Client Bulletin #582

As we have previously reported, the U.S. Department of Labor on March 24 issued regulations that adopt a new interpretation of the "persuader" reporting requirements under the Labor Management Reporting and Disclosure Act. If not enjoined by a court before July 1, the regulations will take effect for agreements entered on or after that date between private sector employers and their outside consultants and lawyers that are for “persuader activity.” The regulations, where applicable, will impose reporting obligations for employers and their attorneys and consultants that are potentially significant.

Under the new regulations, “reportable” persuader activity includes all outside consultant and lawyer activity for covered employers that has a “direct or indirect object” of persuading employees in the exercise of their union organizing rights. Employers, labor consultants, and lawyers, subject to limited exemptions, will be required to report persuader activities and monies for such activities on Forms LM-10 (Employer Report) or LM-20 (Consultant Report). These two forms dovetail to require reporting on another form, Form LM-21 (Consultant Receipts and Disbursements Report).

The current rule similarly requires private sector employers and their labor consultants to report on persuader activity. But an "advice exemption" excludes the activities of attorneys and consultants that are "advisory" to the employer (in other words, as long as the attorneys and consultants do not communicate directly with employees, their activities are covered by the exemption).

The new DOL regulations limit the advice exemption to (1) advice that does not have persuasion of employees as its “object,” and (2) representation in collective bargaining, and legal and administrative proceedings. Any service that does not fall into one of these categories is labeled by the DOL’s new interpretation of the LMRDA as indirect or direct persuader activity and not "advice."

The DOL has clarified that the new regulation will not apply to any agreement entered into before July 1 that would not have resulted in reporting obligations (even though the services and payments for the services occur on or after July 1). Thus, agreements made before July 1 are “grandfathered” under the current rule.

As might be expected, at least three lawsuits seeking to block the “Persuader Rule” were filed shortly after the DOL issued the rule in March. Links to copies of all three lawsuits are available here. The outcome of those lawsuits in the near and longer terms is uncertain, and the DOL is not backing down. Private sector employers using outside consultants or attorneys to handle ANY labor relations matters should stay up to date and in close communication with their lawyers. We will keep you posted as events unfold.

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