After announcing the withdrawal of two union friendly administrator interpretations issued by the Obama Administration, the US Department of Labor delivered another blow to unions by announcing that it will take public comment beginning June 12, 2017, on a proposed rule to rescind the Obama-era version of the persuader rule which requires companies to report union persuader activities.
The Obama-era version of the persuader rule was first introduced on June 20, 2011 and the final rule was scheduled to take effect April 25, 2016. However, implementation of the rule was barred by a nationwide permanent injunction.
The persuader rule, found in Section 203 of the Labor Management Reporting and Disclosure Act of 1959, requires disclosure of agreements or arrangements between employers and labor relations consultants under which the consultant undertakes, or agrees to undertake, activities meant to sway workers with respect to whether or not to exercise, or how to exercise, their rights to organize and bargain collectively.
Consultants must disclose the identity of their client, the retention or fee agreement, the fees received and a description of the services provided. The rule however exempts arrangements in which the consultant is providing advice regarding employee relations, and information communicated in the course of an attorney-client relationship.
Traditionally, based on the exemptions, persuader activity had to be publicly reported only if the consultant had direct contact with employees.
This allowed companies to contract with law firms and labor relations consultants during union organization campaigns to draft scripts, talking points, letters, and conduct union avoidance seminars for management without fear that the particulars of such agreements would be disclosed.
The Obama-era version of the persuader rule would have expanded the disclosure requirement to include any advice that indirectly persuades employees regarding union organization and collective bargaining even if the consultant had no direct contact with the employees.
Reporting would be required for any activities that are clearly undertaken with an objective to persuade employees.
Thus, if an attorney were to conduct a union avoidance seminar for an employer in which he develops or assists the employer with developing anti-union tactics and strategies to be used by the employer’s representatives, or if an attorney were contracted to draft or revise personnel policies with the intent to influence employees, such activity, and the entire agreement regarding such activity, must be disclosed under the Obama-era version of the persuader rule.
The Obama-era version of the persuader rule was thwarted when its implementation was barred by a permanent injunction on November 16, 2016.
The court expressed concern that attorneys would be forced to violate the attorney-client privilege by disclosing clients’ identities, fee arrangements, and the nature of the advice and services provided.
Under the Obama Administration, the Department of Labor appealed the court’s decision. However, the Trump Administration has signaled its unwillingness to pursue the appeal.
On May 22, 2017, the Department of Labor issued a draft version of the persuader rule that would effectively undo the Obama-era version; and on June 8, 2017, it announced that public comment on the proposed rule would begin on June 12, 2017, and last for 60 days.
The Department of Labor has cited a number of factors which prompted the rescission of the Obama-era version, including:
- conflicting court interpretations,
- the need to conduct further analysis of the statute and assess the impact on firms and attorneys seeking legal assistance, and
- the resource constraints the department faces when it comes to policing employers.
If implemented, the new rule will return things to the status quo and companies will continue to be able to utilize lawyers and other consultants during union organizing campaigns and collective bargaining without fear of having to disclose those activities or the details of their agreements.
As with the Obama-era version of the persuader rule, we anticipate there will be legal challenges to the version proposed by the Trump Administration.
Although the status quo will remain in effect, there will likely be some uncertainty and confusion regarding what activities are reportable and what information must be disclosed or can be withheld as advice or privileged under the attorney/client exemption.
Therefore, consultation with a lawyer is highly recommended with respect to the determination of reportable activities and prior to the filing of any reporting forms.