On March 23, 2016, the Department of Labor released the long-pending revisions to the “persuader rule,” drastically expanding employers’ disclosure requirements regarding their use of union avoidance consultants, including attorneys as well as HR consultants and media specialists. Our firm, on behalf of Worklaw, an international management-side network of labor and employment firms, will be filing suit to block implementation of the rule.
Under the “persuader rule” in the Labor-Management Reporting Disclosure Act of 1959 (LMRDA), employers are required to file reports and disclose expenditures to the DOL each time they engage a consultant to persuade employees regarding employees’ rights to organize. However, the LMRDA provides an “advice exception,” which had been interpreted for over 50 years to exclude an employer’s discussions with its labor relations consultants – including legal counsel – regarding opposition to a union organizing campaign, as long as the consultants had no direct contact with employees.
Under the new rule, however, the scope of an employer’s reporting obligations under the LMRDA has been substantially expanded, and will include a broad range of activities beyond “direct contact” provided by labor relations consultants – including attorneys. The intent of this one-sided rule is to discourage employers from retaining such consultants, and thereby promote unionization.
Shawe Rosenthal Will Be Fighting Against the Rule
The proposed rule had been subject to vigorous opposition from business groups and management attorneys. In conjunction with other Worklaw firms, Shawe Rosenthal had submitted comments to the DOL objecting to the proposed rule. Now that the rule has been issued, we will be filing suit in federal court on behalf of Worklaw to enjoin the rule from taking effect and to seek its overturn.
Of particular concern is the threat to the attorney-client privilege, which protects the legal communications between companies and their attorneys. The DOL contends that this rule does not affect the privilege, as it only seeks information regarding the identity of the client and consultant, the fee arrangement, and the scope and nature of the persuader agreement other than legal services. From a practical standpoint, however, as our labor clients know, legal advice usually encompasses the practical steps the company should take – which includes the “reportable” activities listed below.
What Does the Expanded Rule Actually Do?
According to the DOL’s Fact Sheet on the new rule, employers and consultants will now have to report not only when there is direct consultant contact with the employees, but also when the consultants:
- Plan, direct, or coordinate managers to persuade workers;
- Provide persuader materials to employers to disseminate to workers;
- Conduct union avoidance seminars; and
- Develop or implement personnel policies or actions to persuade workers.
The DOL lists the following activities, which are typical to a union avoidance campaign, as being reportable:
- planning or conducting employee meetings;
- training supervisors or employer representatives to conduct meetings;
- coordinating or directing the activities of supervisors or employer representatives;
- establishing or facilitating employee committees;
- drafting, revising or providing speeches;
- developing employer personnel policies designed to persuade employees; and
- identifying employees for disciplinary action, reward, or other targeting.
One change from the proposed rule is that employee surveys and union vulnerability assessments need not be reported. The final rule also eliminated the proposal to require disclosure of persuader activity regarding “concerted activity.”
The DOL continues to exempt from disclosure agreements merely to provide “advice” to the employer, meaning “recommendations regarding a decision or course of conduct.” It also exempts any agreement involving solely the provision of legal services. Realistically, however, the expanded reporting requirements essentially subsume these exemptions.
Under the rule, for all agreements or arrangements entered into after July 1, 2016, under which a consultant undertakes or agrees to undertake the “persuader” activities described above, both the employer and the consultant must file certain reports, as described on the DOL’s Employer-Consultant Reporting Page. Specifically:
- Employers must electronically file LM-10 within 90 days after completion of their fiscal year. Among other things, the form requires employers to report any agreements or arrangements with labor relations consultants entered into during the fiscal year. In particular, the employer must identify the consultant, the date of the agreement/arrangement, the terms and conditions of the agreement/arrangement, what specific persuader activities were performed, the period of performance, the extent of the performance, the individual performing the activities, the group of employees or labor unions subject to the performance, and detailed information about the payments. In addition, any agreements must be attached to the form.
- Labor relations consultants must electronically file LM-20 within 30 days after entering into an agreement or arrangement to perform persuader services or after conducting a union avoidance seminar. The form requires the consultant to identify the client company, the date the agreement or arrangement was entered into, the terms and conditions of the agreement, the specific persuader activities to be performed, the period of performance, the extent of the performance, the individual performing the activities, the group of employees or labor unions subject to the performance, and detailed information about the payments. In addition, any agreements must be attached to the form. If the form is being filed for a union avoidance seminar, the registration form and a description of the seminar must be attached to LM-20.
- Labor relations consultants who file LM-20 must also file LM-21, by mail, within 90 days after completion of their fiscal year. This form requires the consultant to “Report all receipts from employers in connection with labor relations advice or services regardless of the purposes of the advice or services,” identifying each employer and the amount of each receipt. It also requires the consultant to report all disbursements made in connection with the same advice or services, including the salary and expenses paid to individually identified officers and employees, administrative expenses, publicity, and professional services fees. Notably, these receipts and disbursements are for all labor relations advice or services, not just those related to persuader activities. In addition, the form requires consultants to report all disbursements made in connection with persuader activities, including the employer for whom the disbursement was made, the amount, and the specific purpose of the disbursement, in detail.
It is important to note that the completed Forms LM-10 and LM-20 will be made publicly available through the OLMS Online Disclosure Room.
We will keep you posted on further developments, including our legal challenge to the rule.