By Kathleen J. Jennings (firstname.lastname@example.org)
On March 23, 2016, the Department of Labor released a rule requiring companies to disclose when they seek advice from outside consultants on a variety of matters involving employees. The so-called “Persuader Rule,” first proposed in 2011, amends the federal Labor Management Reporting and Disclosure Act (LMRDA) to require detailed reports from employers and their advisers, including the types of consulting or legal services rendered and any fees paid. Under the DOL’s prior interpretation of section 203 of the LMRDA, an employer and consultant would be required to file a report of persuader activities only if the consultant communicated directly to the workers. The new final rule requires that both direct and indirect communications be reported.
Although the Department of Labor is characterizing this new Rule as an effort to provide more transparency to employees regarding “the source of the views, materials, and policies that are being used to influence their decisions about how to exercise their right to choose union representation or engage in collective bargaining,” in reality, the ramifications of this new rule reach beyond union organizing campaigns. As discussed below, the Department of Labor did reduce some of the scope of the reportable activities from the rule that was published in the Notice of Proposed Rulemaking. Nevertheless, the scope of the final rule is still greater than necessary to achieve the Department’s stated goal of “transparency.”
The new Rule interprets Section 203 of the LMRDA, which requires labor organizations, consultants, and employers to file reports and disclose expenditures on labor-management activities. However, according to the Department of Labor, a longstanding “loophole,” otherwise known as the “advice exemption,” allows employers to hire consultants to create materials, strategies and policies for organizing campaigns – and even to script managers’ communications with employees – without disclosing anything, as long as the consultant does not directly contact employees. The new rule purports to “close the loophole” to align the regulation with the statute, by requiring reporting on “actions, conduct or communications that are undertaken with an object, explicitly or implicitly, directly or indirectly, to affect an employee’s decisions regarding his or her representation or collective bargaining rights.” Note the use of the terms “implicitly” and “indirectly”—here is where the Department of Labor arguably extends the scope of this rule beyond actual union election campaigns. Note also that the rule also encompasses collective bargaining activities; such activities extend well beyond just organizing and could arguably encompass any activities connected to dealing with a union after a collective bargaining agreement is in place.
The rule modifies the “advice exemption” by revising the instructions to forms filed by employers (Form LM-10) and labor relations consultants (Form LM-20) to report persuader agreements and arrangements. According to those instructions, reports must now be filed if the labor relations consultant undertakes activities that fall within the following categories:
The final rule removed one of the more controversial provisions of the earlier version which would have required the reporting of the provision of legal advice to an employer. The final rule provides that no reporting is required:
by reason of a consultant merely giving “advice” to the employer, such as, for example, when a consultant offers guidance on employer personnel policies and best practices, conducts a vulnerability assessment for an employer, conducts a survey of employees (other than a push survey, i.e., one designed to influence participants and thus undertaken with an object to persuade), counsels employer representatives on what they may lawfully say to employees, conducts a seminar without developing or assisting the employer in developing anti-union tactics or strategies, or makes a sales pitch to undertake persuader activities. Reporting is also not required for merely representing an employer in court or during collective bargaining, or otherwise providing legal services to an employer.
In the final rule, the Department has eliminated the term ”protected concerted activities” from the definition of ”object to persuade employees,” as had been proposed in the Notice of Proposed Rule-making. Instead, reporting is required only for agreements in which the consultant engages in activities with an object to persuade employees concerning representational and collective bargaining activities, but not ”other protected concerted activities.” This is certainly an improvement, but the new Rule has its problems. Indeed, this new rule was opposed by numerous business and employer groups, as well as the American Bar Association, and several groups have indicated that they will challenge this new rule in court.
Although the DOL states that the final rule should not be “construed to
require an attorney who is a member in good standing of the bar of any State, to include in any report required to be filed pursuant to the provisions of this Act any information which was lawfully communicated to such attorney by any of his clients in the course of a legitimate attorney-client relationship,” many management-side labor and employment attorneys are not convinced that this is really the case. For example, if an attorney reviews an employer’s handbook policies to ensure that they are legal, and one of those policies is the company’s “view on unions,” the attorney may be engaging in a mixture of legal and persuader activities, and the result would be that the attorney must report the fee arrangement, including detailed billing records, between the attorney and his/her firm and the company. Those billing records are likely to contain attorney-client privileged information. Moreover, few law firms and companies would welcome the disclosure of those records to a union, which may disseminate some or all of the information contained therein as part of its public relations campaign against the company. Furthermore, any attorney who even reviews a company’s speeches or materials that are disseminated to employees, even if the purpose of that review is to ensure legal compliance, will be required to file a LM-20 report and disclose matters such as the name of the client, the tasks performed for the client, the agreement as to fees, and the total fees received.
As a practical matter, this is another effort by the current administration to help unions to try to increase their decreasing membership rolls. Last year, the National Labor Relations Board issued the new “quickie election rules,” which were designed to decrease the amount of time between the filing of a union election petition and the date of voting in the election. The theory was that the compressed time frame would benefit unions in the election process because employers would have less time to campaign to the employees. However, according to the NLRB’s own three quarter review of the new R-case rules, while the median number of days between the filing of an election petition and the date of an election has decreased significantly, the union’s win rates in those election are essentially unchanged as compared to the previous year. (See https://www.nlrb.gov/news-outreach/news-story/three-quarter-review-revised-r-case-rules). Are employees not interested in what the unions are trying to sell to them? Are employers better prepared for union campaigns?
So will this new persuader rule help unions to increase their success rate at elections? That remains to be seen. The new rule will impose an additional reporting burden on employers, and those who advise them, which includes a lot of attorneys, who will argue strongly that the rule interferes with attorney-client privilege. We will provide further updates as the rule is implemented—and challenged.
The Federal Register published the new rule on March 24, 2016. The change will be applicable to arrangements, agreements, and payments made on or after July 1, 2016. The final rule and additional information is available on the OLMS website: http://www.dol.gov/olms/regs/compliance/ecr_finalrule.htm.
UPDATE: Thus far, two lawsuits have been filed challenging this new rule. On March 30, 2016, a number of business groups, including the National Association of Manufacturers, the Associated Builders and Contractors, a construction trade group, and the Coalition for a Democratic Workplace, a business-backed group that advocates on labor policy, among others, filed a similar challenge in federal court in Arkansas.On March 31, 2016, Worklaw Network, a Denver-based association of law firms that exclusively represent management in labor and employment matters, and 11 of its member firms filed the lawsuit in U.S. District Court in Minnesota.
©2016 Wimberly Lawson