The Department of Labor’s latest regulatory agenda now sets a target date of March 2016 for the publication of its final rule addressing the “advice exception” to the so-called “persuader rule” in the Labor-Management Reporting Disclosure Act of 1959 (LMRDA). On December 7, 2015, the DOL finally sent its final rule to the Office of Management and Budget for review, one of the final steps before the rule can be published.
As the proposed rule has significant monetary and legal implications for employers, employers should continue to prepare for the expected rule change by evaluating their options for compliance and/or challenging the new rule once it is published.
How does the proposed change to the persuader rule affect employers?
The LMRDA currently provides that employers must report to the DOL each time they engage a consultant to persuade employees directly or indirectly regarding employees’ rights to organize or bargain collectively (i.e., “persuader activity”). If employers fail to comply with any of the LMRDA’s reporting requirements, they could face jail for a year and a $10,000 fine.
However, the LMRDA carves out from the reporting requirements an “advice exception,” which has consistently been interpreted to exclude an employer’s engagement of labor counsel to assist them with organizing campaigns so long as counsel has no direct contact with employees and the employer is free to accept or reject its counsel’s recommendations.
If the DOL’s final rule tracks the proposed rule it released in June 2011, it will narrow the advice exception significantly. As a result, employers who engage attorneys to assist in organizing campaigns will now have to file publicly available reports with the government detailing all the labor work, regardless of whether it is considered persuader activity or not, that the law firm performs for the employer.
Moreover, if an employer is a federal contractor, the new persuader rule would run in conjunction with Executive Order 13494, which requires federal contractors to exclude from any billing, claim, proposal, or disbursement the costs incurred in undertaking activities to persuade employees regarding their right to organize. Many expect the government to look to the new definition of reportable persuader activity under the LMRDA to define further the scope of “persuader activities” in Executive Order 13494.
Are there any legal bases for challenging the final rule?
Not surprisingly, the final rule is not without its critics, and there has been some speculation that DOL has taken its time in order to bolster the rule against potential legal challenges. Specifically, critics claim that the proposed rule is improper because it effectively writes the advice exception out of the statute. Moreover, the American Bar Association and the Association of Corporate Counsel assert that the proposed rule is also inconsistent with the rules of professional conduct pertaining to lawyer-client confidentiality. They and others believe that the proposed rule forces lawyers to disclose privileged attorney-client information and that it will discourage employers from seeking legal assistance during union organizing campaigns.
Opponents also claim the new persuader rule will place enhanced burdens on employers to comply, and they take exception to the DOL’s estimate that compliance with the rule will only cost all employers and their lawyers about $826,000 a year. Indeed, others project the increased burden from the narrowing of the “advice exception” to cost employers over $200 million a year, with a former chief economist at the DOL estimating that the new rules will cost approximately $60 billion over a 10 year period.
What can employers do now about the expected final rule?
Clearly, employers do not need to make any changes in their LMRDA reporting based on the expected rule changes yet, but they should continue to prepare for the expected rule change by evaluating their options for compliance and/or challenging the new rule once it is published.