Just before the Thanksgiving holiday, the Department of Labor pushed back its target date from November 2013 to March 2014 for publishing its final rule regarding the “advice exception” to the so-called “persuader rule” in the Labor-Management Reporting Disclosure Act of 1959 (LMRDA). Because the proposed rule has significant monetary and legal implications for employers, they should monitor the proposed rule closely.
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.
Why was the rule delayed until March 2014?
It is believed by some that the DOL postponed publication to evaluate further its options for bolstering the rule against potential legal challenges. Critics of the rule 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.
Is the postponement significant, and how does it affect employers?
The postponement has the potential to undermine the DOL's efforts to publish the rule altogether depending on what actions the DOL decides to take and whether it can finalize the rule for publication by March. If the DOL decides to re-cost the projected the impact of the proposed rule, the DOL will likely have a higher burden for issuing the new rule because the rule could be subject to interagency review. Moreover, if the publication date is pushed back even further into 2014, it could encroach upon the mid-term elections and might ultimately be placed on the back burner until sometime after November 2014.
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. Importantly for federal contractors, the postponement does not affect their obligation to comply with Executive Order 13494.
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