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:
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.