Shawe Rosenthal Sued the Department of Labor, and Now It Has Backtracked on the Persuader Rule


As we previously reported in our March 2016 E-Update, Shawe Rosenthal, on behalf of the Worklaw®Network, a nationwide association of independent labor and employment law firms of which we are a member, filed suit last year against the U.S. Department of Labor to block the DOL’s new interpretation of the advice exemption of the Labor Management Reporting and Disclosure Act (“LMRDA”), or the “persuader rule.”  And now, on Monday, June 12, 2017, the DOL announced a Notice of Proposed Rulemaking (“NPRM”) that proposes to rescind that new persuader rule interpretation.

The LMRDA requires reporting of certain information when an employer hires a consultant to persuade employees in the context of a union election or collective bargaining.  The Department of Labor under the Obama Administration sought to expand the scope of the reporting requirement so greatly that it would have swallowed a statutory exemption from reporting for advice offered to employers behind the scenes – an exemption intended to allow employers to engage in confidential communications with their attorneys.  That exemption had been in place for over 50 years.

The Obama Administration’s approach was inconsistent with the statutory language of the LMRDA, as well as the U.S. Constitution.  Shawe Rosenthal attorneys Mark SwerdlinEric Hemmendinger, and Parker Thoeni, along with our colleagues at Seaton, Peters & Revnew, P.A., led the charge on behalf of Worklaw to prevent the Obama Administration from enforcing its misinterpretation of the LMRDA.  Parallel cases were also filed in Texas and Arkansas, and the Texas federal court issued a permanent nationwide injunction, which has preserved the status quo.

Following the election of President Trump, it quickly became apparent that the DOL was going to take a different approach.  The Trump Administration sought stays in the currently pending cases to determine how it would treat the Obama Administration’s rule.  Surprisingly, rather than concede in the pending litigation and allow the permanent injunction to stand, the DOL has now proposed to rescind the Obama Administration rule and reconsider its approach.

The DOL’s strategy is curious.  If, as many believe, the Trump Administration simply disagreed with the Obama rule and sought to maintain the status quo, it could have simply stopped defending the rule in litigation.  Alternatively, it could have issued a NPRM that proposed rescission without discussing a need for reconsideration and issuance of a rule that is more well-reasoned than the rule issued by the Obama Administration.  One would expect that, if something akin to the Obama rule is still under consideration, it would make little sense to go through the rulemaking process to rescind a rule that is on the books but not enforceable in order to come up with a similar rule.  It appears that the DOL may be considering some new rule between complete rescission and the position taken by the Obama Administration in 2016.  Thus, it is possible that the current NPRM is a stopgap measure intended to improve the DOL’s litigation position in the pending cases.

It remains to be seen how this action will impact the currently pending litigation, but we certainly encourage employers to submit comments to the NPRM, within 60 days from its release on June 12, 2017, urging the DOL to go back to the prior rule. Comments may be submitted electronically here.