Mar 23, 2016

Department of Labor's "Persuader Rules" to be Published Tomorrow

Alert | Employment Services Alert

Labor lawyers at Roetzel have been warning clients about the “Persuader Rules” for five years. These rules will be published by the federal government tomorrow, March 24, 2016, and will go into effect 30 days later. While the nuances of the Persuader Rules should not come as a surprise to our followers, below is an overview of the coverage we’ve provided on this sweeping change in labor law.

January 1, 2013
The National Labor Relation Board’s employee-friendly agenda will continue throughout Obama’s second term. The President will continue to control appointments to the NLRB and the NLRB will continue to interpret the laws very broadly so as to foster unionization and enforce the laws very aggressively. Secondly, a rule that impacts all of my clients is the persuader rule. This rule seeks to force companies to disclose to the federal government where and from whom they received labor relations advice and how much they paid for that advice. This disclosure could be as simple as spending $20 at a seminar to earn continuing education credits to spending much more than that on attorneys to defend a union organizing drive and a multitude of unfair labor practice charges. Even though the rule is not in effect, my clients and I both receive letters from the federal government seeking this information. We do not respond to these letters since this law is not in effect – yet – and I believe this information is protected by attorney-client privilege.

July 9, 2013
The Department of Labor recently announced a November 2013 target implementation date for its revised (i.e. skewed against employers) “advice exemption” in the Labor Management Reporting and Disclosure Act (LMRDA). Currently, companies are not required to disclose to the federal government when they receive advice relating to labor relations, from whom they received the advice, how much they paid for the advice, and the content of the advice. This is all about to change. The revised regulations impose expansive reporting requirements on employers, their labor relations consultants, and possibly their attorneys, representing an unprecedented intrusion into the attorney-client relationship.

The DOL’s proposed revisions require a company to report whenever it receives advice regarding labor relations. Specifically, with respect to persuader agreements or arrangements, “advice” means an oral or written recommendation regarding a decision or a course of conduct. In contrast to advice, “persuader activity” refers to a consultant providing material or communications to, or engaging in other actions, conduct, or communications on behalf of an employer that, in whole or in part, have the object directly or indirectly to persuade employees concerning their rights to organize or bargain collectively. Reporting is thus required in any case in which the agreement or arrangement, in whole or in part, calls for the consultant to engage in persuader activities, regardless of whether advice is also given.” Come November 2013, if the DOL hits its target implementation date, reportable activities will include:

  • drafting, revising, or providing materials or communication to an employer for presentation or distribution to employees;
  • administering employee attitude surveys concerning union awareness or “proneness”;
  • training supervisors to conduct meetings designed to persuade employees;
  • directing activities of supervisors to engage in the persuasion of employees;
  • establishing employee committees;
  • developing employer personnel policies designed to persuade employees; and/or
  • deciding which employees to target for persuader activity or disciplinary action.

Astonishingly, reportable activity will also include the mere supplying of information to an employer concerning the activities of employees or a labor organization in connection with a labor dispute involving that employer. “Labor dispute” is defined very broadly to include not only issues regarding representation or association, but also “any controversy concerning terms, tenure, or conditions of employment.” Examples of reportable activity include:

  • research or investigation concerning employees or labor organizations;
  • employees, employee representatives, or union meetings; and
  • surveillance of employees or union representatives (video, audio, Internet, or in person).

The proposed regulations require employers and their counsel to report the details of these third-party relationships and the specific activities performed regardless of whether the third-parties have any direct contact with employees, as well as provide receipts and disbursements reports for any payments related to the reportable activities. This rule has already faced significant legal challenge. The American Bar Association, Association of Corporate Counsel, and the Ohio State Bar Association (to name a few) have urged the DOL to leave the interpretation of the advice exemption as it has long been understood, arguing that the proposed rules are inconsistent with both the statutory language of the LMRDA and the rules of professional conduct pertaining to lawyer-client confidentiality.

July 17, 2013
While England awaits the birth of Prince William and Princess Kate’s first baby, we in the U.S. await the anointing of our next Members to the National Labor Relations Board. Okay, I concede that more Englanders are waiting with baited breath than we are on this side of the pond. Let’s face it, this fully-functioning NLRB is not good news for companies. President Obama will nominate Nancy Schiffer and Kent Hirozawa to…the National Labor Relations Board. The two new Members were handpicked after close consultations supposedly between the Obama Administration and Richard Trumka, head of the AFL-CIO. As expected, the two new Board nominees have spent much of their professional lives advocating on behalf of unions. Ms. Schiffer was most recently associate general counsel at the AFL-CIO from 2000-12. Before that, she was counsel to the UAW. Mr. Hirozawa is currently chief counsel to NLRB Chairman Mark Gaston, and if confirmed, his term would end Aug. 27, 2016. Hirozawa’s career basically mirrors Gaston’s, as he was an NLRB field attorney (Region 2, covering New York) before spending over 20 years in private practice representing unions.

The Senate will also vote on the remaining Board nominees, Republicans Harry I. Johnson, III and Philip A. Miscimarra. The deal also clears the way for approval of Thomas Perez’s nomination for Labor Secretary. This deal averted the “nuclear option” but also removes obstacles to the NLRB proceeding with its aggressive pro-labor agenda. A fully functioning Board is poised to make sweeping changes, including issuing more expansive “quickie” or “ambush” election rules, moving forward with its persuader reporting rules, and continuing to change legal precedent as it has done over the past few years.

January 11, 2016
The 1959 Labor Management Reporting and Disclosure Act (LMRDA) focused primarily on union corruption. The most prevalent part of the LMRDA is an LM-2 form that details union expenses. A lesser- known part of the LMRDA deals with payments to consultants called “persuaders.” Companies must report payments for services like communicating with workers about their rights under the National Labor Relations Act. As a practical matter, persuaders interact with employees who may be members of a bargaining unit, while labor lawyers restrict our interactions to management. Lawyers lose the attorney-client privilege when dealing directly with bargaining unit (or potential bargaining unit) employees.

Unfortunately, a rule likely to go into effect in a few months changes this dynamic. The Department of Labor wants companies, consultants, and attorneys to report any time they draft, revise, or provide: 1) materials for presentations to employees; 2) speeches; 3) planning employees meetings; 4) employee attitude surveys; 5) training supervisors; 6) directing activities of supervisors; 7) developing personnel policies; 8) conducting a seminar for supervisors, and more. This is a massive change and captures a lot of work routinely done by attorneys under the cloak of attorney-client privilege. This rule seeks to remove that privilege. It will certainly be challenged, but a broader interpretation has been in place before and survived legal challenge. Companies should contact their labor attorney now and prepare to avoid exposing corporate secrets after this rule takes effect.

February 18, 2016
Five years ago, the Department of Labor (DOL) first issued the proposed regulation to expand employer disclosure requirements about lawyers and consultants hired to help combat union organizing and collective bargaining activities. The rule would revise the DOL’s interpretation of the Labor-Management Reporting and Disclosure Act by narrowing the law’s “advice” exemption as it applies to employers reporting people hired as labor relations persuaders. The word “persuader” is too narrowly defined for the current Administration, and according to the DOL, NLRB, and labor unions, gives employers and consultants a free pass from reporting unless the consultants they hire talk directly to the employees. A DOL spokesman has said, “under that interpretation, even if the consultants script every word that the employer says to employees, the employer and consultant can keep the consultant’s activities secret. This update will make employer reporting on expenditures related to organizing campaigns similar to reporting already required of unions.” The DOL’s perspective may have some traction when dealing with consultants. But it completely disregards the attorney-client privilege, which is why the American Bar Association opposes the change.

On December 7, 2015, the Department of Labor-Management Standards sent the persuader rule to the Office of Management and Budget for final review. The agency estimated in its fall regulatory agenda that the rule will be published in March 2016. If published, I expect multiple lawsuits trying to stop it. For example, a lawsuit could argue that the regulation is arbitrary and capricious under the Administrative Procedure Act. The American Bar Association will likely challenge it on the basis that it infringes on the attorney-client privilege. Congress could also mount a Congressional Review Act challenge of the rule, potentially preventing its implementation if a motion of disapproval is then signed by the president. But which president will be in office if a motion is made?

March 23, 2016
Most of what we warned has come true. The final rule, however, provides minimal reprieve from the original language in that “no 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.

Stay tuned for coverage of the certain lawsuits that will be filed and whether this law will be stayed pending the outcome of those suits.