rule and has violated the laws dealing with such burdens,” the plaintiffs contend.

The plaintiffs are asking the court for a preliminary injunction, declaratory relief invalidating the final rule, an order vacating the final rule and enjoining its implementation, and attorneys’ fees and costs.

Muting employer voices in union campaigns? Employers quickly criticized the final rule, which many see as tipping the balance toward unions. “DOL’s persuader rule is a clear attempt to chill employers’ First Amendment rights by placing onerous restrictions on their ability to receive advice and discuss the potential pros and cons of unionization with their employees,” ABC President and CEO Michael Bellaman said in a statement announcing the suit. “The rule will have a particularly disparate impact on small businesses that do not employ in-house legal counsel, and carries serious repercussions including possible jail time.” According to Bellaman, the DOL’s final rule “replaces clear-cut legal definitions with an indecipherable guessing game for both employers and advisors.” He says the final rule is aimed at silencing the voice of employers “by working hand-in-glove with the NLRB’s flawed ‘ambush election rule’ in a thinly veiled attempt by the administration to achieve the goals of its failed ‘card check’ proposal.” Associated ABC will be represented by its general counsel, Littler Mendelson P.C., and Cross, Gunter, Witherspoon & Galchus, P.C. in the case.

The lawsuit, Associated Builders and Contractors of Arkansas v. Perez, was filed in the Eastern District of Arkansas, the case is No. 4:16-cv-00169-KGB.