Little Rock was a magnet for representatives from law firms around the country last week when U.S. District Judge Kristine Baker heard arguments in the first federal lawsuit attempting to stop the Obama administration’s new “persuader rule” concerning anti-union activities.
No ruling on a motion for preliminary injunction is expected for another week or two, according to Little Rock attorney Bruce Cross. His firm, Cross Gunter Witherspoon & Galchus, is both a plaintiff in the civil case filed against U.S. Labor Secretary Thomas E. Perez and counsel to six business organizations also hoping to nip the new rule in the bud.
“This will affect all private businesses more than anything I have seen in all my years of practice,” Cross said.
Unlike other controversial DOL proposals, like the recent rule imposing fiduciary duty on retirement plan advisers and a pending change in the threshold wage for overtime pay eligibility, the persuader rule seemed to blindside employers. It was proposed in 2011, Cross said, but strong negative reaction from the business community sent it to the back burner.
“Then suddenly, around Christmastime, it was sent as a final rule to the Office of Management & Budget,” Cross said. “Then [it] came out in final form just before Easter with an effective date of April 25,” although the reporting requirement doesn’t begin until July 1.
The rule reinterprets a section of the Labor-Management Reporting & Disclosure Act of 1959 concerning an employer’s right to get confidential advice on union activities. In the past, only people hired by managers to directly influence employees — “persuaders” — had to be disclosed to the DOL. And for more than 50 years, according to the suit against Perez, this understanding of the law was “consistent” and “judicially approved.”
But under the revised rule, an employer would have to disclose to the Department of Labor even getting outside advice from a lawyer or a trade organization. In addition to the Cross Gunter firm, the plaintiffs in the suit are the Associated Builders & Contractors of Arkansas, Associated Builders & Contractors Inc.; Arkansas State Chamber of Commerce/Associated Industries of Arkansas; Arkansas Hospitality Association; National Association of Manufacturers; and the Coalition for a Democratic Workplace, which itself is made up of more than 600 employer organizations.
In affidavits, the plaintiff organizations argue that the DOL’s interpretation infringes on employers’ rights of free speech and free association.
The DOL, however, argued that the plaintiffs had not made a case for any irreparable harm that had to be averted by an injunction. Represented by Elisabeth Layton, a senior counsel with the U.S. Department of Justice, the Labor Department’s response to the lawsuit said the application of the rule on disclosure to advisers as well as direct persuaders had long been recognized — even by federal courts — as ambiguous.
“Thus, the agency re-interpreted this ambiguity in the statute in light of its awareness that anti-union campaigns were increasingly relying on indirect persuader activity, and that transparency is a central goal of the statute because Congress viewed transparency as essential ‘to protect employee rights to organize, choose their own representatives, [and] bargain collectively,’” Layton wrote.
The revised rule, according to the DOL’s position, still allows attorneys or others to give advice on anti-union strategies without triggering the requirement to report. But the minute they participate in carrying out those strategies, they must comply with the reporting requirement. For instance, a lawyer counseling employers on activities that pass muster with the National Labor Relations Board would not be reportable. But a consultant creating materials that the employer then distributes to employees would trigger the reporting requirement.
Even then, the activity would be perfectly legal.
Cross told Arkansas Business that the preliminary injunction hearing attracted lawyers from other states as spectators, since similar challenges to the new persuader rules have also been filed in Texas and Minnesota. But the Cross Gunter suit was the first, filed April 1, and Baker’s decision could influence the others.
“If Judge Baker grants the injunction, it will apply in Arkansas,” Cross said. “But whether the Department of Labor will try to enforce it elsewhere is the $64,000 question.”