On March 23, 2016, the U.S. Department of Labor (DOL) issued its long-anticipated reinterpretation of the “persuader” rule in the Labor Management Reporting Disclosure Act of 1959 (LMRDA). Spanning more than 400 pages, the DOL’s final rule significantly narrows the “advice” exception to the LMRDA and dramatically increases the reporting requirements for both employers and their lawyers.
The new rule also presents substantial ethical issues, and three lawsuits have already been filed challenging its implementation. Despite these legal challenges, the new rule goes into effect April 25, 2016 and applies to arrangements and agreements made on or after July 1, 2016. Failure to comply with the LMRDA’s reporting requirements carries the risk of jail time and a $10,000 fine. As a result, employers should carefully review the new requirements and seek appropriate legal advice.
To review the new DOL rule in its entirety, click here.
Reporting Requirements Under the LMRDA
The LMRDA requires employers to report each time they engage a consultant to persuade employees on how to use their collective bargaining rights (i.e., “persuader activity”). Most commonly, employers and consultants engage in persuader activities during union campaigns to persuade employees not to unionize.
Although employers have always had to report any direct face-to-face persuader activities with employees by their labor relations consultants, employers and their lawyers have taken advantage of the “advice” exception to the LMRDA when lawyers merely provide advice, even if the lawyer’s advice included a “persuasive” component – i.e., recommendations that would influence whether an employee should or should not join a union. For more than 50 years, the DOL has taken the position that a consultant’s or lawyer’s indirect persuader activities were not reportable, so long as the employer could accept or reject the consultant’s suggestions.
DOL Significantly Narrows the “Advice” Exception
In an effort to close what the DOL considers a loophole, the DOL’s new rule significantly narrows the advice exception and now requires employers and consultants to report communications that “in whole or in part, have the object directly or indirectly to persuade employees concerning their rights to organize or bargain collectively.”
According to the DOL, the advice exception no longer “shield[s] employers and their consultants from reporting agreements in which the consultant has no face-to-face contact with employees but nonetheless engages in activities behind the scene.” Under the new rule, employers and their lawyers and consultants must now file reports with the DOL 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.
- Indirect Persuasion. A consultant has no direct contact with employees, but undertakes one or more of the following activities with an object to persuade employees:
- Planning, Directing, or Coordinating Supervisors or Managers. This includes both meetings and other less-structured interactions with employees. Examples include the consultant planning, directing or coordinating which employees they meet, where they meet, when they meet, for how long they meet, the topics discussed and the manner in which they are presented, the information gathered from the employees and how they should gather it, debriefing with the supervisor to orchestrate the next steps in the campaign, and identifying materials to disseminate to employees.
- The Provision of Persuader Materials. This covers the providing of materials or communications to the employer in oral, written or electronic form for dissemination or distribution to employees. However, if an “object” of the revisions is to ensure legality as opposed to persuasion, a consultant’s revision of employer-created materials (including edits, additions and translations) does not trigger reporting.
- On the other hand, if the revisions are intended to increase persuasiveness of the material, then the reporting obligation is triggered. Further, where a consultant merely provides an employer with “off-the-shelf” material selected by the employer from a library or other collection of pre-existing materials prepared by the consultant for all employer clients, then no reporting is required as long as the consultant does not play an active role in selecting the materials for its client’s employees based on the specific circumstances facing the employer-client.
- Conducting a Seminar for Supervisors or Other Employer Representatives. Seminar agreements must be reported when the consultant develops or assists the attending employers in developing anti-union tactics and strategies for use by the employer’s supervisors or other representatives. A consultant who merely solicits business by recommending that the employer hire the contractor to engage in persuasive activities does not trigger reporting. In no case is the employer required to file a Form LM-10 for attendance at a multiple-employer union avoidance seminar.
- Developing or Implementing Personnel Policies or Actions. According to the DOL, reporting is required only if the consultant develops or implements personnel policies, practices or actions for the employer that have as an object to, directly or indirectly, persuade employees (e.g., the identification of specific employees for disciplinary action, reward or other targeting based on their involvement with a union representation campaign or perceived support for the union, or implementation of personnel policies or practices during a union organizing campaign). For example, if the consultant, in response to employee statements about the need for a union to protect against firings, develops a policy under which employees may arbitrate grievances, reporting would be required. However, if the grievance process was set up in response to a request by employees – without any history of a desire by them for union representation – or as a policy developed as part of a company’s startup of operations, without any indication in the agreement or accompanying communications that the policy was established to avoid union representation of the employer’s workforce, no reporting would be required.
The DOL’s summary to the final rule, however, provides that:
[N]o reporting is required by reason of a consultant merely giving “advice” to the employer, such as, for example, when a consultant offers guidance on employer personnel policies and best practices, conducts a vulnerability assessment for an employer, conducts a survey of employees (other than a push survey, i.e., one designed to influence participants and thus undertaken with an object to persuade), counsels employer representatives on what they may lawfully say to employees, conducts a seminar without developing or assisting the employer in developing anti-union tactics or strategies, or makes a sales pitch to undertake persuader activities. Reporting is also not required for merely representing an employer in court or during collective bargaining, or otherwise providing legal services to an employer.
Union Persuader Form LM-10 Reporting
Although the LMRDA does not restrict or limit an employer’s ability to engage in persuader activities, the required Form LM-10 persuader reports will be public record and can be used by the union in a campaign against the employer – a fact recognized by the DOL in the summary to the final rule:
[I]t is important for employees to know that if the employer claims that employees are family – a relationship will be impaired, if not destroyed, by the intrusion of a third party into family matters – it has brought a third party, the consultant, into the fold to achieve its goals. Similarly, with knowledge that its employer has hired a consultant, at substantial expense, to persuade them to oppose union representation or the union’s position on an economic issue, employees may weigh differently a claim that the employer has no money to deal with a union at the bargaining table.
Interestingly, the DOL expressly declined to address how this new interpretation impacts a consultant’s reporting requirement on Form LM-21, Receipts and Disbursements Report. Annual Form LM-21 requires a persuader to report and publicly disclose all clients and all fees on account of any labor relations advice or services, even if unrelated to persuader activity. However, the DOL plans on publishing a proposed rule on Form LM-21 in September 2016, in which it will “propose mandatory electronic filing for Form LM-21 filers, and it will review the layout of the Form LM-21 and its instructions, including the detail required to be reported.”
Conclusion
Within days of the new rule, three lawsuits were filed challenging its implementation, alleging that the rule eviscerates the attorney-client privilege and has dramatic impacts on confidentiality. Despite such challenges, employers cannot afford to run the risk of noncompliance while these lawsuits work through the courts, and employers should take immediate action to review their Form LM-10 reporting practices.
For further information or questions about the information contained in this legal alert, or for any assistance you might need in evaluating your LMRDA reporting requirements in light of the new rule, please contact the authors, your McGuireWoods contact, or a member of the firm’s labor team or labor and employment group.