New guidance from the U.S. Department of Labor creates a barrier for employers seeking confidential advice about dealing with union organizing campaigns. Under the revised “persuader” rules, currently set to take effect on July 1, 2016, when employers engage consultants or attorneys to provide communications or strategic advice to counter union organizing, both the employers and consultants will be forced to file public disclosures about their service and financial arrangements. Proactive employers can take steps now to prepare for the changes.
This advisory outlines which confidential advice will now trigger a reporting obligation, which services will remain confidential, what information has to be reported, and what practical steps employers can take before July 1, 2016 to have expert advisers available to assist in case the employer is ambushed with a quickie election petition. This advisory also covers the first legal challenges (in Arkansas and Minnesota) seeking to enjoin the new rules.
What Are The Persuader Rules All About?
The Labor-Management Reporting and Disclosure Act (LMRDA) has long required those who engage in “persuasive” activity for employers in connection with union organizing or collective bargaining to file reports of their service and fees with the Department of Labor. Because the LMRDA excluded “advice” from the reporting obligations, the law has been interpreted to apply only when hired consultants personally deliver counter-union messages directly to employees. On the other hand, “indirect” persuasive activities, where consultants or attorneys helped the employer craft its own message, but the employer made the final decision, were considered exempt advice not subject to reporting under the LMRDA.
The new USDOL guidance issued March 24, 2016 dramatically narrows the “advice” exemption. Effective July 1, 2016, indirect persuasive advice and services will trigger a reporting obligation for both employers and their attorneys.
To justify this change long sought by unions, the USDOL touts a need for transparency so employees understand whether consultants are involved (and how much they are being paid) when deciding whether to vote for or against union representation. However the new rules do not fulfill this stated purpose: with the NLRB’s fast track elections rules, employer and attorney reports often will not be filed until well after employees cast their ballots on election day.
So what purpose will the reports really serve? It is clear that unions will find uses for the persuader information after the fact, including ammunition for subsequent organizing campaigns, during negotiations, or for PR stunts in an attempt to embarrass employers. In addition, those who currently provide indirect advice may choose to stop doing so, in light of the breadth of the reporting obligation. Moreover, employers may be dissuaded from seeking advice and legal counsel during organizing campaigns so that they can avoid reporting. As discussed below, the detail of information which consultants will be required to file annually is highly intrusive both as to them and their clients.
Why Should I Care?
Most employers who are the targets of union organizing campaigns do not have much, if any, professional experience with union tactics and the rules governing those campaigns. In today’s world, this is especially important because the National Labor Relations Board (NLRB) adopted rules in 2014 to fast track union organizing elections. Local unions have a tremendous advantage because they rely upon professional organizers, tactics, campaign materials and other support from their national and even international organizations.
When a union organizing petition is filed, employers naturally turn to their existing legal team, which typically includes outside counsel with labor law expertise, for support for what is frequently an emotional, scary, fast-paced series of decisions which can significantly affect their company’s future. These rules drive a significant wedge between that relationship when employers most need prompt, reliable, trustworthy advice and guidance from a known source. Your existing relationship with your lawyer puts you several steps ahead of any which you might form with a previously unknown outside consultant.
In addition, these rules negatively impact the exercise of your First Amendment rights which are guaranteed under federal labor law. Those rights include both the right to speak and to be silent according to your own discretion. The new rules will also require the disclosure of private and confidential information relating to your relationship with your legal counsel.
Finally, the rules invade the sanctity of the realm of attorney-client privilege because the reportability of much conduct, such as the creation and implementation of employer rules and policies, will depend upon the purpose of adoption. The government admits that the purpose will be judged, in part, by communications between the employer and its lawyer. Similarly, an otherwise privileged conversation with a client as to which pre-existing materials may be best suited for the circumstances they are facing will trigger a reporting requirement.
What Types of Advice Will Now Trigger a Reporting Obligation?
Under the new rules, advising arrangements between employers and consultants formerly exempt from disclosure now trigger a reporting obligation if an object (not the sole purpose) is to persuade employees about whether to seek union representation or the outcomes of collective bargaining. Per the USDOL, newly reportable “indirect” activities fall in four broad categories:
- Planning, directing, or coordinating activities undertaken by supervisors or other employer representatives including meetings and interactions with employees;
- Providing material or communications for dissemination to employees;
- Conducting a union avoidance seminar for supervisors or other employer representatives;
- Developing or implementing personnel policies, practices or actions for the employer.
These activities typically arise in relation to union organizing campaigns and union avoidance seminars, but could also arise during union contract negotiations.
What Non-Reportable Advice Can My Lawyer Provide?
Labor lawyers can still provide critical legal advice to employers without triggering a reporting obligation under the LMRDA.
Click here to view table
Other examples of non-reportable advice and services include:
- Provide an overview of NLRB case law relating to the right of employees to organize and bargain collectively
- Review employer communications for legality
- Represent an employer before any court, administrative agency or arbitration, and conduct investigations necessary for those purposes
- Author newsletters to train supervisors how to improve their communications with employees
- Provide employers with publicly available information about unions, such as published labor contracts and governmentally required reports
What Information Has to be Reported, and Are There Any Penalties?
The new persuader regulations will be implemented through revised reporting forms and instructions for employers (LM-10) and for consultants, including attorneys (LM-20). All submitted forms will be available to the public in the Online Public Disclosure Room at www.unionreports.gov.
Employer’s LM-10 Report Employers will be required to file LM-10s covering each engagement for covered persuader activities once a year within 90 days of the close of their fiscal year and retain supporting documentation for five years.
The reports identify:
- The consultant
- The consultant agreement’s source, terms and conditions
- Types of persuader activities performed
- The subject group of employees and labor organization
- Payment dates and amounts
Attorney/Consultant LM-20 and LM-21 Reports
On the other hand, consultants, including lawyers, who engage in any persuader activity for a client, must file a LM-20 report within 30 days of the engagement, which may correspond with the tail end of an organizing campaign. In that report the same types of information concerning terms and conditions of the agreement, specific types of persuader activities undertaken and payments is required. If the terms of their agreement change, consultants must file updated forms LM-20.
A lawyer or other consultant is also required to file an annual LM-21 report within 90 days of the close of its fiscal year. That report requires significantly more intrusive financial disclosures. Unlike the LM-20 which is limited to persuader activities, in the LM-21 an attorney will be required to disclose all “receipts from employers in connection with labor relations advice or services regardless of the purpose of the advice or services.” Thus, receipts for exempt legal advice, which has nothing to do with persuader activities, must be disclosed. In other words, if attorneys provide reportable advice to an employer, they also have to disclose all of the employer’s fees for collective bargaining, arbitrations, NLRB matters,and other labor-related representation. It is unclear whether receipts must be reported for clients for whom labor relations advice and services are provided but for whom no persuader activity has occurred. The attorneys and consultants will also have to disclose all disbursements for reportable services, which include compensation to employees as well as office and administrative expenses.
Notably, OLMS refuses to justify, much less discuss, the onerous invasion of confidentiality and administrative burden which the LM-21 reports will impose upon lawyers and, collaterally, their clients under the guise that LM-21 report forms will be the subject of a separate rulemaking proceeding which will commence this coming September. If OLMS acts with the alacrity it has shown with respect to the current rule, we should have those answers sometime in 2021.
As to penalties, criminal sanctions of fines up to $10,000 and imprisonment of up to one year are in place for “willful” violations, including false statements, material omissions or destruction of relevant documents. Signors (typically the president and treasurer for the employer and consultant) can be held personally liable for “knowing” false statements. Civil actions for injunctive relief are also authorized for statutory violations.
How Employers Can Prepare Now for the July 1 Changes
The rule will go into effect for all agreements, arrangements and payments made after July1, 2016. That leaves approximately a three-month window for employers to take action (so long as payments for any services are made prior to the deadline). We suggest that employers consider doing the following:
- At the upper management level, make policy decisions, if not done so already, as to the company’s position concerning unionization and communicate it to employees through various means such as employee handbooks, standalone personnel policies and the like.
- Conduct a vulnerability assessment concerning vulnerability to union organizing within various departments of the organization. We often find that problems with communication are a common reason employees turn to unions. We also find that issues other than money rank high on employee concern lists. Given the new fast track election rules, having this information in hand ahead of the game can make a real difference.
- Conduct an employee satisfaction survey on various workplace concerns. The NLRB has long found this practice legal, even during unionization campaigns, if there is a history of doing such surveys on a routine basis over time.
- Review and revise your employee handbook and personnel policies for compliance with current NLRB standards and to put in place certain provisions which might be difficult to add after July 1, 2016, such as a statement concerning the company’s position on unionization.
- Train managers and supervisors concerning the importance of the roles which they would play in any union campaign. Training between now and July 1 (if payment is made before July 1) could address topics relating to effective communication far beyond the simple “Do’s and Don’t’s” which will be where the line is drawn after that deadline.
Is Anything Being Done to Challenge The Rules?
Already, two lawsuits have been filed seeking to enjoin the new persuader rules, with more anticipated to follow.
Earlier today, March 31, an association of law firms known as Labnet,Inc., which represents employers, along with its member firms, filed a complaint in the United States District Court for the District of Minnesota. Yesterday, March 30, the Arkansas State Chamber of Commerce, a law firm, and several trade associations representing employers, filed their complaint in the United States District Court for the Eastern District of Arkansas. The Arkansas complaint alleges that the “challenged Rule infringes on the right of employers … to communicate with and receive advice from expert advisors on labor issues” and that it “equally infringes on the right of those who seek to give labor relations advice to employers … [and] to render such advice without fear of criminal penalties ….” Both complaints challenge the rules on several grounds, including violation of the First Amendment rights of Freedom of Speech and Association, invasion of attorney-client privilege, and violation of due process rights (vagueness).
We expect that there will be hearings prior to the effective date of the new rules.