DOL Takes Last Step in Finalizing Persuader Rule Revision
The Department of Labor (“DOL”) took the final step towards finalizing its revision of the “persuader rule” on December 7, 2015. The revision was first proposed in July 2011, but because of initial push-back, it fell to the wayside for several years. Due to recent efforts by the DOL, the revision has been revived.
The persuader rule comes out of the Labor-Management Report and Disclosure Act of 1959 (“LMRBA”). Generally, the LMRBA regulates financial reporting and disclosure requirements by labor organizations and employers. The Office of Management and Budget (OMB) received the DOL’s revision to the persuader rule on December 7, 2015. Once approved, the rule can be published in the Federal Register. The DOL’s revision will drastically limit the “advice exception” to the persuader rule.
Currently, the LMRDA persuader rule requires employers to report to the DOL every time they use a consultant to persuade employees directly or indirectly regarding the employees’ rights to organize or bargain collectively. If employers fail to report, penalties could be as steep as one year of jail time and a $10,000 fine. However, there is an exception to the persuader rule, known as the “advice exception.” The advice exception has been interpreted by the DOL, since 1962, to exclude an employer’s consultation with its attorney, as long as the employer’s attorney has no direct contact with employees and the employer is free to reject the attorney’s recommendations.
The proposed revisions to the persuader rule narrows the advice exception. Specifically, the revised interpretation states:
With respect to persuader agreements or arrangements, “advice” means an oral or written recommendation regarding a decision or a course of conduct.
In contrast to advice, “persuader activity” refers to a consultant’s providing material or communications to, or engaging in other actions, conduct, or communications on behalf of an employer that, in whole or in part, have the object directly or indirectly to persuade employees concerning their rights to organize or bargain collectively. Reporting is thus required in any case in which the agreement or arrangement, in whole or in part, calls for the consultant to engage in persuader activities, regardless of whether or not advice is also given.
This change means that employers who have their attorneys engage in certain activities will have to publically report to the DOL. Those activities include: drafting, revising or providing materials to an employer for presentation, dissemination or distribution to employees, directly or indirectly; training supervisors or employer representatives to conduct individual or group meetings designed to persuade employees; establishing employee committees; research or investigation concerning employees or labor organizations; and other oversight activities.
The proposed rule change has several critics, many of whom argue the rule change is improper because it eliminates the advice exception from the statute. The American Bar Association also argues the rule change is inconsistent with lawyer-client confidentiality.
Until the proposed change is actually published in the Federal Register, employers simply need to be aware of the proposed change and the potential effects it could have on its reporting practices.