Unless a court stays the new persuader rule, employer reporting obligations with regard to the use of lawyers and consultants to, directly or indirectly, influence the exercise by employees of their rights to bargain with their employers collectively through unions will be substantially increased.

On March 23, 2016, the U.S. Department of Labor (DOL) issued its final rule regarding “persuader” activity, nearly five years after its initial proposed rule and despite vigorous opposition from the American Bar Association, 13 state attorneys general, numerous trade associations and law firms. The rule expands employer reporting obligations to include “indirect” persuader activity previously not required to be reported. Barring intervention by the courts, the new persuader rule will be applicable to arrangements, agreements and payments made on or after July 1, 2016.

LMRDA Reporting Requirements

For more than 50 years, the Labor-Management Reporting and Disclosure Act (LMRDA) has been interpreted by the DOL to require that employers who use consultants or attorneys to persuade employees with regard to the exercise of their rights to be represented by a union to report such use to the DOL if those activities involved direct contact or communication with the employees. If a consultant or lawyer engaged in such reportable activity, reports would have to be filed by both the consultant/lawyer and the employer. The reports have to identify the parties to the relationship and any agreement or arrangement and related expenditures, including how much was paid to the consultant/lawyer for these activities (“reportable information”).

The reports are public and posted on the DOL website for access and copying by anyone, including unions, competitors and those seeking to do business with either the consultant/lawyer or employer.

Excluded from “reportable activity” was “advice” given to an employer, as distinguished from direct persuasion.

The New Persuader Rule Expands Reportable Persuader Activity

Under the new rule, in addition to reporting activities by an attorney or consultant who engages directly with employees, an employer must report agreements, arrangements and expenditures when its attorney or consultant engages in “indirect” persuader activities. Indirect persuader activities are any of the following activities when those activities have as an object the persuasion of employees with regard to the exercise of their rights to be represented by a union and engage in collective bargaining with their employer:

• Plan, direct or coordinate activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees;
• Train supervisors or other employer representatives how to influence or persuade employees in meetings or other communications;
• Provide material or communications to the employer, in oral, written or electronic form, for dissemination or distribution to employees; and
• Develop or implement personnel policies, practices or actions for the employer.

It is important to note that even where activities may not be considered “persuader” activities when performed in the normal course, such as the drafting of personnel policies, they will become reportable if done in response to or out of concern for union organizing.

Also, the DOL makes a particular point that persuader activities may occur outside of the context of union organizing. For example, a consultant’s or lawyer’s negotiation of a collective bargaining agreement or resolution of questions arising out of a collective bargaining agreement would not be considered “persuader” activity. However, assisting an employer with drafting a communication to its employees seeking to persuade them to vote to ratify a contract settlement or to explain the position of the employer taken at the bargaining table would be considered persuader activity and reportable.

Finally, the reports to DOL are public documents retrievable on the DOL’s website.

The New Persuader Rule Narrows the Exemption for Advice

In explaining its changes to the persuader rule, the DOL acknowledges that where a lawyer or consultant undertakes activities that do not have as an object the persuasion of employees, the activities are not reportable. That is, a lawyer or consultant who exclusively counsels an employer with respect to what they may lawfully say to employees, advises about compliance with the law or provides guidance with respect to best practices in the development of personnel policies is providing “advice” that does not require reporting.

In its new rule, however, the DOL restricts the activities that fall within this general concept of “advice.” For example, a lawyer may review a document for legal compliance without triggering a reporting obligation. However, if the lawyer revises or suggests the revision of the document to make it more persuasive or effective, the lawyer would have slipped into being a persuader and the activity and fee paid must be reported.

What This Means for Employers

Unless a court stays the new persuader rule, employer reporting obligations with regard to the use of lawyers and consultants to, directly or indirectly, influence the exercise by employees of their rights to bargain with their employers collectively through unions will be substantially increased.

How the new rule will impact individual employers will depend on the facts in each situation. Advice concerning the application of the rule is not considered persuader activity.

We believe strongly that the DOL’s new persuader reporting rule interferes with attorney-client privilege and expectation of confidentiality and should be enjoined by the courts for those reasons, as well as a violation of the First Amendment and Fifth Amendment. Moreover, we believe the rule to be inconsistent with the LMRDA itself. Nevertheless, employers and their lawyers and consultants should prepare for the full implementation of the rule on July 1, 2016.

Regardless of how the courts may rule, it is vital to guard the confidentiality and privilege of the attorney-client relationship.

There are very strong bases to challenge the legality of the final rule that is nothing less than an aggressive and unprecedented assault on the attorney-client privilege with the acknowledged goal to aid unions. However, unless the final rule is enjoined, it will go into effect with regard to arrangements, agreements and payments made on or after July 1, 2016. We will keep you posted on developments as they occur.

About Duane Morris

Duane Morris Employment, Labor, Benefits and Immigration attorneys assist employers with respect to developing strategies for dealing with the new rule’s requirements.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.