Don't look now, but the U.S. Department of Labor’s latest Fall 2015 Semiannual Regulatory Agenda advances the controversial proposed revisions to the "persuader activity" reporting requirements under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). Final regulatory action is now scheduled for March of 2016. The final regulations were sent to the White House Office of Management and Budget (OMB) on December 7 for review—among last stops before issuance of the final regulations.
Ironically, a companion regulatory action to revise the LMRDA's LM-21 Form—on which government contractors and consultants are required to report "persuader activities," and for that matter "all other labor relations services for all clients" (whether or not related to "persuader activity")— is scheduled under the Fall 2015 Regulatory Agenda for rulemaking in September of 2016. That would seem to be the wrong order since changes to the LM-21 reporting forms should coincide with revisions to the "advice exemption" under the proposed "persuader activity" regulations.
Proposed "Persuader Activity" Regulations Substantially Flawed
The proposed "persuader" regulations are flawed for numerous reasons. The American Bar Association objected strongly to the new rules, noting during the public comment period that they would interfere with the attorney-client relationship and undermine attorney-client confidentiality. The Association of Corporate Counsel and a group of state attorneys general have also objected to the proposed revisions on the same grounds.
The new rules would also upset long-standing labor relations policy by restricting the ability of employers to retain counsel to prepare for lawful communications with their employees during union organizing campaigns so that their employees are fully informed before voting in union representation elections.
Current "Persuader Activity" Reporting Requirements Working
Under the LMRDA, employers and consultants are required to publicly report the identity and fees of "consultants" (including lawyers and trade associations) paid to "persuade" employees by communicating with them directly regarding union organizing. Ever since the law was enacted, however, it has contained an "advice exception," section 203(c), which excludes reporting for legal advice to employers. This includes training of managerial and supervisory staff during union organizing campaigns so long as there are no direct communications between the outside lawyer and employees; the employer is free to accept or reject the advice. These regulations have worked well over the years to prevent the types of deceptive practices that once existed where employers hired "persuaders" to pose as employees and influence their views through direct communications on unionization while reporting back to the employer. If employers and consultants fail to report such "persuader" contacts they are subject to criminal liability—up to one year imprisonment and a $10,000 fine.
How Will the Proposed Regulations Revise "Persuader Activity" Reporting?
The proposed regulations issued in June 2011 would significantly broaden the obligations of employers and their legal counsel to publicly disclose information that has historically been considered privileged and confidential legal advice pursuant to the LMRDA's "advice exception" and protected from disclosure by both ABA and state bar association rules of professional conduct. Under the proposed revised regulations, all an attorney or firm’s communications with an employer that could have a "direct or indirect" object to persuade employees, including the following, would be required to be publicly disclosed:
- The identity of the consultant or law firm, and financial arrangements or fees charged in representing and advising employers on union-related communications with employees.
- If the lawyer or firm reports a single persuader activity, then the lawyer or firm must disclose the identity of and financial arrangements it has with all clients for all labor relations services—even those services unrelated to "persuader activity," such as advice related to handbook reviews, supervisory training, arbitrations, collective bargaining, and strike preparation.
- Documents and materials, written or electronic, which are intended for lawful communications with employees under the National Labor Relations Act.
- Supervisory and managerial training also intended for the employer’s lawful communications with employees.
- Communications in which policies are developed related to union organizing for use in lawfully communicating with employees, and
- Communications coordinating the timing and sequencing of an employer's communications with employees to respond to union organizing campaigns so that employees are fully informed before signing union authorization cards or voting in a representation election.
These overbroad reporting requirements would limit access to legal counsel because they would put lawyers on the horns of an ethical dilemma: An attorney would either disclose employer confidences and risk disciplinary action by state bar associations—including, perhaps, suspension of his or her license to practice law—or refuse to disclose employer confidences and risk criminal liability under the LMRDA.
Moreover, implementation of the new regulations would be extremely costly for employers and their outside counsel, to an extent well beyond the $826,000 annual cost estimated by the Department of Labor. In fact, others have estimated the costs at $200 million per year, and a former chief economist for the U.S. Department of Labor projects $60 billion over 10 years.
Ambush Election Rules Would Make Implementation Complicated, Costly
Further complicating implementation of the proposed regulations is Executive Order 13494, which prohibits reimbursement of costs for “persuader activities’ on government contracts. More important, the NLRB's new representation election rules, referred to either as the "ambush” or "quickie” election rules, make the search for legal advice from outside counsel even more critically time sensitive following the receipt of a petition for election from a union seeking to represent employees. Delays in locating legal counsel can put employers in jeopardy and expose employees to unintended unfair labor practices.
Under the new election rules, employers are required to submit a formal position statement to the NLRB within seven days of receipt of a petition. This position statement must respond to the petition in full, is binding, and waives all issues not raised. At the same time, along with the position statement, employers are required to compile and disclose a list of employees' names in the petitioned-for unit and those the employer contends should be included in the bargaining unit, employees’ addresses, employees’ personal phone numbers and email addresses, work locations, and work shifts.
Elections are thereafter directed "as soon as possible"; the time frame is usually a matter of days. During this "critical" election campaign period, employers must maintain laboratory conditions free from unfair labor practices—which expose employers to rerun elections following a union loss—in communicating with employees regarding unionization.
All of this makes it important for employers to use legal counsel to advise on how to lawfully communicate with employees during this fraught period.
Status of the Proposed Persuader Regulations?
If, following OMB review, the final persuader regulations are promulgated in March of 2016 along the lines of the proposed regulations issued in June of 2011, they will undoubtedly be challenged in Congress and in the federal courts. The last time revisions to the "persuader activity" advice exception were proposed, toward the end of the Clinton administration as "midnight regulations," they were challenged in federal district court; the lawsuit was withdrawn when incoming President Bush rescinded the regulations before they became effective. But in Washington, no bad idea ever goes away, so like a Phoenix rising from the ashes, changing the “persuader” rules is back in vogue.