The DOL's Persuader Rule: Employers should act by July 1!
The U.S. Department of Labor (DOL) recently issued a new regulation that impacts what employers and their advisors are required to report about labor relations advice and services related to certain union organizing and avoidance activity. The new regulation, known as the “persuader rule,” requires employers and their advisors (including lawyers, law firms, consultants, and even trade associations) to file detailed reports specifying the work performed and the fees charged for each activity where the advisor provides assistance or advice on union organizing/avoidance activity considered by the DOL to be “persuader” activity.
Many non-union employers who have not had to follow this topic closely are surprised by this seemingly intrusive reporting requirement. This rule will make obtaining advice on union avoidance activities more difficult for employers. You may wonder if there is anything you can do to protect what you consider to be confidential consultations with labor relations advisors and, in particular, legal counsel.
In fact, there is.
The DOL recently clarified that to avoid the reporting requirement you need to have a signed service agreement in place prior to July 1, 2016, covering indirect persuader services. This provides a very short timeframe to act to protect your business from reporting and public disclosure of labor advice.
Below is a summary of the new aspects of the persuader rule and the limited time opportunity to sign a service agreement.
What does that mean in every day terms? Persuader activity, whether direct or indirect, is activity that is intended to influence employees about their rights to join a union and bargain collectively. The activity can be direct, such as meeting with employees to discuss reasons not to join a union. Persuader activity can also be indirect, such as an employer’s work with a consultant to plan strategies to stay union-free.
However, an “Advice Exemption” to the LMRDA was also long-interpreted to exclude reporting on indirect persuader activity by law firms, consultants and other advisers. This meant that lawyers and other consultants have not been required to report on activities such as preparing union avoidance material and supervisory training. Rather, labor relations consultants, including lawyers, were only required to report direct contact and communication with the employer’s employees.
Under the new rule, labor relations consultants (including lawyers) are required to report a single instance of “persuader advice or services” on a DOL Form LM-20 within 30 days of the engagement. Once a report is made, the consultant must annually report “all labor relations advice and services” on a DOL Form LM-21, even if the advice and services do not involve persuader activity.
Employers are also required to report the indirect persuader activity on a DOL Form LM-10 once a year within 90 days of the close of their fiscal year and must retain supporting documentation for five years.
All forms submitted to the DOL are available to the public through the DOL’s Online Public Disclosure Room.
Penalties for violating the reporting requirements can be harsh, including monetary fines and potentially prison time. For “willful” violations of the reporting requirement, which include false statements, material omissions or destruction of relevant documents, penalties may include fines up to $10,000 and imprisonment of up to one year. Signors of the LM-10 and LM-20 (typically, the president and treasurer for the employer and consultant) can be held personally liable for “knowing” false statements.
The DOL has now clarified that the reporting requirement for indirect persuader activity will not apply to an agreement for such services in place prior to July 1, 2016.
McDonald Hopkins has prepared an agreement for our clients to sign prior to July 1, 2016, so that they can receive advice and counsel on union avoidance, union organizing, and other indirect persuader services without the required reporting and financial disclosure obligations. If you have not already received a copy of the agreement, you may contact your McDonald Hopkins attorney or Miriam Rosen (mrosen@mcdonaldhopkins.com) to receive a copy of the agreement.
Although your company may be non-union and may not currently have any such issues pending, that may change in the future. It is prudent to take advantage of this limited opportunity to be “grandfathered” out of much of the reporting requirements by having a signed agreement for these services on file – even if such activities occur in the future.
Many non-union employers who have not had to follow this topic closely are surprised by this seemingly intrusive reporting requirement. This rule will make obtaining advice on union avoidance activities more difficult for employers. You may wonder if there is anything you can do to protect what you consider to be confidential consultations with labor relations advisors and, in particular, legal counsel.
In fact, there is.
The DOL recently clarified that to avoid the reporting requirement you need to have a signed service agreement in place prior to July 1, 2016, covering indirect persuader services. This provides a very short timeframe to act to protect your business from reporting and public disclosure of labor advice.
Below is a summary of the new aspects of the persuader rule and the limited time opportunity to sign a service agreement.
What is persuader activity?
The underlying concept is straightforward; the application is a bit trickier. Under the Labor-Management Reporting and Disclosure Act (LMRDA), persuader activity is “direct or indirect [activity] that is intended to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing.”What does that mean in every day terms? Persuader activity, whether direct or indirect, is activity that is intended to influence employees about their rights to join a union and bargain collectively. The activity can be direct, such as meeting with employees to discuss reasons not to join a union. Persuader activity can also be indirect, such as an employer’s work with a consultant to plan strategies to stay union-free.
Is the reporting requirement something new?
Yes and no. The long-standing rule under the LMRDA required employers and consultants to report direct persuader activity when labor relations consultants communicated directly with employees to persuade them concerning unionization.However, an “Advice Exemption” to the LMRDA was also long-interpreted to exclude reporting on indirect persuader activity by law firms, consultants and other advisers. This meant that lawyers and other consultants have not been required to report on activities such as preparing union avoidance material and supervisory training. Rather, labor relations consultants, including lawyers, were only required to report direct contact and communication with the employer’s employees.
How is the new persuader rule different?
Basically, the new rule changes the interpretation of the word “advice” and narrows the types of activities that are excluded from the LMRDA’s reporting requirements. The new rule requires the reporting of “indirect persuader activity” by a broad range of consultants providing labor relations advice. Significantly, the new rule expands the scope of covered services to include advice provided by lawyers on certain indirect union avoidance activity.What is indirect persuader activity under the new rule?
The new rule broadly defines indirect persuader activity to include the types of advice and services that employers often receive from lawyers and other consultants in trying to maintain a union-free workplace. These activities include:- Training for supervisors on “labor-management relations matters, including how to persuade employees concerning their organizing and bargaining rights”
- Preparing material for an employer to distribute to employees
- Developing or implementing “personnel policies or actions for an employer with an object to persuade employees”
What is the new reporting requirement?
Employers and consultants are still required to report on direct persuader activity. The significant change is the new reporting requirements related to indirect persuader activity.Under the new rule, labor relations consultants (including lawyers) are required to report a single instance of “persuader advice or services” on a DOL Form LM-20 within 30 days of the engagement. Once a report is made, the consultant must annually report “all labor relations advice and services” on a DOL Form LM-21, even if the advice and services do not involve persuader activity.
Employers are also required to report the indirect persuader activity on a DOL Form LM-10 once a year within 90 days of the close of their fiscal year and must retain supporting documentation for five years.
All forms submitted to the DOL are available to the public through the DOL’s Online Public Disclosure Room.
Penalties for violating the reporting requirements can be harsh, including monetary fines and potentially prison time. For “willful” violations of the reporting requirement, which include false statements, material omissions or destruction of relevant documents, penalties may include fines up to $10,000 and imprisonment of up to one year. Signors of the LM-10 and LM-20 (typically, the president and treasurer for the employer and consultant) can be held personally liable for “knowing” false statements.
Are non-union employers affected by this rule?
Yes, this rule has the most potential impact on non-union employers. This rule is specifically intended to require disclosure of activities that employers may take to keep their organizations union-free, such as obtaining advice on union avoidance activities and lawfully communicating with your employees about remaining union-free.When is this rule effective?
The persuader rule was effective on April 25, 2016 and was applicable to arrangements and agreements as well as payments “made on or after July 1, 2016.” The conflict between the effective and application dates initially created some confusion about the rule.The DOL has now clarified that the reporting requirement for indirect persuader activity will not apply to an agreement for such services in place prior to July 1, 2016.
What does this means for employers?
The DOL’s clarification on the new rule creates a window of opportunity for employers to enter into agreements prior to July 1, 2016, for indirect persuader services they may receive in the future.McDonald Hopkins has prepared an agreement for our clients to sign prior to July 1, 2016, so that they can receive advice and counsel on union avoidance, union organizing, and other indirect persuader services without the required reporting and financial disclosure obligations. If you have not already received a copy of the agreement, you may contact your McDonald Hopkins attorney or Miriam Rosen (mrosen@mcdonaldhopkins.com) to receive a copy of the agreement.
Although your company may be non-union and may not currently have any such issues pending, that may change in the future. It is prudent to take advantage of this limited opportunity to be “grandfathered” out of much of the reporting requirements by having a signed agreement for these services on file – even if such activities occur in the future.
