CLIENT UPDATE

Putney, Twombly, Hall & Hirson LLP
521 Fifth Avenue
New York, NY 10175
Tel: (212) 682-0020

 

March 30, 2016

Department of Labor Finalizes “Persuader” Rule

On March 23, 2016, the United States Department of Labor (“DOL”) finalized its long-debated “persuader” rule, requiring employers and third-party consultants (including attorneys) to disclose to the DOL’s Office of Labor-Management Standard (“OLMS”) the existence of arrangements to “persuade” employees regarding their right to union representation and collective bargaining.  The rule modifies Section 203(c) of the Labor-Management Reporting and Disclosure Act.  The final rule will become effective on April 25, 2016; however, it is applicable only to “persuader” arrangements made on or after July 1, 2016.

Under the previous rule, employers were only required to disclose their dealings with third-party consultants/attorneys when such consultants/attorneys communicated directly with employees in an effort to persuade employees about their rights to union representation and collective bargaining. Under the new rule, both employers and their consultant/attorneys must disclose such “persuader” arrangements even where consultants/attorneys communicate indirectly with employees.  The rule does not require the disclosure of the content of the persuader messages, but requires disclosure of the persuader’s engagement and the financial terms of the engagement.

Covered “persuader” activities that must be disclosed include when consultants or attorneys are engaged to:

  • plan or conduct employee meetings for the purpose of union persuasion;
  • train supervisors or other employer representatives to conduct such persuasion meetings;
  • coordinate or direct the activities of supervisors or other employer representatives designed to persuade employees;
  • establish or facilitate employee committees designed to persuade union sentiment;
  • draft, revise or provide persuader speeches or written materials;
  • develop policies designed to persuade employees; or
  • identify employees for disciplinary action, reward or other targeting based on perceived union support.

Employers’ Reporting Obligation

Employers will be required to report their engagement of persuader services annually on Form LM-10, within 90 days of the close of the employer’s fiscal year.  An employer’s report on Form LM-10 must disclose:

  • the date of each reportable arrangement and the date and amount of each transaction made pursuant to that arrangement;
  • the name, address, and position of the person with whom the agreement or transaction was made; and
  • “a full explanation of the circumstances of all payments made, including the terms of any agreement or understanding pursuant to which they were made.” Employers must attach a copy of any written agreement between the employer and the persuader consultant/attorney.

 

Third Party Consultants’ and Attorneys’ Reporting Obligation

Consultants/attorneys that engage in persuader activities will be required to file two separate reports with OLMS: (1) a Form LM-20, which must be submitted to the OLMS within 30 days of the consultant agreeing to engage in reportable activity; and (2) a Form LM-21, which must be submitted to OLMS within 90 days of the close of the consultant's/attorney’s fiscal year. 

The Form LM-20 requires disclosure of, among other things, the nature of the agreement with the employer and the specific activities that the consultant/attorney will perform on behalf of the employer.  Particularly troubling, once a consultant/attorney reports on Form LM-20 a single instance of “persuader” advice or services, the consultant/attorney must then disclose “all labor relations advice and services” on Form LM-21, even though such advice or services do not involve persuader activity.  Moreover, Form LM-21 requires the consultant/attorney to report the names and addresses of all of the employers for whom the consultant/attorney provided labor relations advice or service "regardless of the purpose of the advice or service," and all receipts and disbursements from those employers in connection with those services. 

Although commentators urged the DOL to narrow the scope of the information that must be disclosed in Form LM-21 so that disclosure is required only for those receipts and disbursements pertaining to clients for whom persuader activities were undertaken, the DOL refused to address such concerns in the current rule.  The DOL explained:  “issues arising from the reporting requirements of the LM-21 are not appropriate for consideration under this rule. The [DOL] has expressed its intent to address issues surrounding the Form LM-21 in a separate rulemaking in the future.”  Such separate future rulemaking is currently scheduled to begin in September 2016, leaving great uncertainty for consultants/attorneys and the employers that they represent until the issue is clarified.

Takeaway for Employers

Unions will likely use the reported information in organizing campaigns and collective bargaining negotiations.  Employers should therefore discuss the reporting obligations and potential implications with counsel before engaging a persuader.

The new rule will almost certainly be subject to legal challenge. We will provide updates in the event of any developments.

*   *   *

If you have any questions regarding the persuader rule, please do not hesitate to contact us.