The Department of Labor ("DOL") intends to implement a new rule that would reverse the DOL’s longstanding interpretation of the advice exemption to the Labor-Management Reporting and Disclosure Act ("LMRDA") and expand the scope of employer activities that would trigger reporting requirements under the LMRDA. The so-call "persuader" rule is a linchpin of organized labor’s efforts to increase union membership. This proposed change, which the DOL seeks to implement by November 2013, is expected to have a significant impact on employers and others, including employer associations and attorneys who provide advice to employers in labor and employment matters. As union membership and interest in organizing has waned, this is yet another attempt by organized labor to remain relevant.
The LMRDA requires employers to disclose arrangements with consultants where the object thereof is to persuade employees "to exercise, not to exercise, or persuade employees as to the manner of exercising" their collective bargaining rights. Consultants providing such "persuader" services must file a report with DOL disclosing these arrangements and also report all clients and fees for whom any labor relations advice has been provided, not just those clients who have received persuader services. If employers or consultants fail to comply with any of these requirements, they face jail for a year and a $10,000 fine.
Section 203(c) of the LMRDA exempts from disclosure any services related to "giving or agreeing to give advice." The DOL has excluded from reporting requirements situations where a labor relations consultant’s activity involves advice to an employer regardless of whether the advice also had a persuasive component. The longstanding interpretation of the advice exemption has been to exclude those arrangements where a consultant or law firm provides material to employers that the employer is free to use, not use, or modify. For half a century, reporting was not required under this statute if attorneys or consultants advised their clients about employee communications but did not communicate directly with employees. This clear, bright-line test has been easy to understand and implement.
DOL PROPOSED PERSUADER RULE
In recent years, organized labor has sought changes that will benefit unions in their efforts to organize more employees across the country. As part of this campaign, organized labor has lobbied for a change in the DOL’s interpretation of the LMRDA that would expand the reporting requirements of employers and labor relations consultants. In response to those efforts, the DOL issued a proposed rule in June 2011 to effectively eliminate the advice exemption by requiring employers, labor relations consultants, and employer associations to publicly disclose information that heretofore has been considered confidential. Any activity undertaken that is directly or indirectly related to persuading employees will now be considered outside of the advice exemption. As a result, almost all consultation with labor lawyers during a union campaign will be subject to the disclosure requirements. The DOL’s proposed new rule also broadens the scope of reportable persuader activity by redefining "persuasion" to cover activities that influence the decisions of employees with respect to any "protected, concerted activity in the workplace," such as "developing employer personnel policies or practices designed to persuade employees."
THE PROPOSED RULE IS UNLAWFUL
The proposed rule is inconsistent with the plain language of the LMRDA. Specifically, the rule would be unenforceable because it renders the advice exemption meaningless due to the fact that the rule would require the disclosure of activities that Congress expressly intended to be exempt from reporting requirements. The legislative history of the LMRDA makes it clear that the advice exemption was intended to be a "broad" exemption. However, the DOL’s interpretation of the exemption could not be any narrower. The proposed rule is also inconsistent with the plain language of the LMRDA because it expands the scope of reporting obligations to encompass activities intended to persuade employees concerning "protected concerted activity in the workplace," which is beyond the reach of the LMRDA.
The proposed rule violates the NLRA. The rule would violate Section 8(c) of the National Labor Relations Act because it inhibits an employer’s right to communicate with employees regarding its views about organizing.
The proposed rule violates employer’s free speech rights. The rule would infringe on the right of free speech protected by the First Amendment.
The proposed rule erodes the confidential attorney-client relationship. The rule would unlawfully require the disclosure of information protected by attorney-client confidentiality obligations and the attorney-client privilege.
IMPACT OF THE RULE
The rule will tie employers’ hands and facilitate union organizing campaigns. Under the rule, employers that need advice on union-related matters, but do not want to subject themselves to the LMRDA’s reporting requirements, will be discouraged from seeking counsel and will be forced instead to guess at what they can lawfully say to employees regarding union matters. The idea here is to force the company and the lawyer-consultant to report, so that the union can utilize that information to "embarrass" the employer and mount corporate campaigns.
The rule is especially troublesome in light of developments at the NLRB. The frequently changing landscape of NLRB precedent makes it all the more imperative that employers have access to counsel with respect to union organizing issues. Coupled with the NLRB "ambush election" rule, the Specialty Healthcare decision and other NLRB decisions, the Persuader rule could achieve the same objectives as the Employee Free Choice Act.
The rule will impose significant costs on U.S Businesses. The DOL estimate that the rule change would impose an annual cost of $826,000 is woefully inadequate. A report published by the Manhattan Institute estimates that the total burden for the first year would be between $7.5 billion and $10.6 billion. The subsequent annual costs amount to between $4.3 billion and $6.5 billion. The total cost over a ten-year period could be approximately $60 billion.
The rule will be particularly harmful for small businesses. Small businesses, without a team of in-house lawyers to provide labor advice, will be even more vulnerable during union organizing campaigns.