Introduction

Five years after it first began working on it, the Department of Labour (DOL) published the final version of its controversial 'persuader rule' on March 24 2016. Section 203 of the Labour Management Reporting and Disclosure Act requires an employer to report the identity, fee arrangement and scope of activities performed by outside labour relations consultants that directly or indirectly persuade employees to engage in or refrain from union organising. However, it exempts from disclosure services that simply constitute advice to the employer. The DOL had long interpreted this advice exemption as excluding from the Labour Management Reporting and Disclosure Act's reporting requirements activities that do not involve direct communications between consultants and employees. The new rule eliminates the exclusion of indirect communications from the Labour Management Reporting and Disclosure Act's reporting requirements and focuses the reporting requirement on whether the consultant's activities are intended to persuade employees.

Challenge

The rule was expected to be strongly resisted by the business community, and a legal challenge has already been launched. On March 30 2016 a coalition of business groups and a law firm filed suit in federal court challenging the constitutionality of the final version of the rule. In Associated Builders and Contractors of Arkansas v Thomas E Perez (4:16-cv-00169-KGB), the National Association of Manufacturers, other industry groups and an Arkansas-based law firm also argued that the rule infringes on attorney-client privilege. The lawsuit, filed in US District Court for the Eastern District of Arkansas, has asked the court for a preliminary injunction to temporarily block the rule from taking effect on April 25 2016 while the case makes its way through court. Ultimately, plaintiffs are seeking declaratory judgment that the rule is invalid.

Comment

Unless the challenge succeeds in delaying or invalidating it, the persuader rule will take effect on April 25 2016 and will apply to arrangements and agreements entered into on or after July 1 2016. The new rule could raise serious attorney-client privilege concerns for employers, and remains vague as to when advice conduct may cross the line to become persuasion activity. Accordingly, employers should consult with their labour attorneys to determine what activities are likely to trigger reporting requirements.

For further information on this topic please contact Katherine A Roberts, Francis S Lam or Heidi Larson Howell at Sidley Austin LLP by telephone (+1 213 896 6000) or email (kate.roberts@sidley.com, flam@sidley.com or hlarsonhowell@sidley.com). The Sidley website can be accessed at www.sidley.com.

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