Employers without union-represented workforces may be tempted to breeze over articles about union or National Labor Relations Act (NLRA) matters, but, in recent years, federal agencies have compelled their attention. All employers need to give immediate attention to a long-percolating issue presently before the Department of Labor (DOL). If you are an employer who relies on third-party advisors to provide guidance about encouraging employees to reject union organizing efforts, then read on! Under recently published final rules set to take effect in the coming months, you will need to publicly disclose the receipt of most such advice – including how much you paid for it, the specific nature of the services provided, the dates of service, and a copy of any written agreement with the advisor.
The LMRDA—Employer and Consultant Reporting & The “Advice Exemption”
The Labor Management Reporting and Disclosure Act of 1959 (LMRDA) amended the National Labor Relations Act (NLRA) in many ways, including creating detailed reporting and recordkeeping requirements for employers and labor relations and HR consultants. Under Section 203(a) of the LMRDA, an employer must report on an annual basis certain expenditures and activities, including any agreement or arrangement with a third-party consultant, to persuade employees about their collective bargaining rights or to obtain certain information concerning the activities of employees or a labor organization in connection with a labor dispute. Under the LMRDA, the providers of such persuader services must also report the arrangements with employer clients.
For nearly 30 years, however, the DOL has allowed for an “advice exemption” on such reporting for a service provider who “has no direct contact with employees and limits his activity to providing to the employer or his supervisors advice or materials for use in persuading employees which the employer has the right to accept or reject.” As a result, law firms and other HR advisors have very carefully avoided engaging in such direct contact with client employees about union persuasion matters and very few employers have ever had to file LMRDA reports.
Final Rules Dramatically Narrow the Advice Exemption, Resulting in Expansion of Reportable Actions
On March 24, 2016, the DOL published final rules that dramatically narrowed the advice exemption and will require considerably more employer and consultant reporting. In the rules, the DOL abandons its long-standing interpretation of the advice exemption and announced a new, much broader standard for reportable conduct: if the object of the outside consultant’s effort is to dissuade client employees from supporting a union, then that effort is reportable even if the consultant has no direct contact with the employees.
More specifically, the final rules detail the following four categories of reportable persuader consultant activity that do not involve any direct employee contact:
- Planning, Directing, or Coordinating Supervisors or Managers. Reporting is required if the consultant—with an object to persuade—plans, directs, or coordinates activities undertaken by supervisors or other employer representatives. This includes both meetings and other less structured interactions with employees.
- Providing Persuader Materials. Reporting is required if the consultant provides—with an object to persuade— material or communications to the employer, in oral, electronic (including, e.g., email, Internet, or video documents or images), or written form, for dissemination or distribution to employees. Reporting would be required, for example, if the consultant drafted, revised, or selected persuader materials for the employer to disseminate or distribute to employees.
- Conducting a Seminar for Supervisors or Other Employer Representatives. Some law firms and HR consulting firms hold seminars on a range of labor relations matters, including how to persuade employees concerning their organizing and bargaining rights. Seminar agreements must now be reported, but only if the HR consultant develops or assists the attending employers in developing anti-union tactics and strategies for use by the employer, the employers’ supervisors or other representatives. Employers attending general union avoidance seminars will not be required to file reports concerning their attendance.
- Developing or Implementing Personnel Policies or Actions. Reporting is only required if the HR consulting firm develops or implements personnel policies or actions for the employer with an object to persuade employees. For example, a consultant’s identification of specific employees for disciplinary action, or reward, or other targeting based on their involvement with a union representation campaign or perceived support for the union would be reportable. As a further example, a consultant’s development of a personnel policy during a union organizing campaign in which the employer issues bonuses to employees equal to the first month of union dues, would be reportable.
Additionally, any persuasion activity that involves direct client employee contact will remain reportable.
These final rules could have a drastic impact on the confidential nature of the attorney/client relationship. Although the LMRDA expressly exempts “information which was lawfully communicated to such attorney by any of his clients in the course of a legitimate attorney-client relationship,” the DOL’s final rules push attorneys right up to the edge of breaching client confidentiality. Perhaps not surprisingly, several professional attorney groups, including the American Bar Association, have opposed the rules on the basis that they would require disclosure of confidential client communications.
What Consulting and Counseling Activity Will Remain Exempt from Reporting?
Under the final rules, no report will be required if an HR or legal consultant “exclusively counsels” employer representatives about what they may lawfully say to employees, ensures a client’s compliance with the law, or provides guidance on NLRB practice or precedent. Additionally, no report will be required if the consultant exclusively provides representation to an employer before any court, administrative agency, or arbitration tribunal or in collective bargaining.
Other Changes Under the Final Rule – New Reporting Forms & Method
The final rules also include important changes to the LMRDA reporting forms by expanding the amount of detail required from both the employer and the HR or legal services provider. Prior reporting forms allowed very general responses for the types of services provided, for example. The new reporting forms require a specific description of the services and continue to require the amounts paid for those services. The consultant must report this information within 30 days after being engaged to provide persuader services and also annually, along with the details of such arrangements, including amounts received from the employer client and a copy of any related client agreements. Going forward, both the employer reports and the consultant reports must also be filed electronically, which the DOL notes will allow employees, unions and the public to view them on the DOL website and very soon after submission.
Continued LMRDA Enforcement and Significant Penalties
Employers need to take note of these changes since the DOL has the authority to conduct investigations and impose significant penalties concerning compliance with the LMRDA reporting requirements. The Secretary of Labor may file civil actions in federal court to restrain violations and ensure compliance with the reporting requirements. Employers or consultants who knowingly fail to disclose material facts in reports or willfully fail to file a LMRDA report will face serious criminal penalties, including fines of up to $100,000 and imprisonment for up to one year.
The final rules become effective on April 25, 2016 but only apply to arrangements, agreements and related payments made on or after July 1, 2016. On March 30, 2016, several business groups brought a lawsuit against the DOL challenging the legality of the rules. Two similar lawsuits were filed just a few days later. This litigation may result in the rules being delayed. In light of the very sensitive nature of the information that will be required in publicly available LMRDA reports, we encourage employers to keep a close eye on the rollout of these final rules.