DOL’s New Persuader Rules Take Effect Soon – Are You Ready?
Starting July 1, law firms doing labor and employment work could be required to disclose information about all of their labor and employment clients unless the firm has agreements in place prior to July 1 with those clients regarding “persuader” activity.
The U.S. Department of Labor released new rules in March expanding the circumstances in which employers and their consultants may be bound by reporting requirements under the Labor-Management Reporting and Disclosure Act. These “persuader” rules require that employers, lawyers and consultants report to the DOL the fee arrangement and expenditures associated with it for any activity that was aimed directly at persuading employees regarding unionization. Specifically, any work that (1) had a goal of persuading employees regarding unionization or (2) supplied the employer with information about employee or union activities in connection with a labor dispute. Under the version of the rule that has been in effect for more than 50 years, “advice” to an employer was not reportable activity, exempting most attorney-client relationships from the reporting requirements.
The new rules define “advice” narrowly and expand the definition of persuader activities from direct employee persuasion to include indirect persuasion, such as directing or coordinating supervisors; drafting editing or choosing materials to distribute to employees regarding unionization; holding seminars for employers that discuss persuasion strategies; and developing personnel policies in the context of organized activity or with persuasive intent.
Under the DOL’s new rule, reports would have to include fee arrangements and expenditures for “all advice and services on matters having a bearing on the relations between an employer and his employees,” for any client a law firm represents in the labor and employment realm. That means if a law firm does persuader work for any client, the firm will have to report its fee arrangements and billing for clients for whom they do reportable work and any other clients for whom they do other labor and employment work. Those reports could include charges for work on harassment investigations, discrimination claims and other issues that do not touch on collective bargaining.
The law imposes criminal penalties and personal liability on individuals, both at the employer company and in the consulting firm, who knowingly fail to make the required disclosures.
Agreements established before July 1, 2016 will still fall under the old rule, and law firms are rushing to get clients to sign such agreements before the new rules take effect. Employers should reach out to their legal counsel, if they have not discussed this issue already, to determine (1) whether counsel does any reportable work for the employer, (2) whether counsel does any reportable work for any other employers and (3) whether the employer is comfortable with counsel’s duty to report based on the answers to the first two questions.