The U.S. Department of Labor has announced that its controversial new regulations on “persuader” activities will take effect on April 25, 2016. These regulations significantly alter the interpretation of the 57-year-old Labor Management Reporting and Disclosure Act (LMRDA) by redefining disclosure requirements and by narrowing the LMRDA’s exemption for “legitimate” attorney-client communications. Several organizations have already announced their intention to challenge the legality of this rule before it even takes effect.

The new regulations on persuader activity, first proposed by the Obama administration in 2011, are based upon a brand new interpretation of a 1959 federal law intended to eliminate union corruption and abuse of power. The new persuader rule requires employers and consultants to report any of the following activities:

• Planning or conducting employee meetings;
• Training supervisors or employer representatives to conduct meetings;
• Coordinating or directing the activities of supervisors or employer representatives;
• Establishing or facilitating employee committees;
• Drafting, revising or providing speeches;
• Developing employer personnel policies designed to persuade employees; and
• Identifying employees for disciplinary action, reward, or other targeting.

Previously, such disclosures were only required when an employer engaged outside consultants to communicate directly with employees about how to exercise their rights to organize, form a union, and bargain collectively. The significance of the new regulations is that they require disclosures even when the consultant or attorney will have no direct interaction with employees. The Department of Labor compares this change to pulling back the curtain in The Wizard of Oz to reveal the identity of the person who scripted the employer’s message and managed its delivery.

The new persuader regulations do not prohibit employers from hiring consultants, nor do they place new limits on what assistance those consultants may provide. However, the DOL believes that disclosing the identity of the consultants will help employees make a more informed choice in exercising their rights. The clear, yet unstated, motive underlying these changes is to discourage management, attorneys, and law firms from counseling and advising employers with respect to union organizing efforts.

It is no surprise that the persuader rules are strongly supported by major labor organizations such as the Service Employees International Union and the AFL-CIO. The U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) oppose the new regulations, believing the changes stifle employers’ free speech rights to counter union organizing, and the American Bar Association has expressed concerns that the rules will interfere with attorney-client privilege. It is expected that several employer groups will challenge these regulations in court while congressional Republicans vote to overrule the persuader rules under the Congressional Review Act, 5 U.S.C. §§ 801-80.

The persuader regulations are based on section 203 of the LMRDA, 29 U.S.C. §433. The LMRDA does not require an employer or its consultant to file a report covering services involving advice to an employer or representing the employer in collective bargaining before any court or administrative agency, in arbitration, or when advising the employer on any related question. Further, the LMRDA specifically states that it shall not be construed to require an attorney who is a member in good standing of the bar of any state to include any information lawfully communicated to the attorney by clients in the course of a legitimate attorney-client relationship in any report required by the LMRDA. It is this exemption for attorney-client communications that will form the basis of anticipated court challenges to the persuader regulations.

The persuader regulations exempt agreements where an attorney or consultant merely provides “advice” to an employer, which is now defined as providing “recommendations regarding a decision or course of conduct.” The regulations also exempt any agreement that involves only the provision of legal services. The DOL attempts to skirt the statutory exemption for attorney-client privilege by requiring attorneys to disclose the identity of their clients, the fee arrangement, and the scope and nature of services provided only when the attorneys provide services other than legal services with the intent to persuade employees regarding union representation or collective bargaining.

The International Franchise Association has already stated it is considering a court challenge to the DOL’s persuader rules. NAM has stated it “will aggressively pursue legislative and legal action to overturn this dangerous, unnecessary rule.” The United Associated Builders and Contractors “is committed to fighting this burdensome, costly and poorly crafted rule through every available avenue.”

If you have any questions about how this could impact your business, please contact:

• Caroline J. Berdzik (609.986.1314; cberdzik@goldbergsegalla.com)
• Sean P. Beiter (716.566.5409; sbeiter@goldbergsegalla.com)
• Or another member of the Goldberg Segalla Employment and Labor Practice Group.