Closing the Loophole: Department of Labor Issues Final “Persuader” Rule
Thinking about running an anti-union campaign or consulting an attorney about your company’s non-union preferences? You may want to get started now, because the game is changing. In a move widely-believed by the business community to be political payback to labor unions, the Department of Labor (DOL) on Wednesday published a new final rule that closes perceived loopholes in Section 203 of the Labor Management Reporting and Disclosure Act (LMRDA) and greatly expands reporting requirements for employers and labor consultants alike. Under the old rule, reporting of persuader activity by a labor relations consultant (including attorneys) was not required unless the consultant had direct contact with employees. Under the new rule, which goes into effect July 1, 2016, disclosure of even indirect contact with employees will be required.
New Rule Upends Over Fifty Years of Precedent
In a nutshell, Section 203 of the LMRDA mandates that employers and any labor relations consultants they retain disclose the terms (including financial terms) of any agreement or arrangement by which the consultant provides services with an object, directly or indirectly, to persuade employees concerning their rights to organize a union or bargain collectively with the employer.
Since the 1960s, DOL has taken the position that reporting of those arrangements was not required if a consultant limited his or her activities to providing sample materials such as speeches, postings, letters to employees, and the like that the employer was free to accept or reject. In the 1980s, DOL further restricted the reporting requirement, stating that no reporting was required unless the consultant had direct contact with employees, either in person or by way of telephone calls, written letters, or email. DOL is now taking the position that such an interpretation created an unfair loophole to Section 203’s reporting requirement, which the new final rule is intended to eliminate.
Indirect Persuasion Efforts Must Now Be Reported
Under the new final rule, any direct contact with employees by the consultant with an object to persuade employees as to their organizational or collective bargaining rights will continue to be a reportable event. But now, disclosure for indirect contact with employees will be required.
In its explanation of its final rule, DOL identified the following 4 categories of indirect persuasion that will trigger the reporting requirements:
Directing, planning, or coordinating the efforts of supervisors and managers to persuade employees.
Providing persuader materials intended to persuade employees, including speeches, postings, letters to employees, videos, etc. Further, DOL is now taking the position that when a consultant revises materials prepared by the employer and the intent of such revisions is to enhance persuasion, a reportable event occurs. However, if the object of the revision is solely to ensure legality, no reporting is required.
Conducting union avoidance seminars, if the consultant develops or assists the attending employer in developing anti-union strategies to be used by the employer and its supervisors and managers.
Developing personnel policies that have the direct or indirect object of persuading employees in the exercise of their organizational or collective bargaining rights.
Certain legal advice remains exempted from disclosure. For example, advice as to the legality of communications to employees under the National Labor Relations Act, or representation of the employer in administrative proceedings or during collective bargaining negotiations, would continue to be exempt from reporting.
Mechanics of Reporting
If an employer and a consultant enter into an arrangement or agreement by which the consultant will provide reportable activities, then both must electronically file a report with DOL within 30 days of the formation of the arrangement or agreement. An employer would file Form LM-10, which requires detailed information as to the identity of the consultant, the persuader activities to be performed, and the amount and dates of payments to the consultant. Consultants will be required to file form LM-20 which discloses similar information. If the arrangement or agreement calls for the consultant to provide both advice activities and persuader activities, then the entire agreement or arrangement must be reported. Failure to timely file the reports are punishable by both civil and criminal penalties.
Anticipated Objections to the New Rule
When the new rule was first proposed by DOL in 2011, it faced severe criticism from business groups and legal organizations such as the American Bar Association. Business groups argued that the rule infringed employers’ free speech rights under the First Amendment. The ABA and other legal groups argued that the rule requires disclosures in conflict with the attorney-client privilege. These arguments were rejected by DOL, but we anticipate that they will form the basis of soon to be filed legal challenges seeking to revoke the rule.