06.30.2016

|

Updates

A federal judge in Texas has issued a nationwide injunction against the new labor “persuader” reporting requirements that were due to take effect on July 1, 2016.  The ruling does not impact earlier employer reporting requirements, which remain in effect.

Background

The reporting requirements blocked by the Texas court relate to Section 203 of the Labor-Management Reporting and Disclosure Act of 1959, which requires every person to file reports with the U.S. Department of Labor (DOL) when, pursuant to an arrangement or agreement with an employer, he or she

undertakes activities where an object thereof is  . . . 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[.] 

These activities are commonly referred to as “persuader” activities, and those engaging in such activities are commonly referred to as “consultants.”  The reporting requirements apply alike to nonlawyers and lawyers.

A consultant who agrees to engage in persuader activities is required to report to the DOL detailed information about the agreement and services on Form LM-20 within 30 days after entering into the agreement.  Within 90 days after the end of the consultant’s fiscal year, the consultant must file Form LM-21, which requires the reporting of even more extensive information, including the identity of clients for whom the consultant provided any labor relations advice or services and the amount received from them for those services.  An employer that has an agreement with a consultant for persuader activities is required to file its own annual report on Form LM-10, which identifies all persuader consultants it used during the year and the payments made to each of them.  Once filed, all these report forms are open to the public.

Excluded from the reporting requirements are agreements to provide “advice” (the advice exception).

For years, the advice exception was construed to cover the giving of advice and the providing of services to employers to use to persuade employees in union organizing drives, negotiations and strikes, so long as the consultant did not communicate directly with the employees.  That meant, for example, that a consultant could prepare a speech designed to persuade employees about union representation without triggering the reporting requirement, so long as the speech was delivered by the employer.  If, however, the consultant delivered the speech to the employees, the reporting requirement applied.  In the trade, the difference was referred to as “direct” persuader activity and “indirect” persuader activity.  Direct persuader activity was reportable; indirect persuader activity was not.

Working within these parameters, labor lawyers and nonlawyer labor consultants have long provided persuader services, such as preparing and revising language for speeches or other campaign literature to be delivered to employees in union organizing drives, recommending strategies to persuade employees to vote against union representation and other services to assist employers in union election campaigns and labor disputes.  When the services were limited to indirect persuader activities, neither the lawyers nor their clients had a reporting obligation.

New Reporting Requirements Now Blocked by Texas Court

On March 24, 2016, the DOL announced new reporting requirements that essentially eliminated the distinction between direct and indirect persuader activities.  The new requirements would have mandated the reporting of all agreements between a consultant and an employer where “an object [is], directly or indirectly, to persuade employees to exercise or not to exercise, or to persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing.”  If the agreement covered both reportable and nonreportable services, the entire agreement would have to be reported.  The new reporting requirements would have applied to all agreements entered into on or after July 1, 2016.

Expands Reportable Activities and Services.  The new requirements would greatly expand the activities and services that must be reported to include many activities that are ordinarily performed by an employer’s lawyers, such as drafting documents and communications that an employer may decide to provide to its employees, training supervisory employees and drafting employment policies. 

Limits Advice Exception.  In turn, the new reporting requirements would significantly limit the advice exception.  For example, even though a lawyer would be permitted to review employer-prepared campaign materials for legality, he or she would not be permitted to make suggestions to increase their persuasiveness.  If the lawyer was hired to help make the materials more persuasive, or to make suggestions about campaign strategy, the entire agreement would have to be reported.

Legal Challenges

Several lawsuits were filed challenging the requirements on a number of different grounds.  In the first to be decided, a federal judge in Minnesota ruled that the requirements were likely improper because they encroached too far on the advice exception.  However, that judge did not issue an injunction because he did not believe that the plaintiffs had established that they would be irreparably harmed while the case proceeded to a final determination. 

In the second case to be decided, a federal judge in Texas agreed with the Minnesota judge that the new requirements were likely improper.  In the Texas case, however, the judge concluded that the plaintiffs there had established that they would be irreparably harmed if the new requirements were allowed to take effect.  He therefore issued a nationwide preliminary injunction against them pending further proceedings.

Status of New Rules

Because the new reporting requirements have been enjoined, they will not take effect on July 1, 2016 as originally scheduled.  The DOL has not yet publicly announced whether it intends to appeal the injunction or wait until the cases progress to final judgment at the trial court level. 

Cautionary Persuader Reporting Reminder

The preexisting reporting requirements remain in force.  Therefore, agreements between consultants and employers to engage in direct persuader activities, such as having the consultant directly interact with employees with an object to persuade them about how to exercise their rights, must be reported by both the consultant and the employer.  However, employers that limit direct employee interaction to their own supervisors and managers do not have to report those activities.

Employers that are targeted by a union organizing campaign or involved in collective bargaining or labor disputes should consult experienced counsel before engaging outside consultants to be sure that they are complying with the persuader reporting requirements that remain in effect. 

 © 2016 Perkins Coie LLP


 

Sign up for the latest legal news and insights  >