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DOL “Persuader” regulation is back

By Judd H. Lees, Sebris Busto James

By Judd H. Lees, Sebris Busto James

On June 21, 2011, the Department of Labor first published a proposed rule which threatened to significantly change union election procedures and redefine so-called “persuader activity.” The proposed rule immediately caused an uproar among employers and, in particular, the legal community which viewed the proposed changes as depriving employers of much-needed legal help in responding to union organizing efforts or, at a minimum, providing training and advice to supervisory and management personnel regarding their rights under federal labor law.  

As a result of the outcry, the rule was shelved and opponents breathed a sigh of relief. However, on Wednesday, March 25, 2016, the Department of Labor released an unchanged version of the rule which it termed “final” and which will become effective on July 1 of this year. This article will provide an overview of the current “persuader” rule, the July 1 change, and the implications for construction employers and, more importantly, their attorneys.

Current Persuader Rule

In a union organizing setting or any setting in which activity protected under federal labor law is involved, construction employers often require the services of third-party attorneys and management consultants since most employers are unsophisticated about both unionism as well as the federal labor laws governing election conduct. Absent training and guidance, management, and especially supervisors, easily overstep the boundaries of acceptable conduct. Overstep too much and there is no election—there is, instead, a mandatory bargaining order with the union.  

Section 203 of the Labor Management Reporting and Disclosure Act (“LMRDA”) currently requires these third party so-called “persuaders” to file Form LM-10 disclosing financial information, not only about the client being served but also other clients receiving similar labor law assistance. Based upon these attendant Form LM-10 financial disclosures, management attorneys are understandably reluctant to be characterized as “persuaders.”  

Fortunately, Section 203(c) of the LMRDA currently provides an exception to the reporting requirement for third parties who merely provide “advice.” The Department of Labor has, to date, interpreted the “advice” exception fairly broadly to exclude all assistance where the third party does not have direct contact with the eligible voters. This “advice” exception not only applies to traditional advice or overview, but also to preparation of employer speeches to employees.  In the event the employer wishes to have a third party communicate with employees directly, attorneys often bring in management consultants who do not mind the requisite financial disclosures required of a “persuader.”

July 1 Tightening of “Advice” Loophole and Resulting Reporting Requirements

Under the new DOL regulations to take effect on July 1, the “advice” exception would be significantly limited to an “oral or written recommendation regarding a decision or course of conduct.” Carved out of the “advice” exception (and hence now reportable persuader activity) is any third-party consultation involving material or communications conveyed to an employer, or any actions, conduct, or communications on behalf of the employer that, “in whole or in part, have the object directly or indirectly to persuade employees concerning their rights to organize and bargain collectively.” The “directly or indirectly” caveat has most management labor lawyers extremely nervous.

The new regulations clarify that persuader activities will include, but not be limited to: (1) drafting, revising or providing  speeches, written communications or other materials to an employer for presentation to employees; (2) planning individual or group meetings aimed at persuading employees to vote against a union; (3) training supervisors or employer representatives how to conduct such individual or group meetings; (4) coordinating or directing the activities of supervisors; and (5) developing personnel policies or practices aimed at convincing employees to reject unions. In anticipation of passage of the rules, Regional offices of the NLRB have already sent out notices to attorneys filing notices of appearance on behalf of employers in union representation proceedings, of the potential need for Form LM-10 reports from them.
The regulations exclude attorney conferences or group seminars for employers as long as the sole purpose is to provide guidance to them. However, conducting a seminar for supervisors or employer representatives on union organizing does appear on the “persuader” checklist.  In addition, the new rules would require reporting for information-supplying activities based on research or investigations concerning employees or labor organizations, as well as any surveillance activities. All appear on the revised Form LM-20 for reporting.

Labor Secretary Thomas Perez has attempted to sell the July 1 change as necessary to allow employees caught in the middle of a union organizing effort to know who is providing the employer messaging regarding the demerits of unionization.  However, it is a rare union which fails to advise employees it is attempting to organize that the employer has hired a “high priced” management consultant or a law firm to assist in its “messaging” in an attempt to undercut the message. Employees are not as unsophisticated as the Labor Secretary seems to think and the source of information regarding the facts that well-informed employees should consider before they choose outside representation–union initiation fees, restrictive union constitutions and by-laws, the potential for costly assessments and fines, the underfunded state of many union pension plans—is far less important than the right of employees to receive this information so they make an informed decision in the privacy of the voting booth.  

The implications for employers of the DOL narrowing of the “advice” exception is twofold. First, the revised line between “advice and “persuader activity” is confusing.  For example, supervisory training regarding lawful and unlawful conduct during a pre-election period may not be designed for a specific employee presentation, but one could argue that such advice is aimed at providing supervisors with mini-speeches or talking points to answer individual employee concerns or questions and thus is persuader activity. Similarly, revisions of handbook policies regarding “open door” policies, could be construed as union avoidance and therefore persuader activity since, according to Department of Labor guidance, persuader activity need only have an “indirect” object of persuading employees about their union rights.    

Second, the ramifications for guessing wrong are substantial. Attorneys who cross the line must file Revised Forms LM-20 and LM-21 requiring the attorney and the law firm to disclose in writing, receipts for all labor relations advice or services provided to all employers during the year, regardless of whether that advice was related to persuader activity—an anathema for most management attorneys and their law firms. The Form LM-20 will require information about the agreement between the attorney and the employer, the fees involved and the scope and nature of the employment. A separate report must be filed for each agreement or arrangement made with each employer for whom persuader services are provided.

Director John Lund of the Office of Labor-Management Standards (“OLMS”) responsible for enforcing the new regulations, attempted to quell management concerns in a July 11, 2011 web chat by stating that the new regulations would not present a threat to the attorney-client privilege. The Director commented that he did not foresee the need to examine the content of attorney-client communications in order to determine whether they constituted “persuader” activity or exempt “advice.” However, again, the somewhat amorphous nature of the proposed regulations would appear to make such an inquiry necessary and management attorneys who have regularly filed notices of appearances in certification and decertification petitions (which will trigger a Board notice that a report may need to be filed), will think twice about continuing to represent employers in these settings.

It would therefore appear that the administration is attempting to do via regulations what it has been unable to do to date via legislation—nullify, or as one member of the National Labor Relations Board stated, “eviscerate” the ability of employers to mount an effective campaign against unionization. When the regulation becomes effective, employers and their counsel may be reluctant to provide information to employees as to why they should vote “no” in a union election. Skilled management labor lawyers may also be reluctant to assist employers for fear their “advice” may be characterized as persuader activity triggering financial reporting. As a result, employers will have to be even more proactive in establishing lines of communication with employees which are in constant use and do not turn on the certification process under the National Labor Relations Act.

Judd Lees is a shareholder with Sebrus Busto James and a member of AGC’s Legal Affairs Committee.

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