Today the Department of Labor issued its final rule for publication tomorrow, March 24, 2016, addressing the “advice exemption” to the so-called “persuader rule” in Labor-Management Reporting Disclosure Act of 1959 (LMRDA). Almost five years after it published the proposed rule, the DOL announced that it was adopting “the proposed rule, with modifications, [providing] increased transparency to workers without imposing any restraints on the content, timing, or method by which an employer chooses to make known to its employees its positions on matters relating to union representation or collective bargaining.” The final rule becomes effective 30 days after publication, and applies “to arrangements and agreements as well as payments (including reimbursed expenses) made on or after July 1, 2016.” Moreover, according to the DOL, the “persuader rule” applies to labor relations governed by both the National Labor Relations Act and the Railway Labor Act.

In the Final Rule, the DOL asserts that:

section 203(c) (known as the “advice exemption”) does not shield employers and their consultants from reporting agreements in which the consultant has no face-to-face contact with employees but nonetheless engages in activities behind the scenes (known as indirect persuader activities) where an object is to persuade employees concerning their rights to organize and bargain collectively.

Justifying the Final Rule’s interpretation of the “advice exemption,” the DOL claims that:

it is important for employees to know that if the employer claims that employees are family — a relationship will be impaired, if not destroyed, by the intrusion of a third party into family matters — it has brought a third party, the consultant, into the fold to achieve its goals. Similarly, with knowledge that its employer has hired a consultant, at substantial expense, to persuade them to oppose union representation or the union’s position on an economic issue, employees may weigh differently a claim that the employer has no money to deal with a union at the bargaining table.

The rule modifies the “advice exemption” by revising the instructions to forms filed by employers (Form LM-10) and labor relations consultants (Form LM-20) to report persuader agreements and arrangements. According to those instructions, reports must now be filed if the labor relations consultant undertakes activities that fall within the following categories:

  1. A consultant engages in direct contact or communication with any employee, with an object to persuade such employee; or
  2. A consultant who has no direct contact with employees undertakes one or more of the following activities with an object to persuade employees:
    • Planning, Directing, or Coordinating Supervisors or Managers.  This includes both meetings and other less structured interactions with employees. Examples include the consultant planning, directing or coordinating which employees they meet; where they meet; when they meet; for how long they meet; the topics discussed and the manner in which they are presented; the information gathered from the employees and how they should gather it; debriefing with the supervisor to orchestrate the next steps in the campaign; and identifying materials to disseminate to employees.
    • The Provision of Persuader Materials. This covers the providing of materials or communications to the employer, in oral, written, or electronic form, for dissemination or distribution to employees. However, a consultant’s revision of employer-created materials, including edits, additions, and translations, if an “object” of the revisions is to ensure legality as opposed to persuasion, does not trigger reporting. On the other hand, if the revisions are intended to increase persuasiveness of the material, then the reporting obligation is triggered. Where a consultant merely provides an employer with “off-the-shelf” material selected by the employer from a library or other collection of pre-existing materials prepared by the consultant for all employer clients, then no reporting is required as long as the consultant does not play an active role in selecting the materials for its client’s employees based on the specific circumstances faced by the employer-client.
    • Conducting a Seminar for Supervisors or Other Employer Representatives.  Seminar agreements must be reported when the consultant develops or assists the attending employers in developing anti-union tactics and strategies for use by the employer’s supervisors or other representatives. A consultant who merely solicits business by recommending that the employer hire the contractor to engage in persuasive activities does not trigger reporting. In no case is the employer required to file a Form LM-10 for attendance at a multiple-employer union avoidance seminar.
    • Developing or Implementing Personnel Policies or Actions. According to the DOL, reporting is only required if the consultant develops or implements personnel policies, practices, or actions for the employer that have as an object to, directly or indirectly, persuade employees (e.g., the identification of specific employees for disciplinary action, or reward, or other targeting, based on their involvement with a union representation campaign or perceived support for the union, or implementation of personnel policies or practices during a union organizing campaign). For example, if the consultant, in response to employee statements about the need for a union to protect against firings, develops a policy under which employees may arbitrate grievances, reporting would be required. However, if the grievance process was set up in response to a request by employees — without any history of a desire by them for union representation — or as a policy developed as part of a company’s startup of operations, without any indication in the agreement or accompanying communications that the policy was established to avoid union representation of the employer’s workforce, no reporting would be required.

The final rule, however, provides that:

no reporting is required by reason of a consultant merely giving “advice” to the employer, such as, for example, when a consultant offers guidance on employer personnel policies and best practices, conducts a vulnerability assessment for an employer, conducts a survey of employees (other than a push survey, i.e., one designed to influence participants and thus undertaken with an object to persuade), counsels employer representatives on what they may lawfully say to employees, conducts a seminar without developing or assisting the employer in developing anti-union tactics or strategies, or makes a sales pitch to undertake persuader activities. Reporting is also not required for merely representing an employer in court or during collective bargaining, or otherwise providing legal services to an employer.

In addition, the DOL eliminated the term “protected concerted activities” from the definition of “object to persuade employees” provided in the proposed rule. Instead, reporting is required only for agreements in which the consultant engages in activities with an object to persuade employees concerning representational and collective bargaining activities, but not “other protected concerted activities.”

Trade associations are given somewhat different treatment under the Final Rule. As a general rule, trade associations will only be required to report in two situations: 1) where the trade association’s employees serve as presenters in union avoidance seminars or 2) where they undertake persuader activities for a particular employer or employers (other than by providing off-the-shelf materials to employer-members).

In response to commenters’ assertions that the proposed rule violates the attorney-client privilege, the DOL repeatedly asserted:

None of the information required to be reported under the revised interpretation is protected by the attorney-client privilege. To the extent the agreement provides confidential details about services other than reportable persuader/information-supplying activities, the principles of attorney-client privilege would apply and such information is not reportable absent consent of the client.

Specifically, the DOL explained that as a general rule information such as the fact of legal consultation, clients’ identities, attorneys’ fees, and the scope and nature of the employment are not deemed privileged. Moreover, the DOL asserts that section 204 of the LMRDA, as a federal law, controls over any conflicting state ethics rules prohibiting the disclosure of confidential client information such as the identity of the client, the fact of representation, and the fees paid as part of that representation.

The DOL, however, did not address the impact that the Final Rule will have on consultants’ reporting requirements in Form LM-21, Receipts and Disbursements Report. Annual Form LM-21 requires the reporting and public disclosure of all clients and fees on account of any labor relations advice or services, even if unrelated to persuader activityIn response to comments concerned about the proposed rule’s impact on Form LM-21, such as the scope and detail of reporting about service provided to other employer clients, the DOL merely stated that Form LM-21 “is not the subject of this rulemaking.” Indeed, the DOL plans on publishing a proposed rule on Form LM-21 in September 2016, in which it will “propose mandatory electronic filing for Form LM-21 filers, and it will review the layout of the Form LM-21 and its instructions, including the detail required to be reported.”

According to the DOL, the average cost of compliance will be $151.14 per Form LM-20 for labor consultants, and is $226.70 per Form LM-10 for employers.

As there have been many critics to the proposed rule, including the American Bar Association and the Association of Corporate Counsel, it is almost a given that there will be legal challenges to the Final Rule. Also, some organizations have already issued press releases asserting that they will work with lawmakers to reverse the Final Rule. Accordingly, please follow our blog, Labor Relations Today, our Twitter feed (@LRToday), and our Flipboard magazine for additional developments and analysis.