Texas Court Enters Nationwide Injunction on “Persuader Rule”

Labor and employment attorneys and their clients have been anxiously watching the court dockets for a decision that could invalidate, or at least postpone, the effective date of the so-called “Persuader Rule.” The waiting ended this afternoon, just days before the rule was set to take effect on July 1, 2016. 

The United States District Court for the Northern District of Texas issued a nationwide preliminary injunction, noting that the rule is inconsistent with current law and exceeds the Department of Labor’s authority. See National Federation of Independent Business, et al. v. Thomas E. Perez, Secretary, U.S. Department of Labor, Case No 5:16-cv-00066-C.
 
The current “Persuader Rule” at issue requires employers and their attorneys to file financial reports with the DOL disclosing payments of legal fees made and received after July 1, 2016, for advice given by attorneys regarding labor law matters, potentially including union organizing, collective bargaining negotiations and labor arbitration, as well as routine counsel for non-unionized employers who wish to remain union free. 

This rule applies to unionized and non-unionized workplaces. The rule is also written broadly enough to cover most employment law and legal advice activities:  advising on the state of employment laws, recommending, advising and drafting policies, and advising on personnel matters. 

Attorneys throughout the nation have been arguing that the rule is clearly illegal and would require attorneys to violate the attorney-client privilege or risk significant consequences of not filing the required governmental reports. Nyemaster Goode joined as an amicus and as a member of the Employment Law Alliance in support of enjoining the effectiveness of the rule in a lawsuit pending in Arkansas, making arguments similar to those made in the Texas Court. See Associated Builders & Contractors of Arkansas, et al. v. Thomas Perez, et al., Case No, 4:16CV169-KCB.

Last week, the DOL issued a clarification that the Persuader Rule will not apply to any written arrangement or agreement between a law firm and employer client entered into before July 1, 2016, for the provision of labor law advice. So in recent days, many firms, including Nyemaster Goode began asking clients to enter into legal services agreements out of an abundance of caution, to ensure federal reporting of legal services was not required and the attorney-client privilege remained protected.

However, in light of the Texas Court’s injunction, the need for the legal services agreements is, at this point in time, moot.

Should you have questions about this issue, please do not hesitate to contact one of the Labor & Employment attorneys at Nyemaster Goode.