The 2016 Labor-Management Reporting and Disclosure Act (LMRDA) Final Persuader Rule: What Does It Mean? (United States)

By James A. Prozzi, Philip B. Rosen, Daniel D. Schudroff

 

On March 24, 2016, the United States Department of Labor (DOL) published its Final Rule relating to "persuader" activity under the Labor-Management Reporting and Disclosure Act (LMRDA), almost five years after first proposing the rule. Unless stayed by Congressional act or litigation (described in more detail below), the rule will be applicable to agreements, arrangements and payments made on or after July 1, 2016.

LMRDA Reporting Requirements

Under LMRDA Sections 203(a) and (b), employers and their "labor relations consultants" must report to the DOL:

[a]ny agreement or arrangement with a labor relations consultant or other independent contractor or organization pursuant to which such person undertakes activities where an object thereof, directly or indirectly, is to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing...

DOL's Former Interpretation

For decades, essentially, only (1) direct persuasive communications between consultants (or attorneys) and employees and (2) indirect communications that did not meet the broad definition of the "advice exception" were reportable to the DOL. The advice exception in LMRDA Section 203(c) exempts from the reporting requirements "the services of such [consultant] by reason of his giving or agreeing to give advice to such employer..."

The former interpretation of the rule, in effect since 1962, was easily understood and simply applied. Direct persuasive communications between a consultant (or attorney) and an employee were required to be reported. However, communications between a consultant (or attorney) and an employer, manager or supervisor (although persuasive) were deemed advice and were not reportable so long as the client could review, revise and/or reject the advice.

The Final Rule

Unless halted or delayed by litigation, government action or the next administration, the Final Rule will compromise the advice exception. In short, the rule's revised interpretation will attempt to convert into "persuader activity" some of what is now accepted as legal advice. Under the Final Rule, both the employer/client and its consultant/attorney would be required to report to the DOL all arrangements in which an "object" (directly or indirectly) of the services provided by the consultant/attorney is to persuade employees about the manner of exercising the employees' "right to organize and bargain collectively through representatives of their own choosing" under federal labor law.

The DOL takes the position that the "advice exemption" still applies to an arrangement where the consultant/attorney "exclusively provides legal services." Therefore, according to the Final Rule, the advice exemption applies where, for example, the attorney exclusively counsels employers regarding what they may lawfully say to employers, ensures a client's compliance with the law, offers guidance on personnel policies and best practices, and provides guidance on National Labor Relations Board (NLRB) or National Mediation Board practice.

Types of Non-Reportable Activities

Notably, the DOL has taken the view that the following activities are not reportable:

It is likely that the DOL will provide additional guidance and examples of what types of activities are (and are not) reportable in the future.

Types of Reportable Activities

Generally speaking, there are five circumstances which will trigger reporting. In each of these categories, as noted above, the services must be performed "with an object to persuade" in order to be reportable. Thus, it is important in categorizing legal services to distinguish these non-reportable services from those "with an object, explicitly or implicitly, directly or indirectly, to affect an employee's decisions regarding his or her representation or collective bargaining right."

1. Direct contact by attorney with employees. As noted above, this type of activity has always been reportable. As a result, the Final Rule does not change the reporting obligations in this regard.

2. Planning and coordinating supervisor contact with employees. Here, an attorney/consultant with no direct contact with employees "plans, directs, or coordinates activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees." From a sports analogy standpoint, the attorney/consultant acts as a coach and the employer representatives act as the players on the field. As such, the attorney/consultant coordinates which employees supervisors will meet, where they meet, when they meet, how long they meet, what they discuss, etc. This is different from counseling solely on the law, which would not be reportable.

 

3. Drafting communications. In this context, an attorney/consultant with no direct contact with employees "provides material or communications to the employer, in oral, written, or electronic form, for dissemination or distribution to employees." This activity would include oral, electronic, and written materials but does not include descriptions of communications the NLRB has found lawful or "off-the shelf" materials.

 

As referenced above, an attorney/consultant still would be able to rely upon the "advice exemption" if it revised materials or communications prepared by an employer for the purpose of ensuring its legality, i.e., that it is lawful under the National Labor Relations Act. However, if an attorney/consultant enhances a draft communication to make it more persuasive, that appears to be reportable activity.

 

4. Supervisory training. According to the DOL, if an attorney/consultant with no direct contact with employees "conducts a seminar for supervisors or other employer representatives," that event is reportable if it is "with an object to persuade" (e.g., similar to the coach/player analogy under number 2 above). A supervisory training session which merely describes the law would not appear to be reportable. Thus, attorneys/consultants who hold public union-free seminars "with an object to persuade" (regardless of whether there is an admission charge for attendance) and similar supervisory training sessions (e.g., seminars which provide "how to" advice) generally would appear to have a reporting requirement under the Final Rule.

 

5. Policy Development. Generally speaking, an attorney/consultant developing "best practice" policies is not reportable. However, the DOL has indicated that an arrangement/agreement pursuant to which an attorney/consultant with no direct contact with employees "develops or implements personnel policies, practices, or actions for the employer" is reportable, but only if it has an "object to persuade" as defined in the final rule.

The DOL has provided examples of what becomes reportable, including:

• If an attorney/consultant "in response to employee statements about the need for a union to protect against firings, develops a policy under which employees may arbitrate grievances..."
• If an attorney/consultant "identifies or assists in identifying specific employees for reward or discipline, or other targeted persuasion, because of the employees' exercise or potential exercise of organizing and collective bargaining rights or the employees' views concerning such rights."

Reporting Mechanics

If an attorney/consultant engages in the reportable activities referenced above, the attorney/consultant must file a Form LM-20 with the DOL within "30 days after entering into [an] ...agreement, except for reports covering union avoidance seminars, which are due 30 days after the conclusion of the seminar." Attorneys/consultants are also required to file a Form LM-21 within 90 days of the close of the attorney/consultant's fiscal year. However, the DOL has issued a special enforcement policy indicating that, at present, attorneys/consultants need not fill out certain sections of the Form LM-21: Part B (the statement of receipts in connection with "labor relations advice or services") or Part C (the statement of disbursements in connection with "labor relations advice or services" sections).

Under the Final Rule, employers will have a general corresponding duty to report on the Form LM-10, arrangements, agreements, or payments to attorneys/consultants providing persuader services. These reports must be filed with the DOL within 90 days of the close of the employer's fiscal year.

Opponents, Congressional Acts, and Ongoing Litigation

Numerous groups have opposed implementation of the Final Rule, including the American Bar Association (ABA), because in that organization's view, "it would require many management-side labor lawyers to divulge confidential client information to the federal government."

Additionally, Republicans in the House of Representatives introduced a joint resolution (H.J. Res. 87) expressing congressional disapproval and seeking to block implementation of the Final Rule. Representative Bradley Byrne (R-AL), a member of the House Committee on Education and the Workforce, introduced H.J. Res. 87, saying, "I am proud to introduce legislation to protect hardworking Americans and employers from a rule that would restrict privacy, upend the attorney-client relationship, and limit employee access to information during an organizing campaign." On May 23, 2016, the House Committee on Education and Workforce, by a 22-13 vote, approved a resolution pursuant to the Congressional Review Act to block the Final Rule from taking effect.

In addition, lawsuits have been filed in the United States District Courts for the Eastern District of Arkansas, District of Minnesota, and Northern District of Texas challenging the Final Rule. These lawsuits are pending. Depending upon their outcome (and any appeal(s) that might be taken from the Courts' decisions), the July 1, 2016 effective date may be delayed.

Concluding Thoughts

The Final Rule will attempt to convert into "persuader activity" some of what is now accepted as legal advice. As a result, the Final Rule will make it more difficult for employers to communicate facts and opinions on labor relations matters to employees without incurring a reporting obligation. It remains to be seen whether any of the legal challenges to the Final Rule will be successful. Until that point, attorneys/consultants and employers will need to prepare new protocols to ensure compliance with the Final Rule's reporting requirements.

About the Authors

James A. Prozzi

Philip B. Rosen

Daniel D. Schudroff

Additional Resources