The Department of Labor Issues Controversial New Persuader Rule, and its Reach Extends Beyond Just Union Organizing Campaigns

May 18, 2016

4541On 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.

The final rule interprets Section 203 of the LMRDA, which requires labor organizations, consultants, and employers to file reports and disclose expenditures on labor-management activities.  The final 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:

  • Direct Persuasion: A consultant engages in direct contact or communication with any employee, with an object to persuade such employee about how he or she should exercise representation or collective bargaining rights; or
  • Indirect Persuasion: A consultant who has no direct contact with employees undertakes one or more of the following activities with an object to persuade employees:
    • Planning, Directing, or Coordinating Supervisors or Managers.
    •  The Provision of Persuader Materials.
    • Conducting a Seminar for Supervisors or Other Employer Representatives.
    • Developing or Implementing Personnel Policies or Actions.

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. Moreover, 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 still has its problems.

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, even when there is no active union organizing campaign, 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.  Even more ominous is the line of cases in most circuits that indicate once some reportable functions are performed for an employer, then all activities for all employers have to be reported, whether they are persuader activities or not.  The new rule expressly does not address that issue, based on existing case law.  There was never a problem before because only “direct” communications with employees were the subject of reporting, and thus there were basically no reports.

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.