The Department of Labor (“DOL”) has issued a statutory interpretation or rule regarding “persuaders” hired by employers to assist the employer in dealing with a labor union. The rule went into effect at the end of April and it has already spawned three lawsuits and legislation in both houses of Congress to repeal it. The DOL’s persuader rule will require lawyers and their clients to each file detailed financial reports detailing the work performed for the client and the fees charged for each activity where the lawyer provides assistance or advice that is considered a “persuader” activity.
“Persuader” activities: new required financial reports
While the statute requiring reporting of “advice” has been in place for several decades, the regulations never applied the statute to lawyers or their activities not involving direct contact with employees. Now the DOL will require lawyers and their clients to report the financial amounts paid for advice given by lawyers when the lawyers assist in the organizing campaign or other “persuader” activities. At this point, legal work handling National Labor Review Board (“NLRB”) matters appears to be excluded. Under the rule, any amounts paid for advice rendered for example, in drafting letters or other materials sent to employees must be disclosed by both the client and the lawyer. Also, given the broad interpretation of the rule by the DOL, it is possible that the DOL could consider routine matters such as grievance work, arbitrations, contract negotiations as well as other traditional work performed by labor lawyers, as “persuader” work.
Reporting requirement timeframe
There appears to be a limited window of opportunity to avoid these reporting requirements. If an agreement is in place prior to July 1, 2016, there is most likely no reporting requirement for either the employer or its client. The final “persuader” rule states, “This final rule is effective on April 25, 2016. The rule will be applicable to arrangements and agreements as well as payments (including reimbursed expenses) made on or after July 1, 2016,” (emphasis added). The “effective” versus “applicable” dates are clearly confusing. To clarify this, as part of the legal challenge to the rule in the Eastern District of Arkansas, the DOL filed the attached status report which clearly states that July 1 is the practical effective date:
While the effective date of the Rule is April 25, 2016, the rule is only applicable to arrangements and agreements made on or after July 1, 2016, and to payments made pursuant to arrangements and agreements entered into on or after July 1, 2016. 81 Fed Reg. 15924. The Rule revises the reporting requirements, and related recordkeeping requirements, for certain agreements and arrangements entered into between employers and labor relations consultants or other independent contractors, and payments made pursuant to those agreements and arrangements. The 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.
What this means for you
While guidance on the rule is minimal, we have drafted an agreement for current clients to consider in the event there is any organizing activity or the need for “persuader” activities in any of your facilities and you seek our assistance or advice. Because Davis Brown believes this rule violates the attorney client privilege, if there is no agreement in place prior to July 1, 2016, we will not perform any work that could be deemed to require filing a report.
Davis Brown does not believe this rule applies to work representing employers before the NLRB or other similar agency where no persuader work is performed. In addition, while we believe this agreement is valid and avoids the applicability of the “persuader” rule, there is no guarantee that the courts or the DOL will follow the above quoted guidance and a report could be required.
Even if you are non-union, and even if there is no activity at your facility at the present time, we encourage you to consider signing this agreement in the event any union activity occurs at any of your facilities.
Should you have any questions or would like a copy of the agreement, please contact your employment and labor relations lawyer.