In follow-up to our earlier blog post about the first lawsuit to challenge the U.S. Department of Labor’s Final Persuader Rule that was promulgated in late March, two additional lawsuits have been filed challenging the Final Rule, this time in the U.S. District Court for the District of Minnesota and in the U.S. District Court for the Northern District of Texas.
The suit filed in Minnesota, Labnet Inc. d/b/a Worklaw Network v. United States Department of Labor (Case No. 0:16-cv-00844), was filed by a group of eleven law firms who are all members of an association of independent law firms. The suit filed in Texas, National Federation of Independent Business v. Perez (Case No. 5:16-cv-00066), was filed by an association of small businesses, a national trade association, and a local chamber of commerce.
The new lawsuits attack the Final Rule on the following grounds:
- The DOL exceeded its statutory authority in promulgating the Final Rule because: the Final Rule is contrary to the plain meaning of and completely destroys the Labor-Management Reporting and Disclosure Act’s advice exemption; it illegally attempts to usurp state laws with respect to regulation of the attorney-client relationship; it attempts to amend the LMRDA by rulemaking; and it improperly attempts to regulate the conduct of union representation proceedings, a role that has been delegated to the National Labor Relations Board under the National Labor Relations Act.
- It violates free speech and association rights guaranteed under the First Amendment because it interferes with employers’ free speech right to express views regarding union organizing, it targets those who communicate a particular message conveying a particular viewpoint, and it will substantially hinder employers from consulting attorneys when formulating and delivering their views on the topic of unionization.
- It violates due process rights guaranteed under the Fifth Amendment because it is too vague, and laws that carry criminal sanctions are subject to a strict application of the void for vagueness test.
- It violates the Regulatory Flexibility Act because the DOL both failed to properly conduct the regulatory flexibility analysis required by that Act and was arbitrary and capricious in its certification that the Final Rule will not have a significant impact on a substantial number of small entities. In this regard, an independent analysis by the former Chief Economist at the DOL concluded that the first-year cost alone would be $10,433 per firm.
- Even if the Final Rule is determined to be valid as applied to advice given to a particular client, the ensuing reporting requirement is overbroad because it requires disclosures concerning all receipts from all clients “regardless of the purposes of the advice or services” and because it requires the filer to disclose all disbursements to its officers and employees.
Both lawsuits ask the courts to declare that the Final Rule is unlawful under the Administrative Procedure Act, to preliminarily and permanently enjoin implementation and enforcement of the Final Rule, to set aside the Final Rule, and to award the plaintiffs their attorneys’ fees and costs. We will keep you apprised of further developments as they occur.