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Employment Law In Focus

As you may have already heard, one of the latest examples of unfriendly rulemaking directed at employers from the U.S. Department of Labor concerns regulations that adopt a new interpretation of the “persuader” reporting requirements under the Labor Management Reporting and Disclosure Act. The key points of those requirements are outlined below – and unless various legal challenges that have already been filed are successful, beginning July 1, 2016 they will impose reporting obligations for employers and their attorneys and consultants that are potentially quite significant.

A quick history might help.  Since 1959, arrangements between employers and “labor persuaders” have been subject to reporting requirements with the DOL. These requirements have historically not been triggered unless a lawyer or consultant has dealt directly with employees in an attempt to affect their support during the course of a union organizing campaign. The advice of attorneys, however, has been exempt from the reporting requirements as privileged and confidential attorney-client communications, provided that the attorney limits his or her services to advice, which the client is free to accept or reject, and the attorney avoids direct communications with bargaining unit employees. This arrangement has worked well for more than 50 years and has allowed management-side labor attorneys to effectively represent companies in union organizing and NLRB elections without undermining the sanctity of the attorney-client relationship.

Once the new rule goes into effect, however, this advice exemption will be dramatically narrowed. The new rule will require both the attorneys and their clients to report all arrangements in which “an object” of the services is to persuade employees in the exercise of their right to engage in union organizing. These reports must be filed electronically and, once filed, become public records. For example, an attorney-developed campaign communication which was intended for client review and approval, would not have been subject to any reporting requirements in the past. That same communication would now trigger the need to report – even if the attorney simply reviewed a letter or speech initially prepared by the client.

Under the new regulations, “reportable” persuader activity includes all outside consultant and lawyer activity for covered employers that has a “direct or indirect object” of persuading employees in the exercise of their union organizing rights. Employers, labor consultants, and lawyers, subject to limited exemptions, will be required to report persuader activities and monies for such activities on Forms LM-10 (Employer Report) or LM-20 (Consultant Report). These two forms dovetail to require reporting on another form, Form LM-21 (Consultant Receipts and Disbursements Report), and both can be obtained from the DOL’s website.

The current rule similarly requires private sector employers and their labor consultants to report on persuader activity. But the current “advice exemption” (at least until July 1, 2016) excludes the activities of attorneys and consultants that are “advisory” to the employer. In other words, as long as the attorneys and consultants do not communicate directly with employees, their activities are covered by the exemption.  The new DOL regulations severely limit the advice exemption to: (1) advice that does not have persuasion of employees as its “object,” and (2) representation in collective bargaining, and legal and administrative proceedings. Any service that does not fall into one of these categories is labeled by the DOL’s new interpretation of the LMRDA as indirect or direct persuader activity and not “advice.”

Significantly, the DOL has clarified that the new regulation will not apply to any agreement entered into before July 1, 2016 that would not have resulted in reporting obligations (even though the services and payments for the services occur on or after July 1). Thus, agreements made before July 1 are “grandfathered” under the current rule, which is why many labor attorneys are entering into new  specific legal services agreements with clients concerned about actual or potential union activity to account for that exception.

At least three lawsuits seeking to block the “Persuader Rule” were filed shortly after the DOL issued the rule in March. The outcome of those lawsuits in the near and longer terms is uncertain, and the DOL is not backing down. Needless to say, private sector employers using outside consultants or attorneys to handle ANY labor relations matters should stay up to date and in close communication with their lawyers.

This article was written by Terry Clark and Ken Carlson of Constangy, Brooks, Smith & Prophete, LLP

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