The Labor-Management Reporting and Disclosure Act requires labor organizations, consultants, and employers to file reports and disclose expenditures on labor-management activities. For over fifty years, the DOL has interpreted the provisions of the Act to require reporting only for what are known as “direct” persuasive activities, such as when employers hire consultants or attorneys to personally and directly deliver counter-union messages to employees. Under the Act, mere “advice” pertaining to persuasive activities is not reportable. The advice exemption permitted law firms and employers to avoid the reporting obligations since the law firms were not actually engaged in direct persuasion, but only in advice. However, in March of this year, the DOL set forth a Final Rule significantly broadening what is reportable by employers and consultants in an effort to require reporting on activities that have been viewed as “advice.” Significantly, the Northern District of Texas today issued an order preliminary enjoining the Department of Labor from enforcing its Final Rule until a lawsuit challenging the Final Rule can be fully litigated. Unless that preliminary ruling or other pending challenges to the Final Rule are successful and upheld on appeal, the Final Rule will apply to agreements entered into on or after July 1, 2016. Two important updates concerning the Final Rule are covered in this alert, one of which necessitates an employer taking action before July 1, 2016.

Requirements under the Final Persuader Rule

The Final Rule requires consultants and employers to report not only direct, but also indirect persuasive activities, such as providing advice concerning a speech that an employer then delivers to employees.

The DOL has divided reportable indirect persuasive activities into four categories: (1) planning, directing or coordinating activities undertaken by supervisors or other employer representatives including meetings and interactions with employees; (2) providing material or communications for dissemination to employees; (3) conducting a union avoidance seminar for supervisors or other employer representatives; and (4) developing or implementing personnel policies, practices or actions for the employer. Specific examples of reportable indirect activities include, but are not limited to: planning or conducting employee meetings; training supervisors or employer representatives to conduct meetings; coordinating or directing the activities of supervisors or employer representatives; establishing or facilitating employee committees; drafting, revising or providing speeches; developing employer personnel policies designed to persuade employees; and identifying employees for disciplinary action, reward or other targeting.

Non-reportable indirect activities may include: providing an overview of NLRB case law relating to the right of employees to organize and bargain collectively; reviewing employer communications for legality; representing an employer before court, agency or arbitration; and providing employers with publicly available information about unions, such as published labor contracts and required reports for governmental agencies.

DOL Representative States that New Rule Does Not Apply to Multi-Year Agreements Entered into Before July 1, 2016

In response to the Final Rule, several lawsuits have been filed challenging the rule, including one where the Arkansas State Chamber of Commerce and several trade associations representing employers filed a complaint in the United States District Court for the Eastern District of Arkansas. During this lawsuit, which is still ongoing, the DOL filed a Status Report which stated “the position of the DOL is as follows”:

While the effective date of the Rule is April 25, 2016, the rule is only applicable to arrangements and agreements entered into on or after July 1, 2016…. [T]he Department will not apply the Rule to arrangements or agreements entered into prior to July 1, 2016, or payments made pursuant to such arrangements or agreements. Consequently, under the Rule no employer, labor relations consultant or other independent contractor will have to report or keep records on any activities engaged in prior to July 1 that are not presently subject to reporting or file the new Forms LM-10 or LM-20 (revised pursuant to the Rule) for any purpose prior to July 1.

The DOL took this position to explain why the parties had agreed to allow the DOL an extension of time to respond to the Plaintiffs’ Motion for Preliminary Injunction – i.e. because the Final Rule does not apply to agreements entered before July 1, 2016, the preliminary injunction determination could be delayed.

The U.S. Chamber of Commerce has interpreted this Status Report to take the position that agreements for indirect persuading entered into prior to July 1, 2016 are not reportable.

Agreements entered into prior to July 1, 2016 are not reportable, even if activities undertaken (and payments made) pursuant to such an agreement occur after July 1 (this applies to indirect persuader activity only; direct persuading will always require reporting). Thus, one could interpret this to mean that indirect persuading activities that occur after July 1, 2016 (even months or years after) are not reportable if they are made pursuant to an open-ended or multi-year agreement entered into prior to July 1, 2016.

In addition, the DOL has recently interpreted the Final Rule to exclude an agreement or arrangement signed before July 1, 2016, even if the services and payments occur after July 1. In an email exchange between the U.S. Chamber of Commerce and the DOL reported by numerous sources as occurring on June 16, 2016, a representative of the DOL said:

Services and payments made pursuant to a multi-year agreement, even if they occur after July 1, are not required to be reported on the new Form LM-20, so long as the agreement was signed prior to July 1. The prior form applies.

It has also been reported by sources that the DOL has stated this position in response to questions at seminars concerning the Final Rule. While a formal statement has not been made by the DOL regarding its position with respect to multi-year deals, these statements raise the possibility that an employer could avoid reporting obligations for indirect persuasion activities by entering into a multi-year agreement prior to July 1.

One court has preliminarily prohibited enforcement of the Final Rule, while another court permitted enforcement despite heavily criticizing the Final Rule

In one of the lawsuits that has been filed challenging the lawfulness of the Final Rule, on June 27, 2016, a Texas district court granted a preliminary injunction to a an organization of employers in part because the Final Rule would limit employers’ ability to have closed-door, confidential communications with their attorneys. Previously, on June 22, 2016, a Minnesota federal district court found that the plaintiffs (a group of law firms) had a likelihood of success on the merits on its position that the DOL’s Final Rule conflicts with the Act’s advice exemption by requiring the reporting of activity that is mere advice simply because its aim is persuasive activity. That court, however, denied preliminary injunctive relief because it found that the plaintiffs failed to show that the requirement to report this information would cause irreparable harm. The analysis of these court denied injunctive relief, the court is well reasoned and affords a roadmap for other courts to follow in finding that the Final Rule’s interpretation of the advice provision is inconsistent with the Act. However, whether such challenges will ultimately prove successful is uncertain.

Recommendation: Sign Multi-Year Agreement Covering Indirect Persuasion Before July 1

It remains to be seen whether indirect persuasion activities will indeed be reportable when they constitute advice. Whether the activity is advice or subject to the attorney/client privilege will likely depend on a case by case analysis and the nature of the particular services provided. In light of the current uncertainty, for employers who have concerns about the possibility of reporting to the public information concerning the amount of money and firms engaged in response to union organizing efforts, it is advisable to enter into multi-year agreements prior to July 1, 2016 in light of the possibility that indirect persuasion activities performed pursuant to that agreement are not reportable. In entering into those agreements, it is important, however, to remember that direct persuasion activities have always been reportable. In this regard, if the agreement covers both advice and direct persuader activities, the DOL’s position is that the agreement is still reportable. Accordingly, this agreement should only cover advice concerning persuader activities and indirect persuasion.