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New U.S. Department of Labor "Persuader Rule" to be Effective July 1 – Immediate Action Required to Secure Exemption

Publisher: Day Pitney Alert
June 23, 2016

An important change in the U.S. Department of Labor (DOL) interpretation of the federal Labor-Management Reporting and Disclosure Act (LMRDA) requires your immediate attention and consideration. To protect your interests, you must act on or before June 30.

The LMRDA currently requires an employer to report to the DOL any agreement and arrangement with a third-party consultant (including an attorney) to "persuade" employees as to their rights to collective bargaining, to obtain certain information concerning employee activities, or to persuade employees as to their rights to join or not join a union. This "persuader rule" currently requires employers and consultants (including attorneys) to report agreements only where the consultant communicates directly with employees. But that will soon change. This change will require additional reporting to the DOL, which will be available to the general public, identifying types of services performed and payments for services, even where performed by counsel, disclosing what heretofore has been confidential legal advice.

The New "Persuader Rule"

Under the DOL's new "persuader rule," which becomes effective July 1, employers and consultants/attorneys are required to file reports whenever they enter into an agreement or arrangement whereby the consultant undertakes or agrees to undertake "persuader activities." "Persuader activities" are broadly defined as any actions, conduct or communications that are undertaken directly or indirectly with the explicit or implicit object of affecting an employee's decisions regarding his or her representation or collective bargaining rights. Thus, the following categories of indirect consultant activity undertaken with the object of persuading employees will now trigger reporting:

  1. Planning, directing or coordinating activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees;
  2. Providing [including contributing content to] material or communications for dissemination to employees;
  3. Conducting a union avoidance seminar for supervisors or other employer representatives; and
  4. Developing or implementing personnel policies, practices or actions for the employer.

The DOL recently clarified that the new rule does not apply to agreements between an employer and a consultant entered into before July 1 where the consultant agrees to provide "persuader" services on or after July 1, provided that those "persuader" services would not have triggered reporting obligations under the old rule. DOL representatives further stated that "persuader" payments made after July 1 need not be reported so long as those payments are tied to an agreement made prior to that date.

Your company can preserve its ability to continue to have access to legal help without the additional reporting requirements provided that you sign a new or revised engagement agreement with legal counsel of your choice not later than June 30. Employers and law firms that enter into appropriate agreements by June 30 are exempt under the DOL's revised guidance from the obligation to file public disclosure reports for "indirect persuader" services, even if such services are performed after June 30.

Lawsuits Challenge New Rule

Hope for judicial stay of the implementation of the new rule's onerous "indirect persuader" activity regulation dimmed when one of the courts hearing such an application declined to grant a preliminary injunction. On June 22, the U.S. District Court for the District of Minnesota ruled that, although the law firm plaintiffs were likely to succeed in their claim that portions of the new rule conflicted with the LMRDA:

under the circumstances—when plaintiffs have launched a facial challenge to a new regulation, when it appears that the regulation's potentially valid applications may outnumber its potentially invalid ones, and when there is only a minimal threat of irreparable harm— […] it is preferable to let the regulation take effect and leave plaintiffs to raise their arguments in the context of actual enforcement actions.

Parallel applications for injunctive relief remain pending before federal district courts in Texas and Arkansas.

Recommendation

The DOL's position has substantial adverse implications for all employers, and it provides a very limited window for companies and their counsel to avoid application of the new rule and its new reporting obligations. Whether your company presently has a union presence or activity, is concerned about possible organizing, or prudently wishes to preserve access to confidential legal advice should it encounter union organizing activity in the future, having an agreement that complies with the DOL's recent guidance on the new "persuader rule" can help protect the confidentiality of your communications with and actions by your counsel as to union avoidance activity in the future. It is not necessary that an employer be facing an existing threat of union organizing or a current bargaining obligation for the employer to take advantage of the exemption from future reporting requirements by entering into such a relationship on or before June 30.


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