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Is the Persuader Rule in Peril?

The Department of Labor recently issued a notice of proposed rulemaking that would formally rescind the Obama administration's so-called persuader rule. Experts predict that the rule's rescission is likely, saying it would take some of the guesswork out of employers' reporting requirements.

Wednesday, July 12, 2017
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It may soon be the end of a long, bumpy road for the "persuader" rule.

Years in the offing, the Final Persuader Rule was scheduled to take effect in July 2016, effectively realigning the Department of Labor's regulations with the text of the Labor Management Reporting and Disclosure Act of 1959, according to the DOL.

Among other things, the LMRDA established reporting requirements for labor organizations, union officers and employees, employers, labor-relations consultants and companies. The persuader rule introduced by the Obama-era DOL sought to expand the scope of reportable "persuader" activity for employers and outside labor relations consultants, including attorneys.

For example, the rule would obligate employers and the consultants they hire to file reports not only for "direct" persuader activities such as consultants talking to employees, but for "indirect" persuader activities such as consultants scripting what managers and supervisors say to workers.

None of that happened, of course, as a Texas federal district court issued a June 2016 preliminary injunction that prevented the rule from taking effect.

Then, on June 12 of this year, the DOL under the Trump administration issued a notice of plans to formally rescind the rule. The department offered a variety of reasons for its proposal, including a desire to ensure that "any future changes to the [DOL's] interpretation would reflect additional consideration of possible alternative interpretations of the statute, and could address the concerns that have been raised by reviewing courts."

The DOL also expressed its desire to consider the rule's potential effect on attorneys and employers seeking legal assistance, as well as noting that rescission would permit the department to consider the impact of its "shifting priorities and resource constraints."

The tone of the DOL's June 12 notice "certainly suggests that it's the intention of the department to rescind the rule," says Michael Lotito, a San Francisco-based shareholder at Littler and co-chair of the firm's Workplace Policy Institute.

While he thinks that will take place once a 60-day public comment period ends on Aug. 11, Lotito also predicts pushback that will prevent the rule's rescission from being the final word on the final persuader rule.

"Union groups have filed comments, and I'm sure management groups will be doing the same," he says. "I think that what [current United States Secretary of Labor Alexander] Acosta is anticipating is that there's likely to be a challenge from the union side. It's also conceivable that the DOL decides to rescind the rule as it was proposed, but holds out for the possibility that there could be additional rulemaking in the future."

Resistance aside, labor attorney Mark Theodore expects that the final persuader rule -- as least as it is currently constructed -- will ultimately meet its demise for two primary reasons.

"First, the final persuader rule had obvious legal hurdles to overcome," says Theodore, a Los Angeles-based partner in the labor and employment law department at Proskauer. "This is why a U.S. District Court thought it was appropriate to enjoin the rule on a nationwide basis."

Given that one element necessary to support an injunction is that the claims are likely to prevail, "there was a good chance the rule would be nullified during litigation," he continues.

Politics is a second factor, naturally.

"When there is a change in presidential administrations, these types of rule changes -- which are often driven by partisan motives -- get changed back," says Theodore, adding that a similar rule was promulgated by executive order near the end of the Clinton administration, only to be rescinded by the succeeding Bush administration.

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Should the rule be revoked, "employers, and particularly HR leaders, will be able to act with assurance that, when they seek legal advice over organizing or bargaining issues, that such advice will remain privileged, just as it always has been," says Theodore.

While the possibility that a final rule could go into effect even though it is enjoined, "it's unlikely in this case, because the government requested to essentially stay the litigation pending the outcome of its notice to rescind," he adds. "If the government rescinds the rule, the litigation will be moot."

For all intents and purposes, it already is, says Ashley Laken, a Chicago-based associate at Seyfarth Shaw, and a member of the firm's labor and employment department.

"The final persuader rule was effectively rescinded when the federal court in Texas permanently enjoined its application, says Laken. "Thus, the current proposed rulemaking in many ways merely seeks to confirm this result and the way the LMRDA has been interpreted for more than 50 years."

Whether a result of the Texas court decision or the current proposed rulemaking notice, "continuing with this consistent interpretation greatly benefits employers and HR leaders," she says.

The final persuader rule "would have left employers and their advisors often guessing about what needed to be reported, would have required employers and their outside lawyers to periodically and publicly disclose confidential information about their relationships for any activities that were newly reportable," adds Laken, "and would therefore have discouraged employers from seeking needed legal advice."

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