The Department of Labor Revises Its Rule Regarding "Persuader" Agreements - New Rule Likely to Draw Court Challenges
As we reported nearly five years ago, the Department of Labor (DOL) has been considering changes to the rules governing “persuader activities” under Federal labor law. On March 24, 2016, the DOL’s Office of Labor-Management Standards (OLMS) published a final rule revising the reporting requirements for persuader activities and, more importantly, narrowing the so-called “advice exemption” under the rule, which is discussed more fully below. These changes are likely to draw swift court challenges. Absent judicial intervention, the new rule goes into effect on April 25, 2016, and will govern agreements and arrangements entered into on and after July 1, 2016.
The new rule addresses “persuader” reporting requirements under the Labor Management Reporting and Disclosure Act of 1969 (LMRDA). One aspect of the LMRDA requires employers and their consultants to report to the DOL any agreement “where an object thereof is, directly or indirectly … to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing …” 29 U.S.C. §433(b)(1). The law contains a provision which exempts from reporting any agreement to provide services to an employer in the nature of “advice to such employer” concerning such employee activities or collective bargaining.
For many decades, the DOL has interpreted “persuader activities” to require reporting only in those circumstances where a consultant or independent contractor directly meets with bargaining unit employees in an effort to persuade them to reject union representation. Under the DOL’s new rule, “persuader activities” will be defined more broadly to encompass indirect persuader activities. Moreover, the new rule will significantly narrow the “advice exemption” upon which consultants, including law firms, have relied to provide effective and meaningful advice to their employer clients regarding labor relations matters, without having to report their activity to the DOL.
Under the new rule, reporting requirements will apply whenever there exists an agreement or arrangement with an employer that includes direct contact with employees where an object is to persuade them with respect to their rights, as well as the following categories of indirect activities where an object is to persuade employees:
- obtaining information about a union to be used by an employer in a labor dispute;
- planning, directing, or coordinating activities undertaken by supervisors or other employer representatives in an election campaign, including meetings and interactions with employees;
- providing election campaign materials or communications for dissemination to employees;
- conducting a union avoidance seminar for supervisors or other employer representatives, except in limited circumstances as noted below; and
- developing or implementing personnel policies, practices, or actions for the employer aimed at persuading employees in the exercise of their rights.
Where an employer retains a consultant or contractor to engage in these services, it must file a Form LM-10 employer report. The consultant also must file a Form LM-20 report. Significantly, once an obligation to report has been triggered, the information that must be provided has been expanded as well. For example, a consultant must reveal how much it has been paid for all “labor relations advice and services” and not just persuader services.
The new rule notes that exempt “advice” activities are limited only to those activities that meet the plain meaning of the term, which the DOL describes as an oral or written recommendation regarding a decision or course of conduct. For example, an agreement by a law firm to exclusively provide legal services to a client is not reportable, and representing an employer before a court or during collective bargaining negotiations is also not reportable. The OLMS has provided additional examples of non-reportable activities, including:
- providing guidance on employer personnel policies and best practices;
- giving seminars or other training to generally advise employers regarding the “do’s and don’ts” associated with union activity and/or collective bargaining, which are not focused on a particular organizing effort;
- providing “off-the-shelf” materials relating to bargaining or union organizing; and
- entering into franchisor/franchisee agreements.
It is clear that the modified rule, and the narrowed advice exemption, will create significant burdens for employers. For example, any agreement, even informal or oral, pursuant to which a consultant provides information about a union to an employer to assist with a labor dispute falls within the scope of reportable activity. Similarly, although assistance in the form of representation at the table in connection with collective bargaining is not reportable, developing communications to employees about such bargaining (such as minutes or bargaining updates) would be reportable. If reporting is required, both the employer and the consultant must describe in detail each persuader activity performed or to be performed, and the amount of expenditure for that activity, among many other items. This could potentially require disclosure of information otherwise protected by the attorney-client privilege. While consultants can revise a client’s written election campaign materials to insure legal compliance without reporting, they must report if the revisions are for the purpose of enhancing the persuasiveness of the materials. Such distinctions will be difficult, if not impossible, to draw. The DOL has estimated that the new recordkeeping and reporting burdens on both employers and consultants will increase significantly as a result of these changes.
In the wake of the DOL’s 2011 Notice of Proposed Rulemaking, thousands of commentators voiced their concerns about these expanded reporting requirements and the negative impact upon employers and their advisors, including legal advisors. Several commentators noted that court challenges to block the implementation of these new rules were likely. We anticipate that such litigation will be pursued in the near future.
If you have any questions about the DOL’s proposed rule changes, please contact David B. Kern, email@example.com/414-277-5653, Judith A. Williams-Killackey, firstname.lastname@example.org/414-277-5439, Michael Aldana, email@example.com/414-277-5151, or your Quarles & Brady LLP attorney.