Persuader Regulations Finalized, Increase Employers' and Attorneys' Reporting Obligations | Practical Law

Persuader Regulations Finalized, Increase Employers' and Attorneys' Reporting Obligations | Practical Law

The Department of Labor's (DOL) Office of Labor Management Standards (OLMS) issued a final rule revising the DOL's interpretation of the advice exemption in Section 203(c) of the Labor Management Reporting and Disclosure Act (LMRDA). Known as the "persuader rule," the new OLMS regulations require employers, outside labor counsel, and their labor consultants to report certain "indirect" activities they take to persuade employees in union elections and in exercising some collective bargaining rights.

Persuader Regulations Finalized, Increase Employers' and Attorneys' Reporting Obligations

by Practical Law Labor & Employment
Law stated as of 18 Jul 2018 • USA (National/Federal)
The Department of Labor's (DOL) Office of Labor Management Standards (OLMS) issued a final rule revising the DOL's interpretation of the advice exemption in Section 203(c) of the Labor Management Reporting and Disclosure Act (LMRDA). Known as the "persuader rule," the new OLMS regulations require employers, outside labor counsel, and their labor consultants to report certain "indirect" activities they take to persuade employees in union elections and in exercising some collective bargaining rights.
On March 24, 2016, the DOL's Office of Labor Management Standards (OLMS) issued a final rule amending the DOL's interpretation of the advice exemption in Section 203(c) of the Labor Management Reporting and Disclosure Act (LMRDA). Known as the "persuader rule," the new OLMS regulations require employers, their outside labor counsel, and their labor consultants to report certain "indirect" activities they take to persuade employees about how to exercise their rights in union elections and some collective bargaining. Labor counsel's advice during union campaigns and collective bargaining will increasingly be susceptible to reporting obligations, especially where counsel is involved in priming employers to express their views on unions ahead of union elections and more particularly when advising on "union avoidance" measures. (Interpretation of the "Advice" Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act, 81 FR 15924-01.)
Section 203(c) of the LMRDA provides that "advice given" to an employer (or advice agreed to be given to an employer) is exempt from Section 203's reporting requirement (29 U.S.C. § 433(c)). Employers and the persons providing this advice are not required to file reports about those services.
OLMS previously interpreted Section 203(c) as requiring an employer and its outside labor counsel attorneys and consultants to report non-advice persuader activity only when the outsiders directly communicated with employees.
The new interpretation of advice excludes fewer activities from the reporting obligations. The regulations identify "indirect" persuader activities that must now be reported as including:
  • Agreements between employers and labor relations consultants (defined to include, and paint with the same brush, outside labor counsel and attorney and non-attorney consultants) in which:
    • the employer hires the consultant to help defeat a union organizing campaign; and
    • the consultant will have no open or direct contact with employees but instead will engage in behind-the-scenes activities intended to persuade employees on how to exercise their collective bargaining and union representation rights.
  • Activities by labor consultants to guide an employer's campaign opposing a union's organizing campaign, including:
    • drafting letters, flyers, leaflets, and emails that the employer distributes to employees;
    • writing speeches that management gives to employees in mandatory meetings;
    • providing statements for supervisors to use in meetings they have with employees they supervise; and
    • guiding supervisors on the timing of meetings they have with employees, the particular employees with whom they meet, the locations where the meetings take place, the duration of the meetings, and the content of the information presented to employees and gathered from employees.
  • Seminar agreements between employers and labor consultants in which:
    • a consultant agrees to conduct seminars for supervisors and other employer representatives; and
    • the seminars are devoted to teaching anti-union tactics and strategies for use by the employer's supervisors or other representatives.
  • Consultants developing or implementing personnel policies, practices, or actions geared to helping an employer directly or indirectly persuade employees in exercising their union representation or collective bargaining rights, such as through policies, practices, or actions that:
    • identify specific employees for disciplinary action or reward;
    • target specific employees based on their union support or involvement in a union representation campaign; and
    • attempt to directly satisfy or address employee complaints about the lack of union representation so that union support will decrease.
The new rule provides that certain activities do not trigger the reporting requirement, including when:
  • A consultant:
    • revises an employer's pre-existing materials to ensure compliance with legal obligations (rather than persuade employees);
    • provides an employer with pre-existing materials the consultant prepared in general for all of its employer clients (if the consultant had no role in selecting the materials for a particular employer based on evaluating the employer's particular circumstances);
    • assists an employer with devising policies and practices not for purposes of avoiding union representation; and
    • solicits business by recommending that the employer hire him to engage in persuasive activities.
  • An employer attends a multiple-employer union avoidance seminar.
  • An attorney consulting a client employer:
    • counsels the client employer about its legal position and vulnerabilities, and how to reduce those vulnerabilities through compliance or other actions;
    • identifies unsettled areas of law;
    • represents the client employer in disputes and negotiations; and
    • otherwise provides legal services to an employer.
The DOL:
  • Is revising the employer and consultant reporting forms and instructions to include more detailed information based on the new persuader rule. It has not released final updated forms and instructions, but drafts of each are incorporated in the published final rule (see Form LM-10 Employer Report (pages 100 to 117); Form LM-20 Agreement and Activities Report (pages 118 to 129).
  • Now requires that the revised forms be submitted electronically to OLMS.
  • Issued an FAQ on the final persuader rule.
The final rule takes effect on April 25, 2016 and applies to arrangements, agreements, and payments made on or after July 1, 2016 between employers and outside counsel and consultants tasked with performing the more broadly-defined persuader activities.
As before, employers and consultants with persuader filing obligations must file their respective:
  • Incidental disclosure reports within the sooner of 30 days after agreements for the provision of persuader activities are reached or those services are provided.
  • Annual disclosure reports of annual persuader activity transactions within 30 days after their fiscal year is completed.

Practical Implications

Many employer associations and even attorney associations like the American Bar Association (ABA) submitted comments challenging these proposed rules as:
  • Excessively burdensome.
  • Discouraging:
    • employers from seeking legal counsel for advice at the less clear margins of advice and persuader activity; and
    • outside labor counsel from advising employers at the less clear margins of advice and persuader activity.
  • Infringing on attorneys' ethical obligations to, among other things, keep the nature of their representations and client-related communications confidential.
(See the ABA's comments.)
Litigation challenging the regulations is likely, but employers and outside labor counsel should:
  • Begin preparing to comply with the new reporting obligations, including:
    • evaluating whether labor relations retention and counseling practices should change.
    • communicating with each other about the nature and reporting of current and future labor counseling matters;
    • communicating with each other about any changes in the types of work outside counsel will perform in the future; and
    • preparing protocols and educating their respective employees on accounting and reporting of matters subject to the new reporting obligations and parsing communications, reports, billing, and payment activities not subject to the reporting obligations from what must be disclosed.
  • Stay tuned for new OLMS forms and guidance because these regulations likely will be fully implemented before any litigation about them is completed.
According to the DOL, through the new persuader rule it intends to:
  • Remedy a problem with the current interpretation of Section 203(c) that, according to the DOL, has allowed employers to avoid reporting certain activities that were "clearly undertaken" with the goal of persuading employees regarding their union representation and collective bargaining rights.
  • Restore the DOL's original interpretation of Section 203 to "better effectuate section 203's requirement that consultants report persuader activities."
  • Expand reporting of persuader agreements.
  • Provide employees with information about:
    • how employers use labor consultants (both "openly and behind the scenes") to influence employees' exercise of their union representation and collective bargaining rights; and
    • the source of messages they receive from their employers about exercising their union representation and collective bargaining rights.
  • Effectuate LMRDA Section 203's reporting and informational purposes while also protecting:
    • employers' free speech rights; and
    • the attorney-client relationship between employers and labor relations consultants.
Regardless of what employers and labor counsel think about those stated aims, or how effectively the regulations will reach them, employers and their labor counsel should recognize the true import of these regulations:
  • Some counseling activities to aid employers in simply expressing neutral "look before you leap into union membership" messages or more subjective opinions about unions will now be treated identically as hiring outsiders to actively discourage employees from voting for a union. The disclosures have the effect of painting many efforts of outside counsel with the same brush as efforts of self-avowed anti-union consulting groups.
  • The administrative costs for employers of retaining counsel to participate so-called union avoidance communications and even employee communications during collective bargaining (such as letters to encourage employees to ratify a negotiated collective bargaining agreement) increase as accounting and reporting obligations increase.
  • The administrative costs to outside labor counsel to participate in so-called union avoidance communications and even employee communications during collective bargaining (such as letters to encourage employees to ratify a negotiated collective bargaining agreement) increase as accounting and reporting obligations increase.
  • Unions will have access to more detailed disclosures about the nature and extent to which employers rely on outside counsel for advice at the murkier margins of advice and persuader activity. Employers and outside labor counsel should expect unions may use any disclosures:
    • to publicly label each as "union busters" and other reputation-harming derisive names; and
    • to discourage others from doing business with the employer or firm based on reputational grounds.
For better or worse, the NLRB's so-called "ambush election rule" may undercut the DOL's stated intent of making employees more informed about the source of their employer's campaign speech when voting. The NLRB is reporting that the median number of days between an election petition and an election is down to 24 days since it implemented its election rules. With most elections occurring fewer than 30 days after a petition is filed, timely disclosures about employers retaining labor consultants to oppose unions in those petitioned-for elections would not be available to employees or unions until after elections occur. Labor counsel should also consider reviewing applicable rules of professional conduct to evaluate whether complying with mandated disclosures potentially run afoul of attorney-client confidentiality rules. In light of the ABA's comments opposing the DOL's proposed rule, it may be an open question whether the ABA, attorney licensing authorities in both states that track the ABA's model rules, and those that do not, would hold that the disclosures mandated by the final persuader rule violate counsels' ethical obligations. For its part, the DOL asserts that the disclosures would not (see 81 Fed. Reg. 15924-01, at **15992-16000).
UPDATE: On November 16, 2016, in National Federation of Independent Business v. Perez, the US District Court for the Northern District of Texas granted summary judgment to the National Federation of Independent Business, denied the DOL's cross-motion for summary judgment, holding the rule was unlawful for the reasons the National Federation of Independent Business asserted. The court converted its preliminary injunction to a permanent national injunction preventing the DOL from implementing the rule. (No. 5:16-CV-00066-C (N.D. Tex. Nov. 16, 2016).)
An interlocutory appeal on the preliminary injunction is pending before the US Court of Appeals for the Fifth Circuit (National Federation of Independent Business v. Perez, No. 16-11315 (5th Cir. Aug. 29, 2016)).
UPDATE: On June 12, 2017 OLMS issued a Notice of Proposed Rulemaking proposing to rescind regulations established in the rule, "Interpretation of the 'Advice' Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act," known as the persuader rule. Comments are requested by August 11, 2017. (82 Fed. Reg. 26877 (June 12, 2017).)
UPDATE: On July 18, 2018 OLMS published a final rule in the Federal Register rescinding the regulations established in the final rule titled "Interpretation of the 'Advice' Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act," effective April 25, 2016 (see 81 Fed. Reg. 15924 (Mar. 24, 2016). Under the final rule, the OLMS also revises the Form LM-20 Agreement and Activities Report and the Form LM-10 Employer Report. The rule is effective on August 17, 2018. (Rescission of Rule Interpreting "Advice" Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act, 83 Fed. Reg. 33826-01 (July 18, 2018).)