Judge puts on hold law requiring disclosure of anti-union consultations (UPDATE)

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Company executives won’t have to worry about a new federal rule requiring them to disclose the identities of lawyers and other experts they might turn to for advice on resisting union organization — at least for the time being.

A federal court in Texas this week placed a preliminary injunction on the Obama Administration’s so-called persuader rule, making the new requirements unenforceable while a lawsuit against them proceeds. If the new rule had started applying to contracts on July 1, as originally planned, lawyers and other outside consultants brought on by employers for advice on resisting union-organization campaigns would have had to disclose their identities and activities in public reports to the U.S. Department of Labor.

In a 90-page opinion released Monday, U.S. District Court for the Northern District of Texas Judge Sam Cummings found that the new rule would put lawyers in conflict with state laws protecting attorney-client privilege, would infringe on consultants First Amendment right to discuss matters related to union organizing and would inject vagueness into an area of the law that had formerly been clear.

The court particularly found fault with the Obama Administration’s attempt to define which sorts of communications would have to be disclosed under the new rule. Lawyers and outside consultants now enjoy broad leeway to talk to employers in private about a variety of matters concerning union organization – as long as they don’t make direct appeals to employees.

The Obama Administration’s new rule instead tried to make a distinction between legal advice — which would still not have to be disclosed — and activities meant to persuade, which would have to be reported to the Department of Labor. The Texas court found that separating the two types of activities would many times prove impossible in practice.

It also noted the heavy fines that could be imposed on lawyers who failed to comply with the new requirements. A single violation could result in a fine of up to $10,000 or a year in prison.

The threat of so great a punishment would cause a “chilling effect” and lead fewer employers to seek outside advice when confronted with a union-organization campaign, according to the opinion.

The plaintiffs in the case — which include Wisconsin and nine other states, as well as the National Federation of Independent Business and the National Association of Homebuilders — argued that employers almost always turn to outside consultants when they are faced with a union-organization campaign. One reason is to learn of the likely consequences of unionization and to find ways to make sure employees are aware of those consequences.

Then there are various technical requirements that can be difficult to comply with. When a unionization campaign is official underway, for instance, employers must adhere to a timetable for organizing an election and must put up certain postings for all employees to see.

Wisconsin Attorney General Brad Schimel hailed the Texas judge’s preliminary injunction.

“This is yet another example of federal overreach by the Obama Administration,” Schimel said in a statement. “Businesses should be free to obtain confidential legal advice from their attorneys without interference from the federal government. I am pleased that the federal court put a stop to this unlawful rule.” Follow @TDR_WLJDan