DOL Update: Persuader Rule Blocked; Ruling on Injunction to Prevent December 1, 2016 Overtime Rule Nears

On November 16, 2016, there were two major developments in federal court regarding the Department of Labor’s (“DOL”) Persuader Rule and Overtime Rule that could have a significant impact on employers throughout the country. A federal judge in the United States District Court for the Northern District of Texas granted a permanent, nationwide injunction preventing the DOL’s implementation of the Persuader Rule (see Related Article) because it was inconsistent with the Labor-Management Reporting and Disclosure Act (“LMRDA”).[1]  In the United States District Court for the Eastern District of Texas, a federal judge heard arguments regarding whether to grant a preliminary injunction to prevent the implementation of the DOL’s Overtime Rule (see Related Article), and plans to rule by November 22, 2016.[2]  This article analyzes both federal court rulings and their practical implications for employers.

Employers Will Likely Not Have to Comply with Persuader Rule

Under the LMRDA, employers are required to disclose the hiring of outside consultants hired to tailor management messages during union organizing campaigns, but exempts disclosures where the outside consultant did not directly communicate with employees and the employer could accept or reject materials drafted by the outside consultant.[3]  The Persuader Rule would have required employers to disclose details about its relationships with outside consultants—including third-party attorneys—engaged to assist in certain activities during unionization campaigns, regardless of whether the consultant or attorney has direct contact with any employees.  In his decision granting the permanent injunction, the federal judge held that the Persuader Rule violated the LMRDA, as well as the First and Fifth Amendments to the United States Constitution because it was too vague and ambiguous, and impermissibly restricted employers’ free speech and association.[4]

While the DOL may still appeal the decision to the United States Court of Appeals for the Fifth Circuit, it is anticipated that the appeal would not reach the Fifth Circuit before President-elect Donald Trump takes office, and there is little chance the Trump Administration will defend the Persuader Rule.[5]  Employers should continue to monitor any appeal attempts, but it is likely that employers will not have to follow the Persuader Rule’s requirements and may continue to make disclosures pursuant to the LMRDA as they did prior to the Persuader Rule’s issuance.

Overtime Rule Challenged, but Employers Should Still Plan for Implementation by December 1, 2016 

The DOL’s Wage and Hour Division’s Overtime Rule increasing the minimum salary threshold for White-Collar employees to be exempt from overtime from $445 per week ($23,660 per year) to $913 per week ($47,476 per year) is set to take effect December 1, 2016 (see Related Article).  Twenty-one states, led by Texas and Nevada, are seeking an injunction to prevent the Overtime Rule from taking effect.[6]  Colorado is not one of the Plaintiff states seeking the injunction.  On November 16, 2016, a federal judge heard arguments from both sides regarding the Overtime Rule, and has indicated he will rule on the challengers’ preliminary injunction on November 22, 2016.[7] 

If the preliminary injunction is granted, the Overtime Rule would not take effect December 1, 2016, and it is likely that a Trump Administration would not defend the rule once President-elect Donald Trump assumes office January 20, 2017.  While employers should continue to follow the federal proceedings and be alert for the November 22, 2016 preliminary injunction ruling, most commentators believe that the lawsuit will not be successful.[8]  Employers should therefore continue to prepare to comply with the Overtime Rule by the December 1, 2016 deadline.

Campbell Litigation will continue to track these developments and report back when further updates are available.

[1] Nat’l Fed’n of Independent Bus. v. Perez, No. 16-cv-066 (N.D. Tex. order Nov. 16, 2016); see also Lawrence E. Dubé, DOL Persuader Rule Blocked by Federal Judge, Bloomberg BNA Daily Labor Report (Nov. 16, 2016).

[2] Nevada v. U.S. Dept. of Labor, No. 16-cv-00731 (E.D. Tex. minute entry Nov. 16, 2016); see also Ben Penn, Overtime-Rule Injunction Decision Likely Nov. 22, Bloomberg BNA Daily Labor Report (Nov. 16, 2016).

[3] Retail Industry Leaders Association, Retailers React to Harmful DOL Persuader Rule, PRNewswire (Mar. 23, 2016); see also Adam C. Abrahms and Steven M. Swirsky, Department of Labor Releases New Persuader Rule Intended to Aid Union Organizing, The National Law Review (Mar. 23, 2016) (available at: http://www.natlawreview.com/print/article/department-labor-releases-new-persuader-rule-intended-to-aid-union-organizing) (last accessed Nov. 17, 2016).

[4] See Dubé, supra note 1. 

[5] Daniel Fisher, Judge Permanently Blocks ‘Persuader Rule’ Requiring Firms To Disclose Labor Advice, Forbes (Nov. 16, 2016) (available at: http://www.forbes.com/sites/danielfisher/2016/11/16/judge-permanently-blocks-persuader-rule-requiring-firms-to-disclose-labor-advice/#107fdc69105b) (last accessed Nov. 17, 2016).

[6] See Nevada v. U.S. Dep’t of Labor, 16-cv-00407 (E.D. Tex. filed Sept. 20, 2016). 

[7] Nevada v. U.S. Dept. of Labor, No. 16-cv-00731 (E.D. Tex. minute entry Nov. 16, 2016)

[8] Staci Ketay Rotman and Erin Fowler, 21 States File Suit Challenging the DOL’s New Overtime Rule, Wage & Hour Insights (Sept. 20, 2016) (available at: http://www.wagehourinsights.com/2016/09/21-states-file-suit-challenging-the-dols-new-overtime-rule/) (last accessed Nov. 17, 2016).