What’s At Issue:
Proposed U.S. Department of Labor (DOL) revisions to the “advice exemption” under the Labor Management Reporting and Disclosure Act (LMRDA) “persuader activity regulations” may soon require employers, consultants, and law firms to publicly report and disclose private, confidential arrangements, financial and otherwise, currently protected by the attorney-client privilege for legal advice to employers regarding union organizing, collective bargaining, and strikes or other concerted activities. The threat of disclosure, and use of such information by unions and others during anti-corporate campaigns, may interfere with the attorney-client relationship by chilling employers’ rights to find or retain counsel for advice on union matters. “Persuader activity” reporting would not be limited to a single matter, but once reported for a single client the regulations require reporting of financial arrangements for all labor relations services with all clients, without regard as to whether those services are related to “persuader activities.” Most clients, lawyers, and law firms will not want their business relationships and privileged client arrangements publicly disclosed.
In addition, as discussed below, under the proposed rules, reporting requirements would go far beyond disclosing arrangements between employers and “persuaders” for direct communications with employees. It would also include, for example, public disclosure of such common services as providing advice regarding speeches and written materials, company policies, supervisory training and seminars, webinars and other programs provided by law firms or even trade associations if the purpose for which it is used even indirectly persuades employees.
Although the DOL’s January 20, 2012, Semiannual Regulatory Agenda scheduled the final regulatory action for August 2012, the proposed revisions to the “advice exemption” under the LMRDA’s “persuader activity regulations” are expected by many observers to be postponed until next year after the 2012 elections. However, the new regulations might be on the horizon if they are issued as “midnight regulations” later in the year following the elections.
The reporting of persuader agreements between employers and labor relations consultants is subject to section 203(c) of the Labor Management Reporting and Disclosure Act. 29 U.S.C. 433. Employers and consultants are required to disclose such agreements or arrangements on the Form LM-10 (Employer Report) and the Form LM-20 (Agreement and Activities Report), respectively. Failure to report is a criminal violation under the LMRDA.
On June 11, 2011, the DOL’s Office of Labor-Management Standards (OLMS) published a notice of proposed rulemaking (NPRM) to revise the Department’s interpretation of the “advice exemption” to the “persuader” reporting requirements of LMRDA’s section 203. In addition, the NPRM proposed revisions to Forms LM-10 and LM-20.
The comment period closed on September 21, 2011. Approximately 6,000 comments were received including, crucially, an important comment from the American Bar Association which objected to the proposed revisions to the interpretation of “advice” as interfering with attorney-client relationships and requested that the proposal be withdrawn.
Since then, no further action has been taken while the DOL reviews the proposed rule. The DOL’s latest Semi-Annual Regulatory Agenda lists final action as scheduled for August 2012. Yet, as stated above, most observers expect that schedule to slip until at least after the 2012 elections.
How the Proposed Regulations Would Change the Law
The NPRM proposal would change the interpretation of “advice” in section 203(c) of the LMRDA. Under the DOL’s current “advice” interpretation, an employer-consultant agreement does not need to be reported if the consultant or law firm has no direct contact with employees and only provides to the employer (or its supervisors), advice or materials for use in persuading employees, that the employer has the right to accept or reject. The DOL has sought to modify its interpretation of “advice” by limiting the definition of what activities constitute “advice,” and thus expanding those circumstances under which disclosure of employer-consultant persuader activities is required.
The NPRM offered examples of persuader activity, which consisted of an expanded scope of actions, conduct, or communications on behalf of an employer to persuade employees, and which would no longer constitute “advice,” which would be exempt from reporting requirements. Such examples included providing persuader material to employers for dissemination or distribution to employees, including drafting or reviewing speeches to be delivered by employers to their employees; coordinating or directing the activities of supervisors or employer representatives through supervisory training to engage in the persuasion of employees; and drafting or implementing policies for the employer with the objective of persuading employees.
Why The Proposed Regulations are Important to You:
This is a major regulatory battle which is important to all employers—but especially small and medium-size employers without the resources or in-house labor law expertise to keep up with the highly technical and frequently changing legal standards of the National Labor Relations Board (NLRB) in defining lawful employer communications. Most employers have not experienced union organizing campaigns, engaged in collective bargaining or experienced strikes. Most are not familiar with concerted activity—which is protected by the National Labor Relations Act (NLRA) whether the company has unions or is union free—and most have not experienced unfair labor practice charges or findings of objectionable conduct during union organizing campaigns which could result in having a union imposed on them without an election. In short, while the NPRM states that the new interpretation will not prevent employers from seeking labor law counsel, it would in fact require reporting at the very time most employers seek advice—during a union organizing campaign as to what employers may lawfully say and do with regard to unionization, signing union authorization cards, and in connection with petitions for elections and demands for employer recognition of the union which precede a union organizing campaign.
Current LMRDA “persuader activity” regulations administered by the DOL require employers, labor relations consultants, and law firms to report arrangements with so-called “persuaders” hired to communicate directly with employees regarding the exercise of their rights to join or form unions, engage in collective bargaining, strikes and other forms of concerted activities. Currently, the regulations are interpreted as only applying where “persuaders” communicate directly with employees, but not where law firms provide legal advice to employers, such as reviewing employer speeches and written materials for use in lawfully explaining the company’s position during union organizing campaigns, collective bargaining and strikes. Reporting the latter legal services is currently exempt under the “advice exemption.” The exemption also includes training managers and supervisors on the legal “dos and don’ts” of communicating with employees without committing an unfair labor practice, and helping to prepare or reviewing company policies and other written materials without inadvertently violating the labor laws.
That is, employees have the right to know when a paid “persuader” is hired to meet and communicate with them directly in an effort to “persuade” them regarding union organizing, collective bargaining, strikes or other concerted activities. But employers have the right to retain legal advice to make sure that the company’s own communications with their employees are lawful. After all, the NLRA authorizes employer “free speech” in Section 8(c), which provides:
(c) [Expression of views without threat of reprisal or force or promise of benefit] The expressing of any views, argument, or opinion, or the dissemination thereof, whether in written, printed, graphic, or visual form, shall not constitute or evidence of an unfair labor practice under any of the provisions of this Act [subchapter], if such expression contains no threat of reprisal or force or promise of benefit. 29 USC § 158(c).
While not limiting or modifying employer rights under the NLRA’s Section 8(c), the reporting requirements in Section 203 of the LMRDA still may require reporting where “persuaders” are hired to communicate the employer’s views directly with employees. However, the “advice exemption” has always allowed employer’s to retain legal services without requiring reporting where such services do not include direct communications with employees.
All of that may change in the future under proposed revisions to the LMRDA’s “persuader activity” regulations which would eviscerate the “advice exemption.”
Even though the Labor Department’s proposed revisions to the persuader regulations are not in effect, the Department has sent “warnings” to employers and law firms when a union files a petition for election. Those warnings inform employers and law firms that the new “persuader” regulations are coming, and that advice received related to communications with employees will soon be subject to reporting.