On March 23, 2016, the DOL issued its long-awaited final “persuader rule” (“Final Persuader Rule”), which drastically expands the agency’s prior interpretation of the types of legal and consulting activities that will be subject to the extensive reporting requirements of Section 203 of the Labor-Management Reporting and Disclosure Act (“LMRDA”). In particular, the Final Persuader Rule seeks to narrow significantly the scope of the so-called “Advice Exemption” to the statute’s reporting requirements. As a result, a wide range of services provided by labor relations counsel and consultants may—for the first time—be deemed by the DOL to constitute reportable “persuader activity” under the LMRDA.
Changes to the Advice Exemption
The LMRDA requires employers and their consultants to report any conduct that constitutes “persuader activity”—that is, activity undertaken with a direct or indirect purpose to persuade employees to exercise (or not exercise) their rights to organize and bargain collectively, i.e., to be represented by a union. Under the statute’s Advice Exemption, however, “advice” given to employers by outside consultants does not constitute reportable persuader activity.
For the past 50 years, the DOL has used a bright-line test to interpret whether or not the activities of consultants, including lawyers, constituted reportable persuader activity. When an employer’s consultants (including labor counsel) directly communicated with the employer’s employees to persuade them about unionization, that activity was reportable. If, on the other hand, an employer’s lawyer or consultant did not directly communicate with the employer’s employees, but simply provided advice that the employer was free to accept or reject, such activity fell within the Advice Exemption and did not need to be reported. Under the DOL’s previous statutory interpretation, therefore, labor counsel did not engage in reportable persuader activity when assisting an employer during a union election campaign by providing strategy and guidance, or assisting in the preparation and drafting of materials (speeches, letters, or other written communications).
Under the new Final Persuader Rule, the DOL has significantly narrowed the scope of the Advice Exemption. Specifically, the agency has abandoned the long-standing bright-line test that distinguished between consultants’ direct communications with employees (which were clearly reportable) and other consultant activities that did not involve direct communications with employees and that the employer was free to accept or reject (which was clearly not reportable). Assuming that the Final Persuader Rule takes effect, employers and their consultants must report a broad range of activity that formerly fell within the Advice Exemption—even activity that does not involve a consultant directly communicating with employees. According to the DOL, only communications between the employer and its consultants that pertain solely to legal advice remain within the scope of the Advice Exemption.
Impact on Employers
The Final Persuader Rule, which will apply to arrangements and agreements made on or after July 1, 2016, will require both employers and consultants to report that they have engaged in the following activities, whenever they are taken with a direct or indirect object to persuade employees about unions:
- planning, directing, or coordinating supervisors or managers;
- drafting or providing persuader materials (including speeches or materials intended for distribution or dissemination to employees);
- conducting seminars for supervisors or other employer representatives; or
- developing or implementing personnel policies to persuade employees.
If a labor consultant or counsel reports engaging in even a single act of reportable persuader activity, the consultant or counsel must also file an annual Form LM-21, listing the names and addresses of all the employers for which the consulting or law firm provided “labor relations advice or services” during the year—regardless of whether or not such advice or services involved persuader activity.
Legal Challenges to the Final Persuader Rule
The Final Persuader Rule, which was first proposed by the Obama administration in June 2011, has been the subject of intense criticism over the past five years from a wide range of sources (including Senators, employer and employee rights groups, and the American Bar Association), all of whom objected to the rule’s potential for compromising and interfering with the attorney-client relationship, and for mandating the release and disclosure of information long understood to be protected by the attorney-client, work product, and other legal privileges.
Three federal lawsuits challenging the Final Persuader Rule have already been filed in U.S. district courts across the country, and the plaintiffs in one such suit have sought a preliminary injunction and expedited hearing on their motion. There has also been ongoing activity before Congress, as the business community, management lawyers, and other employer advocates have criticized the rule. During a recent hearing before a House Education and the Workforce subcommittee, management-side lawyers emphasized that the Final Persuader Rule’s negative effects will likely be compounded by other recent union-friendly rules. For example, the recent “quickie election” rules adopted by the Board drastically reduced the time that an employer has to prepare for an election campaign. The Final Persuader Rule will likely increase the already onerous burdens on these employers as they seek expedited assistance from their consultants and labor counsel.
A version of this article originally appeared in the Take 5 newsletter “Five New Challenges Facing Retail Employers.”
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