As we reported earlier, the new Department of Labor (DOL) “Persuader Rule” dramatically expands reporting obligations for consultants and attorneys who provide certain services to employers related to persuading employees on the subject of union organizing and collective bargaining. The new rule requires that both the employer and the consultant or attorney disclose agreements and payments made by the employer for “indirect” persuader services. Some examples of services that would now be subject to reporting by consultants and attorneys, and the employers that retain them, include:
- Planning, directing, or coordinating managers or supervisors to persuade workers;
- Providing persuader materials to employers to disseminate to employees;
- Conducting union avoidance seminars for supervisors or other employer representatives; and
- Developing and/or implementing personnel policies or actions to persuade employees.
Although the new rule is “effective” as of April 25, 2016, it applies only to consultant arrangements and agreements entered into, and payments made pursuant to such arrangements and agreements, on or after July 1, 2016. Shortly after the new rule went into effect, business groups and other interested parties filed lawsuits in three different federal district courts seeking to enjoin implementation of the rule before the July 1 trigger date.
Yesterday, a federal district court in Minnesota became the first of the three courts to issue a ruling on the validity of the new rule. Although plaintiffs argued that the new persuader rule was invalid for several reasons, the court agreed that the plaintiffs were likely to succeed on only one of the proffered arguments: that the rule is contrary to the plain meaning of the Labor Management Reporting and Disclosure Act (LMRDA). In sum, the LMRDA includes an exemption for “advice” and, under the exemption, “advice” is not reportable. The court analyzed the new rule and found that it modified “advice” in such a way as to make it virtually impossible in some situations to distinguish between reportable persuader activity and non-reportable “advice.” As the judge put it, the DOL’s application of the term “advice” for purposes of the advice exemption left the DOL “drawing lines that are simply incoherent.” Noting that the DOL’s interpretation of “advice” triggered the reporting requirements for activities any reasonable person would consider advice, the court found that plaintiffs “have a strong likelihood of success on their claim that the new rule conflicts with the plain language of the statute.”
Although the court agreed with the plaintiff’s argument that the new rule was contrary to the plain language of the LMRDA, it declined to enjoin the new rule. The court denied injunctive relief because it did not find that the plaintiffs would suffer irreparable harm if the rule were to take effect. According to the court, “at worst, plaintiffs are faced with the prospect of filling out some forms that they should be exempt from having to fill out ….” The court characterized such claimed harm as “minimal and speculative.”
Employers, consultants and attorneys may take some solace in the court’s ruling as it at least partially sets the table for the demise of the new persuader rule. For now, however, the July 1 trigger date for reporting is a little over a week away and still viable. With the fate of the new rule uncertain at this time, employers should be talking with their labor attorney to consider entering into pre-July 1 agreements to provide certain persuader services. The DOL recently clarified that the new reporting obligations apply to arrangements and agreements made on or after July 1, 2016, and to payments made pursuant to arrangements or agreements entered into on or after July 1, 2016. Importantly, DOL’s recent enforcement guidance suggests that it may not apply the new rule to arrangements or agreements entered into before July 1, 2016, even where the agreements are prospective (either open ended or multi-year), and payments made pursuant to such arrangements or agreements are not made for months or even years after July 1. Employers concerned about the new reporting obligations should consider entering a written agreement with their labor attorney before July 1 to provide indirect persuader services prospectively.