Regulatory Transactions

Doug Hass | Franczek Radelet P.C.

In June 2011, the U.S. Department of Labor (DOL) proposed new regulations that would significantly narrow the DOL’s interpretation of the Labor-Management Reporting and Disclosure Act (LMRDA) that  has been in force since 1962. Dubbed the “persuader rules,” the regulations address Section 203 of the LMRDA, which, among other things, requires employers to file reports with the DOL when they hire consultants or contractors (including attorneys) to persuade employees on the issue of unions. The latest report from the DOL to the federal Office of Information and Regulatory Affairs states that the DOL plans to take final action in April 2013 on the new rules.

Section 203(c) of the LMRDA has always contained an exception to the reporting requirement for “advice” given to an employer. For the last 50 years, the DOL interpreted the advice exception to include an attorney’s drafting of letters or speeches to employees or an attorney’s legal reviews of employer communications. Put simply, under the current interpretation, as long as the employer has the discretion to either accept or reject oral or written material submitted by an attorney, then the activities are not reportable under the LMRDA. Only if an attorney (or other consultant or contractor) met directly with employees would the activities become reportable under the longstanding DOL interpretation.

Under the proposed regulations, the “advice exception” would be limited to advising employers on what they may lawfully say to employees, on their compliance with the law, or on general guidance about NLRB practice or precedent. Reportable activities would now include any actions, conduct, or communications on behalf of an employer that could directly or indirectly persuade workers concerning their right to organize and bargain collectively, regardless of whether the attorney/consultant/contractor has direct contact with workers and regardless of whether the employer accepts or rejects the proposals. Furthermore, the DOL’s new interpretation would specifically require reporting the preparation of persuasive scripts, letters, videos, or other digital media for use by an employer or revisions to an employer’s documents by an attorney or consultant.

The DOL also proposed significant changes to the LM-10 and LM-20 forms, used by the employer and consultant respectively, to disclose reportable activity. These revised forms give examples of activities that would be reportable “if the object thereof was, directly or indirectly, to persuade employees,” such as:

• Drafting, revising, or providing written materials for presentation, dissemination, or distribution to employees
• Drafting, revising, or providing a speech for presentation to employees
• Drafting, revising, or providing audiovisual or multi-media presentations for presentation, dissemination, or distribution to employees
• Drafting, revising, or providing website content for employees
• Developing or administering employee attitude surveys concerning union awareness, sympathy, or proneness
• Training supervisors or employer representatives to conduct individual or group employee meetings
• Coordinating or directing the activities of supervisors or employer representatives
• Developing personnel policies or practices
• Conducting a seminar for supervisors or employer representatives

The proposed rule elicited nearly 6,000 comments, including negative comments from the American Bar Association, the U.S. Chamber of Commerce, and numerous other business groups.

The proposed changes drastically increase the reporting requirements for employers and attorneys/consultants/contractors and significantly amend the reporting forms and instructions under LMRDA Section 203. The DOL estimated that its new rules will triple the number of reports that employers must file and increase the reports filed by firms engaged in persuader activities twelve-fold. By narrowing the advice exception, the DOL would broaden the scope of conduct that could trigger potential criminal liability on the part of employers (and others engaged in persuader activity) who fail to comply.

The newly defined standards, particularly when combined with the LMRDA’s potential criminal sanctions for willful non-reporting, could substantially interfere with an employer’s attorney-client relationship, disrupt an employer’s ability to obtain legal advice when confronted by union activity, and have a chilling effect on employer free speech during such campaigns. We will continue to monitor the DOL’s activities between now and April, and will keep you updated as to further developments.