Employers Get a Break on Disclosure of Union Organizing Efforts and Advice: Texas Court Blocks Implementation of the DOL’s “Persuader Rule”

In this blog, we have previously covered the United States’ Department of Labor’s controversial efforts to effect a significant change to the so-called “Persuader Rule,” a regulation first proposed by the United States Department of Labor in 2011, and finally enacted in April of this year, to essentially eliminate the “Advice Exception” to the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”). (See here and here.)  The enactment of the “Persuader Rule” precipitated the filing of multiple lawsuits in federal District Courts across the country by employer-business associations and others.  In a significant victory for employers, on June 27, 2016, in the Federal District Court for the Northern District of Texas, that court granted a nationwide, preliminary injunction against the DOL and others, preventing, for the present, the enforcement of the new Persuader Rule.

The Persuader Rule modifies the “Advice Exception” under the LMRDA, in place since the Kennedy Administration, which allowed employers to receive confidential and privileged counsel from attorneys on union organizing and election efforts. The Advice Exception was and is consistent with state law interpretations of the confidential attorney-client communications privilege, and also consistent with an attorney’s duty of confidentiality to his/her client under state law and rules of professional conduct.  The only caveat to this bright line that no disclosure was required under the LMRDA was that, in providing such counsel, the attorney had no direct contact with employees and the employer was free to accept or reject any recommendations.  Although billed as a modification of the Advice Exception, in this case, Plaintiffs and notably, the American Bar Association (which filed a “friend of the court” brief), saw the Persuader Rule as creating an irreconcilable conflict: forcing lawyers to document and disclose their advice to employer-clients, in violation of their duties under state law and professional rules of conduct, in order to comply with the new DOL rule.  Plaintiffs also argued that the new Persuader Rule violates their First Amendment rights to free speech and association: specifically, that the Persuader Rule would impose a content-based burden on speech about union organizing.  They further argued that the rule was impermissibly vague and violated their right to due process under the Fifth Amendment.

In an 86 page ruling, the Court agreed with and expanded on all of these positions, but most significantly found that the changes to the Persuader Rule “effectively eliminate[ed]” the Advice Exemption to the disclosures requirements of LMRDA.

What comes next is not entirely certain, although an appeal by the DOL to the 5th Circuit would not be surprising.  The DOL could also go back to the drawing board to revise the new Persuader Rule.  Regardless of its next steps, the DOL will need to better articulate and support its rationale for any proposed change.  The DOL apparently believes that the playing field regarding union organizing and elections has somehow become unlevel, and the new Persuader Rule was supposed to address this perceived imbalance.  (Notably, however, the court here was unmoved by the DOL’s arguments and found that the DOL had provided little evidence to support such conclusions.)  Importantly, for the present, for employers who seek advice of counsel on union organizing and election matters, this injunction means that the content and other details of such advice will be kept confidential, and will not be disclosed, on the same terms that existed prior to the April 2016 implementation of the final Persuader Rule; however, employers would be well advised to stay abreast of this issue as it works its way through the courts.

Monte Grix

Unexpected Affirmative Action News: The U.S. Supreme Court Affirms that Universities and Colleges May Continue to Use Race as a Factor in Admissions

On June 23, 2016, in Fisher v. University of Texas et al., (“Fisher II”), the United States Supreme Court voted 4-3 to uphold the limited use of race in college and university admissions.  The result was somewhat surprising given that Justice Anthony Kennedy, writing for the majority, had never before voted to uphold a race-based affirmative action program.  (The Supreme Court had issued an earlier opinion on a different aspect of this case, “Fisher I.”)

In so doing, the Fisher II Court finally put to rest a race discrimination lawsuit that had been pending for more than eight years.  During that time, eight undergraduate classes matriculated at the University of Texas-Austin (“UT-Austin”), while the plaintiff, Abigail Fisher (“Fisher”), grew from an eighteen-year old white high school applicant to a twenty-six year-old who graduated from Lousiana State University and now works as a financial analyst in Austin, Texas.

Background

At the time Fisher applied to join the entering class of fall 2008, UT-Austin had a dual-track admissions policy for Texas residents: (i) a Top Ten Percent Plan (“Plan”) which provided automatic acceptance to those in the top ten percent of their graduating class, equal to 81 percent of the seats available for Texas residents for fall 2008; and (ii) a holistic review program that went beyond class rank to individually evaluate each applicant based on her or his achievements and experiences for the remaining 19 percent of seats available for Texas residents that year. As Fisher did not graduate in the top ten percent of her class, UT-Austin considered and then denied Fisher admission under its holistic review program.

The Supreme Court’s Decision

Fisher subsequently filed suit in federal court, arguing that UT-Austin’s admissions policies practices violated and had discriminated against her on the basis of race in violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution. Fisher asserted that she had not been admitted because of her race.

In August 2009, the District Court granted UT-Austin’s motion for summary judgment. This was subsequently followed by two separate reviews by the Fifth Circuit Court of Appeals affirming summary judgment, in addition to two trips to the U.S. Supreme Court.

In its decision, the Supreme Court first discussed the “strict scrutiny” standard of review that it applied: a university must make a showing that the affirmative action plan at issue is narrowly tailored to this criterion: the benefit of student body diversity that “encompasses a … broa[d] array of qualifications and characteristics of which racial or ethnic origin is but a single though important element.”

Applying this standard, Justice Kennedy, writing for the majority, found that the UT Austin “articulated concrete and precise goals” for its affirmative action program that “mirror[ed]” the compelling interest of obtaining “the educational benefits that flow from student body diversity,” and that UT Austin was owed “considerable deference…in defining [its] intangible characteristics, like student body diversity, that are central to its identity and educational mission.”  At the same time, the Court considered and rejected various race-neutral alternatives advanced by Fisher, including: (i) intensifying outreach efforts to Hispanic and African-American applicants; (ii) changing the weight given to socioeconomic and academic factors to increase diversity; and (iii) uncapping the Plan and admitting all students through a percentage plan.  In doing so, the Court noted that UT-Austin had tried all three alternatives and found them seriously deficient in achieving a diverse student body.

The Implications of Fisher II: Next Steps for Affirmative Action

For all of its significance, the Fisher II ruling is rather narrow. Fisher II analyzed the use of race in a limited number of admissions decisions under the holistic review program that constituted a distinct minority of the overall number of admissions decisions made by UT-Austin, where most students were admitted under the Plan.  Moreover, as Justice Kennedy noted, UT Austin (and all other colleges engaging in holistic review that includes race as a factor) has a “continuing obligation to satisfy the burden of strict scrutiny in light of changing circumstances,” and must engage in “periodic reassessment of the constitutionality, and efficacy, of its admissions program.”

Fisher II’s full impact on public and private universities may not been known for some time.  At present, eight states already ban the consideration of race in higher education admissions decisions at public institutions, and Fisher II will not have any legal impact on those campuses.  In other states, Fisher II may lead public universities to discuss and perhaps even reconfigure their admissions policies should those policies consider race as part of a holistic review.

Moreover, while Fisher II may represent a strong statement that it is possible for public universities to create narrowly tailored affirmative action programs, that public discussion is likely not completely over.  Two other, similar lawsuits are pending in federal court, one involving Harvard College, a private college, and the University of North Carolina-Chapel Hill, a public university.  Both cases were stayed in 2015 pending the outcome in Fisher II and will undoubtedly become more active over the coming months.  Accordingly, colleges and universities that may consider race as one element of a holistic admissions process should stay tuned to these new cases to see what develops.

Derek Ishikawa