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After proposing it seven years ago, the U.S. Department of Labor today formally rescinded its so-called “persuader rule” that would have imposed an onerous reporting requirement on employers and their legal consultants, not to mention make it more difficult for employees to get balanced information about unions. The action brings to a close one of the many examples of regulatory overreach under the Obama administration and restores a clear, decades-old standard.
Under the law, employers who hire law firms or consultants to engage in persuader activity—i.e. persuading employees with regard to unionization— are required to file disclosure forms with the Department, as are the law firms and consultants in question. However, there is an exemption for providing advice to the employer without directly engaging with employees, aptly known as the “advice exemption.” Generally speaking, as long as the consultant merely provides advice with that stipulation, all parties are exempt from the filing requirement.
That interpretation had been in place since 1962, but in 2011 the Department announced that it would consider curtailing the definition of “advice” that fell under the exemption, something unions have long sought to do since the broader definition allows employers to learn how to provide their side of the story to workers during organizing drives.
After initially receiving substantial pushback from the business and legal communities, including the American Bar Association, the Department spent nearly five years finalizing its proposed rule. As expected, the final rule vastly expanded the reporting requirements to correct what the Department called a “disclosure vacuum.” To that end, it removed the advice exemption if a consultant engaged in numerous previously exempt activities, regardless of whether they had direct contact with employees.
Examples of newly reportable activities included planning or coordinating activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees; providing material or communications to the employer for dissemination to employees; and developing personnel policies for the employer.
Following publication of the final rule, the business community challenged its legality, and a pair of federal courts made clear that they were not persuaded by the Department’s rationale. One court in Minnesota declined the invitation to issue a preliminary injunction against the rule, but it called into question whether the rule would survive judicial scrutiny, saying “that plaintiffs have a strong likelihood of success on their claim that the new rule conflicts with the plain language of the statute.” A court in Texas did issue an injunction—first temporary, then permanent—saying the Department’s rule was “defective to its core.”
Following that November 2016 injunction, the outgoing Obama administration had little time to defend the rule and ultimately failed to do so. For its part, the Trump administration announced in May 2017 that it planned to rescind the persuader rule, which it has now done. Its rescission marks the end of an ill-conceived regulation and takes one step closer to the restoration of balance in the area of labor law. Good riddance.