On March 24, 2016, almost five years after it first proposed the rule, the U.S. Department of Labor (DOL) published the final version of its controversial “Persuader Rule.” The new rule drastically changes the DOL’s own prior interpretation of the Labor Management Reporting and Disclosure Act of 1959’s (LMRDA) “advice” exemption to expand employers’ disclosure requirements regarding their use of consultants (including attorneys) hired to oppose union organizing, requiring disclosure even if the consultant has no direct contact with workers.
According to the DOL, the purpose of the new rule is to improve transparency and to give workers information about the source of the messages they are hearing to influence their decisions about how to exercise their right to choose union representation or engage in collective bargaining, while opponents of the rule see it simply as being aimed at discouraging employers from retaining such consultants and discouraging attorneys and other consultants from offering labor relations services, thereby promoting unionization. Under the LMRDA, employers and their consultants are required to file reports with the DOL publicly disclosing the identity, fee arrangement, and scope of activities performed by outside consultants engaged to persuade employees about their right to organize and bargain collectively. However, the Act provides an exemption to this reporting requirement in situations where the consultant is merely “giving or agreeing to give advice” to the employer, which “advice exemption” the DOL had long interpreted as excluding an employer’s discussions with its labor relations consultants -- including legal counsel -- regarding opposition to a union organizing campaign, as long as the consultants had no direct contact with employees.
The new rule continues to exempt from disclosure services that simply constitute “advice” to the employer and also exempts any agreement involving solely the provision of legal services (e.g., counseling employers about compliance with the National Labor Relations Act, representing an employer before an agency, court, arbitrator, or similar tribunal or during collective bargaining negotiations, etc.). However, the new rule revises the DOL’s prior interpretation of the “advice exemption” by significantly narrowing the definition for the types of activities that constitute “advice” to only “recommendations regarding a decision or course of conduct” and by instead focusing on whether the consultant’s activities are intended to persuade employees, regardless of whether or not the consultant had direct contact with employees. Thus, according to the DOL’s Fact Sheet on the new rule, employers and their consultants will now have to report not only when there is direct consultant contact with the employees, but also when consultants engage in the following sub-categories of indirect consultant activity undertaken with an object to persuade employees about their right to organize:
- • Plan, direct, or coordinate activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees;
- • Provide persuader materials or communications to employers for dissemination to workers;
- • Conduct union avoidance seminars; and
- • Develop or implement personnel policies, practices, or actions for the employer to persuade workers.
The DOL lists the following activities, typical to a union avoidance campaign, as being reportable:
- • Planning or conducting employee meetings;
- • Training supervisors or employer representatives to conduct employee meetings;
- • Coordinating or directing the activities of supervisors or employer representatives;
- • Establishing or facilitating employee committees;
- • Drafting, revising, or providing speeches;
- • Developing employer personnel policies designed to persuade employees; and
- • Identifying employees for disciplinary action, reward, or other targeting.
Simply put, “advice” exempt from disclosure under the new rule does not appear to include tactical consultations about how to avoid a union or remain union-free. The new rule is currently facing three lawsuits filed in three separate federal courts by various business groups, associations, and law firms, citing concerns about the confidentiality of attorney-client communications, an employer’s right to obtain advice on labor relations issues, and vagueness in the new rule as to when advice conduct may cross the line to become persuader activity. The first lawsuit was filed on March 30, 2015, one week after the rule was published, in the Eastern District of Arkansas by the National Association of Manufacturers, other industry groups, and a law firm. The second lawsuit, filed by a group of management-side labor and employment law firms, was filed on March 31, 2015 in the District of Minnesota. The third challenge to the rule was filed in the Northern District of Texas by the National Association of Home Builders and the National Federation of Independent Business. Each of these suits asks the respective court to enjoin the Persuader Rule from taking effect pending the court’s ruling on the suit, declare the rule to be invalid, vacate the rule, and permanently enjoin the DOL from implementing it. Unless a court intervenes, the rule will go into effect on April 25, 2016 and will apply to agreements, arrangements, or payments made on or after July 1, 2016, under which a consultant undertakes or agrees to undertake the so-called “persuader” activities described above. Specifically, for such arrangements:
- Employers will be required to electronically file the LM-10 form within 90 days after the end of the fiscal year during which such agreements or arrangements were entered into. In addition, any written agreements must be attached to the form.
- Labor relations consultants will be required to electronically file the LM-20 form within 30 days after entering into an agreement or arrangement to perform persuader services or after conducting a union avoidance seminar. Any written agreements must be attached to the form. If the form is being filed for a union avoidance seminar, the registration form and a description of the seminar must be attached to LM-20.
- Labor relations consultants who file the LM-20 form must also file the LM-21 form, by mail, within 90 days after the end of their fiscal year, reporting all receipts from each employer and the amount of each receipt and all disbursements made in connection with all labor relations advice or services, not just persuader activities.
A violation of these reporting requirements could subject employers and consultants to civil penalties of up to $10,000 and also criminal penalties of up to one year in prison for flagrant violations. Keep in mind that the DOL’s focus here is on the reporting of activities of consultants, including attorneys, undertaken with the goal of persuading employees, as opposed to counseling as to compliance with the National Labor Relations Act. Management-side labor lawyers will certainly rely on this distinction on a going-forward basis should the pending challenges to this new reporting rule fail. Calfee will continue to monitor developments related to the DOL’s Persuader Rule and keep you informed. In the meantime, all employers -- not only those with unionized employees and not even just those who believe they are the target of actual or potential organizing by labor unions -- need to familiarize themselves with the final rule and consult with their labor attorneys to determine what activities are likely to trigger the reporting requirements and to craft a plan to ensure well-coordinated reporting.
For additional information and discussion on this topic, please get in touch with your regular Calfee contact or one of the attorneys listed below: John R. Cernelich 216.622.8251 firstname.lastname@example.org Todd F. Palmer 216.622.8354 email@example.com P. Jason Dejelo 216.622.8645 firstname.lastname@example.org
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