Labor Department Issues "Persuader" Final Rule

The Department of Labor-Management Standards’ (“OLMS”) final “Persuader” rule, issued on March 23, 2016, will have a significant impact on both employers and their labor counsel during unionization campaigns.  The rule is the most recent attempt by the current administration to strengthen labor unions.

The Persuader rule requires an employer to disclose details about its relationships with outside consultants—including third-party attorneys—engaged to assist in certain activities during unionization campaigns.  Unlike the current rule, the revised Persuader rule requires disclosure regardless of whether the consultant or attorney has direct contact with the employees.[1]  As a result, the rule will require law firms who assist employers in such activities to disclose the relationship and their fees.[2] 

This article focuses on the Persuader rule and how it represents a major change to the Advice Exemption, potential challenges to the implementation of the rule, and the rule’s impact on employers and their labor counsel.

A.        The Persuader Rule Represents Seismic Shift in Labor Law Disclosures

Under the Labor-Management Reporting Disclosure Act (“LMRDA”), employers are required to disclose the hiring of outside consultants hired to tailor management messages during union organizing campaigns.[3]  The LMRDA’s Advice Exemption exempted disclosures where the outside consultant did not directly communicate with employees and the employer remained free to accept or reject materials, such as speeches and letters, drafted by the outside consultant.[4]  The Persuader rule, which will take effect July 1, 2016,[5] effectively eliminates the Advice Exemption, requiring employers to disclose the hiring of outside consultants hired during a union campaign if the consultant: (1) plans, directs, trains, or coordinates mangers to persuade workers; (2) drafts or revises speeches; (3) provides persuader materials to disseminate to workers; (4) conducts union avoidance seminars; and (5) develops or implements personnel policies designed to persuade employees.[6]  The Persuader rule may require disclosure even where consultants or labor counsel have no direct contact with employees.[7]  However, the Persuader rule continues to exempt traditional advice, defined as “recommendations regarding a decision or course of conduct.”[8] 

B.        Potential Challenges

Despite the publication of the final rule, there are still several potential challenges that may prevent the Persuader rule’s implementation.  First, Congress may take action, such as pursuing a Congressional Review Act challenge,[9] appropriations rider, or even standalone legislation.[10]  However, President Obama would likely veto any Congressional action.  The strongest challenge to the Persuader rule may be legal claims that the OLMS went far beyond what Congress intended when passing the LMRDA.[11]

C.        Impact on Employers and their Labor Counsel.

The Persuader rule will have a significant impact on both employers and their labor counsel.  The OLMS estimates that between 71-87% of employers hire outside consultants to help the employer get its message across regarding the effects of unionization during union-organizing campaigns.[12]  One of the strongest weapons employers have both before and during unionization efforts is to craft their argument as to why unionization may not be the best route for the employees and the company.  Employers often employ labor counsel to help their campaign.  Accordingly, the Persuader rule, coupled with other recent National Labor Relations Board (“NLRB”) decisions, will fundamentally change how employers campaign and engage unionization efforts. 

Under the Advice Exemption, employers hiring consultants had a bright-line rule to follow, and generally if the consultant did not communicate directly with employees, the employer did not have to disclose the consultant.  Employers will now have to determine whether the more ambiguous Persuader rule requires disclosure.  Employers concerned that borderline activities may require disclosure may opt against seeking advice from outside consultants and legal counsel, resulting in employers failing to get advice on a confusing area of the law during an incredibly stressful time.[13]  Employers who do seek guidance on union avoidance will likely face a lose-lose situation, as the guidance they need will then be used against them by union organizers during the campaign.[14] 

The Persuader rule will also impact the attorney-client relationship.  Outside law firms may elect not to provide advice to employers because the law firm would have to disclose its fees in filings to the OLMS, resulting in a chilling effect on legal advice.[15]  Such public disclosures would also aid unions in their negotiation efforts by being able to point to amounts spent by law firms during both current and previous union-organization campaigns.  Further, the Persuader rule has the potential to “undermine both the confidential client-lawyer relationship and the employers’ fundamental right to counsel.”[16]  Accordingly, the Persuader rule will have a significant impact on both employers and their labor counsel during union-organization campaigns.

D.        Conclusion

The Persuader rule should be viewed as part of the Obama administration’s efforts to strengthen the role of labor unions and minimize the ability of management to effectively campaign against union representation.  Last year, the NLRB adopted the so-called “Quickie-Election rule” to speed up the election process.  Like the Quickie-Election rule, the Persuader rule represents a drastic change in disclosure requirements during unionization campaigns.  While there are potential challenges to delay or prevent the rule’s implementation, the rule will have a significant impact on both employers and their labor counsel.  Campbell Litigation will continue to track the Persuader rule and its potential challenges, and report back when further updates are available.

 

[1] Tyrone Richardson, Labor Department Unveils ‘Persuader’ Final Rule, Bloomberg BNA Daily Labor Report (Mar. 23, 2016).

[2] Noam Scheiber, Rule to Require Employers toDisclose Use of Anti-Union Consultants, The New York Times (Mar. 23, 2016), http://nyti.ms/22Fjx8n (last accessed Mar. 23, 2016).

[3] Retail Industry Leaders Association, Retailers React to Harmful DOL Persuader Rule, PRNewswire (Mar. 23, 2016).

[4] Adam C. Abrahms and Steven M. Swirsky, Department of Labor Releases New Persuader Rule Intended to Aid Union Organizing, The National Law Review (Mar. 23, 2016), http://www.natlawreview.com/print/article/department-labor-releases-new-persuader-rule-intended-to-aid-union-organizing (last accessed Mar. 23, 2016).

[5] Lydia Wheeler, DOL issues union ‘persuader rule’, The Hill (Mar. 23, 2016), http://thehill.com/regulation/pending-regs/274022-dol-unveils-persuader-rule (last accessed Mar. 23, 2016).

[6] Richardson, supra note 1.  See also Brian Mahoney and Marianne Levine, Persuader rule out today, Politico (Mar. 23, 2016), http://www.politico.com/tipsheets/morning-shift/2016/03/persuader-rule-out-today-213362 (last accessed Mar. 23, 2016).

[7] The Persuader Rule requires the employer to disclose the hiring and amount spent on outside consultants, but the employer is not required to disclose the substance of the outside consultants’ messages. 

[8] Richardson, supra note 1.

[9] The Congressional Review Act allows Congress sixty (60) “legislative days” to review “major” published rules. See Chris Opfer, Trade, Overtime Showdown on Deck, as Lawmakers Look to Slow Election Season, Bloomberg BNA Daily Labor Report 2016 Labor Outlook, S-34 (Jan. 25, 2016).

[10] Chris Opfer, House Republicans Want Labor Policy Riders, Bloomberg BNA Daily Labor Report, (Mar. 22, 2016).

[11] Abrahms and Swirsky, supra note 4.

[12] Mahoney and Levine, supra note 6.

[13] Robin Roberts, Retailers Say New Union Organizing Rules Will Have a‘Chilling’ Effect on Free Speech, National Retail Federation (Mar. 23, 2016), https://nrf.com/media/press-releases/retailers-say-new-union-organizing-rules-will-have-chilling-effect-free-speech (last accessed Mar. 23, 2016). 

[14] Retail Industry Leaders Association, supra note 3.

[15] Scheiber, supra note 2.

[16] Jacob Gershman, Businesses and Lawyers Object to Labor Department’s New ‘Persuader’ Rule, The Wall Street Journal (Mar. 23, 2016), http://blogs.wsj.com/law/2016/03/23/businesses-and-lawyers-object-to-labor-departments-new-persuader-rule/ (last accessed Mar. 24, 2016).

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