Five Things Businesses Need to Know about DOL’s New Persuader Rule

Five Things Businesses Need to Know about DOL’s New Persuader Rule

The Department of Labor (DOL) has been busy. In previous posts, TECHPol has discussed some of the DOL’s recent proposals on overtimejoint-employer status, and minimum wage, among other new rules.  On March 24th, the DOL published yet another regulation; this one would increase disclosure of the arrangements businesses make with attorneys or third-party consultants to persuade employees related to union-organizing activities. The Labor Department feels the new regulation is necessary to provide transparency and allow employees to make better informed choices as they exercise their workplace rights, but as you might guess, the business community and some in the legal profession feel the rule goes too far. Here’s what you need to know.

1.  Why Do We Need a New Regulation?

Businesses that hire outside consultants — such as labor consultants or attorneys — for the purpose of persuading employees related to their right to organize and collectively bargain are required to disclose those arrangements. Under the current rules, those disclosures are made if the consultant directly communicates with workers. Consultants also must file reports. Under the law, (the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA)) there is an exemption from the reporting requirements for “advice.” The DOL feels “advice” has been
interpreted too broadly, and in its new regulation the definition is narrowed. The Department points to the many activities that third-party consultants are engaged in to indirectly persuade employees about union activity. For example, consultants may write speeches given by managers, prepare talking points, help write personnel policies or draft letters that are used by businesses to persuade workers. DOL believes that employees should know where this information is coming from when making decisions, and that these indirect communications should trigger reporting. Thus, there is a need for a change in the rules to foster greater transparency and integrity in union-organizing campaigns.

2.  What Are the New Requirements?

The DOL’s new persuader rule expands the breadth of activities for which disclosure by employers and consultants will be required (to be reported electronically via forms LM-10 and LM-20 and made publicly available online). In addition to direct contact with employees, reporting requirements will be triggered if third-party consultants are involved in four other categories of indirect persuasion:

  • directing or coordinating supervisors or managers;
  • providing materials for distribution to persuade employees (unless the consultant only edits for legal content or if the material is of a stock variety);
  • conducting a seminar if the object is to develop anti-union strategies to be implemented by the employer; and
  • developing personnel policies if the purpose is to persuade employees related to involvement with a union or a labor organization effort.

For trade associations, the reporting requirements are a bit different.  The disclosure would be triggered if trade association employees are presenters at a seminar related to avoiding unionization or if the trade association is assisting a particular employer or employers to persuade employees (not just providing “off-the-shelf” materials that are available to all members).

3.  What Isn’t Changing?

The DOL is not placing restrictions on the “content, timing, or methods” used by employers to make their case to employees related to union representation or collective bargaining.  According to the DOL, enforcement procedures will also remain the same and reporting will be done on existing forms, albeit revised versions.

4.  What Are the Concerns?

Some in business and legal communities are raising a number of concerns about the DOL’s expanded disclosure requirements.  Here are some of their claims:

  • The rules for when reporting is required are “vague, confusing, and inconsistent.”  This raises due process issues — it’s not fair to hold someone liable for violating a rule that is not clear in its requirements.
  • The rule violates first amendment rights of free speech and free association as businesses will be less likely to seek information from advisors for the purpose of lawfully communicating with employees about union activity.
  • The rule is particularly burdensome for small businesses who are generally more reliant on outside counsel and who face a higher cost of compliance with regulations.  There are complaints that the DOL did not fulfill its legal requirement to analyze the effects of the rule on small businesses and consider less burdensome alternatives.
  • The DOL does not have sufficient statutory authority to change the requirements. The rule is inconsistent with the LMRDA intent, as well as the National Labor Relations Act, which protects employer communication with employees about union organizing and has been interpreted as precluding from regulation non-coercive speech about unionization.
  • The rule undermines attorney-client privilege and may require attorneys to violate their state legal ethics requirements through disclosure of their arrangements with clients.

5. What Comes Next?

The final rule will become effective on April 25th, and applies to agreements, arrangements or payments made on or after July 1, 2016.  Meanwhile, business and legal groups have filed lawsuits asking for a preliminary injunction and permanent relief, based on a number of claims, similar to the concerns outlined above.  Some in Congress have vowed to push back, but it’s not clear how the legislature will respond. TECHPol has discussed the use of the Congressional Review Act to disapprove regulations and the significant obstacles to enacting legislation to overturn regulations given that opposing parties control the executive and legislative branches.

TECHPol will continue to monitor the fate of this rule and others as the Administration’s regulatory activity picks up in the coming months during the last year of President Obama’s term.