Court Finds DOL’s New Persuader Rule “Flawed”

The U.S. District Court in Minnesota ruled, on June 22, 2016, that the Department of Labor’s new interpretation of the advice exemption from the persuader rule is “untenable” and “flawed.”   The Court did not issue an injunction against the new interpretation, which goes into effect July 1, 2016, but that was based on its finding that the DOL suspended the most objectionable reporting requirement after the lawsuit was filed.  The challenge to the new interpretation was filed by Worklaw Network, a national alliance of labor and employment firms of which we are a member.  Our firm, along with Seaton, Peters & Revnew, P.A. of Minneapolis, represented Worklaw.

The Labor-Management Reporting and Disclosure Act requires lawyers and consultants who engage in “persuader” activity and the clients who receive such services to file reports with the DOL; however, the law exempts “advice” from the reporting requirement.  The persuader rule covers services intended to assist a client in connection with union activity.  For many years, the DOL interpreted “advice” to mean recommendations that the client was free to accept or reject.  Thus, reporting was required only if the lawyer or consultant communicated directly with employees.  This year, the DOL practically eliminated the advice exemption, holding that “advice” does not include any communication with a client that may assist in dealing with union activity.

Three lawsuits were filed challenging the new interpretation.  The ruling in our case was the first.  The Court found that we have a “strong likelihood” of winning our claim that the new rule conflicts with the plain language of the advice exemption in the Act.  The Court did not grant our request for a preliminary injunction, because the DOL has suspended its most burdensome reporting requirement applicable to law firms, the LM-21 form.

The ruling is a major step in the right direction, but is not the final word on the subject.  The case remains open for a final ruling on our challenge to the rule, and two other challenges are pending.  Ultimately, the issue will likely be resolved by a federal appellate court or possibly the U.S. Supreme Court.  We will keep you posted.

In the meanwhile, clients who sign legal service agreements with their lawyers before July 1, 2016 will, according to a DOL spokesman, be grandfathered under the old rule.  We have emailed such agreements to our labor law clients.  If you did not receive one, but think you may need labor law advice in the future, please contact us immediately.