Texas Federal Court Permanently Enjoins DOL “Persuader Rule”

It has been a busy month for the federal courts in Texas, and a long one for the United States Department of Labor (the “DOL”). As we blogged here last week, on November 21, 2016, the United States District Court for the Eastern District of Texas blocked implementation of the DOL’s rule that would have nearly doubled the minimum salary level for the “white collar” exemptions. That ruling somewhat overshadows the fact that, just 6 days earlier, the United States District Court for the Northern District of Texas permanently enjoined enforcement of the DOL’s so-called “Persuader Rule,” leaving the viability of this rule in grave doubt, in light of the likely policy shifts in the administration of President-Elect Donald J. Trump. (See here for our blog entry of potential policy shifts under the new administration.)

As we previously blogged here, here, and here, the thrust of the “Persuader Rule,” a regulation first proposed by the DOL in 2011, and enacted in April of this year, is to essentially eliminate the “Advice Exception” to the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”). 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, the Court granted a nationwide, preliminary injunction against the DOL and others, preventing the enforcement of the new Persuader Rule. With the Court’s November 16 ruling, that permanent injunction is now permanent.

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 violated 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 the Court’s 86-page ruling of June 16, 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 disclosure requirements of LMRDA. On November 16, 2016, in a mere two pages, the Court referred to and incorporated the reasoning of its preliminary injunction order, and ruled that the Persuader Rule “should be held unlawful and set aside.”

What comes next is not certain, but the chances of the Trump Administration adopting the Obama Administration’s position on the Persuader Rule seem remote. The DOL has appealed the preliminary injunction order to the 5th Circuit, and it may well be that the DOL abandons that appeal in the next administration. Importantly, for the present, for employers who seek advice of counsel on union organizing and election matters, this permanent 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 over the coming months.

-Monte Grix

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

California Teachers Seek Rehearing Before Full U.S. Supreme Court Regarding Constitutionality of “Agency Shop” Fees for Non-Union Employees

 Attorneys for the Plaintiff California public sector teachers in the case of Friedrichs v. California Teachers Association have taken the extraordinarily rare step of petitioning the Supreme Court for a rehearing, and have also requested that such rehearing take place after the Court obtains a full complement of Justices capable of reaching resolution by a five-Justice majority.  The request for rehearing was prompted by the Court’s one sentence decision in theFriedrichs  case on March 29, 2016, upholding the judgment of the Ninth Circuit without decision by an “equally divided Court.”  The split decision left intact, for now, the constitutionality of “agency shop” fees for non-union member public employees who are represented by a union.  It had been highly anticipated when the case was heard by the Court in January 2016 that a majority of the Court, including Justice Antonin Scalia, would vote in favor of Plaintiffs to reverse the Ninth Circuit in a 5-4 decision.  Such a decision would have also potentially reversed the Supreme Court precedent upon which the Ninth Circuit’s decision was based, Abood v. Detroit Board of Education.  However, the chances of reversal dimmed with the unexpected death of Justice Scalia a month later. 

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At issue in Friedrichs is the right of public employee unions to require non-union members to pay compulsory “agency shop” fees.    Agency shop arrangements require non-union employees, who are represented by a union that has won the right to bargain for all employees (union members and non-union members) in the bargaining unit, to pay an “agency fee” as a condition of continued employment.  Under Abood, the “agency fee” may be assessed in order to pay for union activity related to bargaining for rights of all employees in the bargaining unit.  However, the “agency fee” assessed cannot be used to pay for a union’s political activity, including lobbying and support of political candidates.  Agency shop fee arrangements are currently permitted in over 20 states, including California, and affect millions of public employees.  The teacher plaintiffs in Friedrichs have asserted that requiring employees who choose not to join the union to pay an agency fee to the union to support even bargaining-related activities violates their free speech rights under the First and Fourteenth Amendment rights.

 

The last time the Supreme Court granted a similar rehearing petition was in 1947.   However, even if the rehearing petition is ultimately denied, several agency fee cases are winding their way through the courts and could eventually be heard by a full Supreme Court.  For now, the result in Friedrichs leaves a question still hanging over the ultimate continued viability of Abood on this important labor relations issue. 

Jayne Benz Chipman

 

Hirschfeld Kraemer files amicus brief in suit challenging Department of Labor’s new “Persuader Rule”

The Department of Labor recently issued a final “persuader rule” under the Labor-Management Reporting and Disclosure Act (“LMRDA”).  The new rule expands the reporting and disclosure requirements of firms involved in persuader activities – where an object is to persuade employees concerning their rights to organize and bargain collectively.  Changing a long-standing understanding that indirect activities, such as drafting communication to employees, coordinating meetings and the like for employers involved in union organizing, were not covered by these reporting requirements, the new rules new expressly include planning or coordinating supervisor activity, providing persuader materials and even conducting seminars or training for supervisors or other training activity even where the consultant/lawyer does not directly meet with employees.  Both employers and lawyers would need to file disclosure statements concerning fees, content of consultation and similar information long believed to be privileged.     Continue reading

OSHA Opens The Door To Union Agents

If you asked 100 non-union employers  whether they thought they would be required to admit union representatives to inspections of their facilities, probably 99 of them would say no.  It turns out they are wrong, at least according to the Occupational Safety and Health Administration (OSHA) under President Obama.

In a little-publicized interpretative bulletin recently issued, OSHA opined that employees of a non-union employer can be represented by anyone he prefers, including an outside union agent.  While OSHA maintains that this is merely a continuation of already existing policy, the fact remains that in the 40-plus years of its existence, OSHA has never provided such an interpretation in the past and there is nothing in the OSH Act or the implementing regulations which supports this guidance.  In fact, OSHA’s guidance directly contradicts a previous interpretive letter which said that union representatives were not allowed at a non-union facility for an inspection.

Why should you care?  Any time a government agency gives a union direct access to a non-union facility, employers should be concerned about the effect it can have on employees.  During an OSHA inspection, it is inevitable that the union agent will make his presence known to other employees, no matter how you try to curtail his activities.

If you are going to be inspected, can you do anything to keep a union out?  You can try.  In response to an inspection notice, employers can tell OSHA that it can proceed with the inspection, but that union agents will not be allowed onsite.  OSHA (and, to a lesser degree, the union) will be given a choice whether they want to proceed with the inspection or seek an inspection warrant from a federal judge.

Is this a sign of more bad news to come?  Potentially.  Over the years, the National Labor Relations Board has reversed itself repeatedly on the issue of whether Weingarten rights apply in non-union workforces.  In Weingarten, the U.S. Supreme Court found that employees in unionized workplaces have the right to the presence of a union representative during any management inquiryhe employee reasonably believes may result in discipline, provided that he asks for such a representative.  Presently, the Board has found that Weingarten rights apply only in union workforces, but under previous administrations, the Board had broadened the holding in Weingarten to apply in non-union settings as well. This administrative action suggests that Weingarten may  be expanded by the Board.

- Dan Handman

Is Another California Supreme Court Employment Decision Bound For Reversal At The U.S. Supreme Court?

While we were all watching football and eating leftovers over the Christmas holiday, the California Supreme Court issued one of the most controversial decisions in years, finding that a union had the right to picket on private property outside of a Ralph’s grocery store.  Most labor lawyers, including me, expect this fight to make its way to the U.S. Supreme Court where it stands a good chance of being reversed. 

A bit of background.  Two California statutes – the Moscone Act and California Labor Code §1138.1 – make it legal for a union to engage in peaceful picketing or patrolling during a labor dispute and prohibit courts from issuing injunctions against them in most cases.  In Ralphs Grocery Company v. UFCW, Local 8, a local chapter of the United Food and Commercial Workers (UFCW) engaged in picketing on the private walkway in front of a Ralph’s grocery store in an attempt to organize the workers there.  Ralph’s had a union-neutral company policy which prohibited speech activities on its property, but the union picketed nonetheless and, after the police refused to intervene, Ralph’s sought an injunction prohibiting the picketing.  Ralph’s maintained that the union was trespassing on its private property and the union contended that its conduct was lawful under the Moscone Act and Section 1138.1. 

The ultimate issue is whether the Moscone Act and Section 1138.1 are constitutional under the First Amendment to the U.S. Constitution.  Generally speaking, state laws which restrict speech based on the content of the speech (i.e., speech about unionizing) are prohibited.  To that end, the U.S. Supreme Court has twice struck down state laws restricting picketing “on a public way” near a school or picketing “before or about the residence or dwelling of any person” as impermissible content-based restrictions. 

The twist in this case is that the Moscone Act and Section 1138.1 do not restrict speech.  On the contrary, the laws: (1) make it lawful to engage in peaceful picketing during a union campaign; and (2) prohibit an employer from getting an injunction to prohibit such picketing.

The Court of Appeal found that to be a distinction without a difference.  It reasoned, “the effect on speech is the same: the laws favors speech related to union disputes over speech related to other matters – it forces Ralph’s to provide a forum for speech based on its content.”  Because of that “preferential treatment,” both the Moscone Act and Section 1138.1 were unconstitutional in its view.   In other words, labor picketers and no one else have the right to picket on private property.

This was not the first time an appellate court had found these two statutes to violate the First Amendment.  In 2001, the U.S. Court of Appeals for the D.C. Circuit (which regularly reviews decisions from the NLRB) found the Moscone Act and Section 1138.1 to be unconstitutional content-based regulations of speech which violate the First Amendment.

The California Supreme Court chose not to follow all of these precedents and found in a 6-1 decision that the Moscone Act and Section 11138.1 were constitutional.  It focused almost exclusively on the fact that “neither the Moscone Act nor Section 1138.1 . . . restricts speech.”  It was truly perplexing that the California Supreme Court chose not to address the “preferential treatment” alluded to by the Court of Appeal and the D.C. Circuit.

So, what happens now?  Ralph’s can seek a writ of certiorari with the U.S. Supreme Court to have the First Amendment issue addressed by that court.  Ralph’s has publicly indicated that it intends to seek such review and there is good reason to think that the U.S. Supreme Court will grant review and find these statutes unconstitutional.  Although the U.S. Supreme Court is famously split on all sorts of high-profile issues, in recent years the Court’s members have seemed to find more common ground when it comes to issues involving First Amendment issues.  And, the California Supreme Court’s dodge of the precise issue here – whether there is any difference between content-based restriction of speech and the preferential treatment of speech based on its content – practically begs for review and reversal by the U.S. Supreme Court. 

- Dan Handman (Los Angeles)