The New Persuader Activity Reporting Requirements—A Significant Development
June 14, 2016
In accordance with the U.S. Department of Labor’s recent public announcement regarding the implementation of its new “persuader activity” rule, all engagements entered into prior to July 1, 2016—including long-term or multi-year agreements for labor relations services to be performed after July 1—will not be subject to the reporting and disclosure requirements of the new rule. Services for "direct" persuader activities previously reportable under the old rule will continue to be reportable.
The History of Reportable Persuader Activity
By way of background, the Department of Labor (DOL) recently finalized regulations that significantly revised and expanded the reporting and disclosure requirements for employers and advisors (including consultants and lawyers) under the Labor-Management Reporting and Disclosure Act's (LMRDA) so-called "persuader activity" regulations. The implementation date for the new regulations is July 1, 2016. Prior to the new regulations, employers and consultants were only required to report agreements where the advisors (including consultants and lawyers) communicated directly with the employer's employees to "persuade" the employees with regard to union organizing. Communications with management were not reportable under the LMRDA's "advice exemption" where the consultant or lawyer did not communicate directly with employees but rendered advice to the employer that the employer was free to accept or reject. That was the bright-line test for reportable persuader activities for 51 years.
The New Persuader Rule
Recently, the Department of Labor finalized new regulations, which will require employers and consultants to report and disclose direct or indirect communications that had an object to persuade employees with regard to union organizing—including what was formerly considered exempt "advice"—exclusively to management. As such, the Department of Labor's new persuader activity regulations substantially undercut the "advice exemption," which Congress had carefully crafted in 1959 when the LMRDA was enacted. The new regulations would require employers and advisors (including consultants, lawyers, and law firms) to report standard labor relations advice and services (which formerly were exempt within the LMRDA's "advice exemption”) that they provide to employers. The implementation date for administration and enforcement of the new regulations is July 1, 2016. (The published rule sets April 25, 2016 as the effective date but will apply only to arrangements and agreements as well as payments (including reimbursed expenses) after July 1, 2016.)
However, according to recent public statements from the Department of Labor (including an email confirmation to the U.S. Chamber of Commerce) multi-year arrangements entered into between an employer and labor relations consultant (including lawyers) before July 1 for labor relations services to be performed in the indefinite future, are not reportable. Persuader services previously covered—such as a consultant's or lawyer's persuader communications directly with employees that were reportable under the old rule—will continue to be reportable.
The Future of the New Rule
Three separate legal challenges to the rule are pending on motions for declaratory and injunctive relief before federal district courts in Little Rock, Arkansas, Minneapolis, Minnesota, and Lubbock, Texas. Those challenges are based on the LMRDA's "advice exemption," which is eviscerated by the new rule, as well as the effect of the rule on the attorney-client privilege. According to these challenges, the rule violates the First and Fifth Amendments to the U.S. Constitution. Decisions in those lawsuits are expected prior to July 1, which is the date the new rule is scheduled to be implemented.
In anticipation of the effective date and before the July 1 window closes, employers may want to enter into new, long-term agreements, covering representation in current and future union organizing campaigns and other labor relations services.