Court won't block implementation of DOL ‘persuader’ rule but sees likely LMRDA conflict
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Monday, June 27, 2016

Court won't block implementation of DOL ‘persuader’ rule but sees likely LMRDA conflict

By Ronald Miller, J.D. A federal district court in Minnesota has denied a motion for a temporary restraining order, or in the alternative, a preliminary injunction or stay requested by an association of law firms that challenged implementation of the Department of Labor’s so-called "persuader" rule. Although the court concluded that the plaintiffs were likely to succeed in their claim that portions of the new rule conflict with the Labor-Management Reporting and Disclosure Act (LMRDA), after weighing the factors identified by the Eighth Circuit in Dataphase Systems, Inc. v. C.L. Systems, Inc., it declined to enjoin or stay the new rule (Labnet Inc. dba Worklaw Network v. United States Department of Labor, June 22, 2016, Schiltz, P.). The association of law firms which represents management in labor and employment matters sought to enjoin the implementation of the "persuader" rule recently promulgated by the DOL under the LMRDA. Congress enacted the LMRDA "to protect employees’ rights to organize, choose their own representatives, bargain collectively, and otherwise engage in concerted activities for their mutual aid or protection." To that end, the LMRDA imposes certain disclosure and reporting obligations on unions and employers, as well as on persons who are retained by employers to engage in "persuader activities" concerning employees’ collective-bargaining rights. Reporting obligation. The DOL interprets Section 203(b) of the LMRDA to require consultants to include in their annual reports not only information about employers for whom they engaged in persuader activity, but also information about all other employers for whom they provided advice or services concerning labor relations, even if that advice and those services did not involve persuader activity. The reporting obligation in Section 203(b) is subject to a crucial qualification, which is the focus of the DOL’s new rule. Exemption. Under Section 203(c) of the LMRDA, the mere giving of "advice" does not trigger an obligation to report. The Eighth Circuit has long adopted the view that Section 203(c) provides an exemption—that is persuader activity is exempt from the reporting requirements that would otherwise apply to that advice under Section 203(b). In so ruling, the Eighth Circuit does not agree with the Fourth, Fifth, Sixth, and Seventh Circuits that the legislative history of the LMRDA supports the view that Section 203(c) is merely a proviso to make explicit the implicit triggering requirement of Section 203(b). For over a half century, DOL’s understanding of the statute has been the same. Thus, deleting Section 203(c) from the LMRDA would have a major substantive impact. Indirect persuader activity. In determining what persuader activity constitutes "advice"—and thus falls within Section 203(c)’s exemption—DOL has long applied a bright-line "accept or reject" test. And since 1989, DOL has taken the position that, as a practical matter, the accept-or-reject standard generally limits reportable activity to that which involves direct contact between the consultant and employees. With the exception of a brief period in 2001, DOL has followed the accept-or-reject standard since 1962. During this time, the reporting of persuader activities has become uncommon, because persuaders only rarely have direct contact with employees. At the same time, employers have increasingly come to rely on outside consultants and lawyers to help them conduct anti-unionization campaigns. DOL estimates that employers use consultants to engage in such indirect persuasion in over 70 percent of union organizing campaigns. In an effort to require disclosure of more of this indirect persuader activity, DOL promulgated the new rule. The new rule dispenses with the longstanding "accept or reject" test. Instead, DOL now defines "advice" as "an oral or written recommendation regarding a decision or a course of conduct." Moreover, DOL has abandoned its longstanding interpretation of the LMRDA and now insists that something done by a consultant cannot be both persuader activity and advice. DOL’s new position conflicts with the Eighth Circuit’s understanding of the statute. Likelihood of success. The plaintiffs challenged the new rule under the Administrative Procedure Act (APA), alleging that it is contrary to the plain meaning of Section 203(c). As an initial matter, the court pointed out that the DOL has the authority to issue, amend, and rescind rules and regulations that prescribe the form and publication of reports required by the LMRDA and that are necessary to prevent the evasion of the reporting requirements. Accordingly, the parties agreed that DOL’s interpretation of the statute must be examined under Chevron. As a general matter, the court agreed with DOL that an act can constitute persuader activity—and not constitute advice—even though the act does not involve direct contact with employees. Thus, the court rejected any suggestion that DOL cannot change its interpretation of the LMRDA to require reporting of persuader activity that does not involve direct contact with employees. On the other hand, the court agreed with the plaintiffs that DOL’s new rule conflicts with Section 203(c) because it requires a consultant "to file a report covering the services of such person by reason of his giving or agreeing to give advice to [an] employer . . . ." The problem is that DOL does not apply its own definition of "advice." Instead, DOL requires reporting of activity that is "advice" under any reasonable interpretation of that word. The court observed that the root of the DOL’s problem is its insistence that persuader activity and advice are mutually exclusive categories. Noting that under the DOL’s new interpretation, the giving of what any reasonable person would define as "advice" does, by itself, trigger the reporting requirement, the court concluded that the plaintiffs have a strong likelihood of success on their claim that the new rule conflicts with the plain language of the statute. Anti-union speech. Next, the plaintiffs contended that the new rule targeted anti-union speech and therefore unconstitutionally discriminated on the basis of viewpoint and content. The court disagreed. Rather, it observed that the rule applies to both pro- and anti-union speech. The rule requires reporting of activities that have as an object "to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing . . . ." While the plaintiffs were correct that the new rule regulates on the basis of content, it did not follow that the rule must withstand strict scrutiny. Rather, because the new rule imposed disclosure obligations, it was subject to the "exacting scrutiny" standard. Consequently, the court determined that the plaintiffs were unlikely to be able to establish that the new rule unconstitutionally discriminated on the basis of viewpoint. Applying exacting scrutiny, the court noted that employees are better equipped to assess an employer’s union-related message if they know that the message has been scripted by a third party. Knowing that messages from an employer originated with a third party who was paid by the employer to help influence the employees gives employees a fuller context in which to evaluate the employer’s arguments. Thus, the court concluded that the plaintiffs failed to establish that they were likely to succeed on their First Amendment claims. Void for vagueness. Addressing other arguments by the plaintiffs, the court disagreed with their contention that the new rule was void for vagueness. Rather, the court found it was rather straightforward and was essentially embodied in the revised LM-10 and LM-20 forms, which ask filers to indicate whether any activities were undertaken with the requisite intent, and then provide a detailed list of thirteen different activities from which to choose. Noting that filling out the form is simply a matter of checking the box next to the activity or activities that the filer performed, the court found that the plaintiffs were unlikely to succeed in invalidating the new rule on vagueness grounds. Arguments that the rule was arbitrary and capricious and overbroad were also likely to fail, declared the court.

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