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DOL’s Rule Redefining LMRDA ‘Advice Exception’ and Expanding Types of Activities Considered Persuasive, Reportable is Finalized – Effective Late April 2016

By Philip B. Rosen, James A. Prozzi and Daniel D. Schudroff
  • March 23, 2016

The United States Department of Labor has announced that it will publish its final rule relating to “persuader” activity under the Labor-Management Reporting and Disclosure Act (LMRDA) on March 24, 2016, almost five years after first proposing it. The rule (which was opposed by the American Bar Association, Association of Corporate Counsel, the Attorneys General of many states, most employers and many key trade associations, among others) is briefly summarized below.

Although scheduled to take effect 30 days after publication (i.e., late April 2016), it is likely that the new rule’s implementation and legality will be challenged in court in the next few days. Other efforts (e.g., through Congress) to stop the new rule from being implemented also are likely. We will provide further updates and information regarding the rule prior to the late April 2016 effective date. The rule will be applicable to agreements, arrangements and payments made on or after July 1, 2016.

LMRDA Reporting Requirements

Under LMRDA Sections 203(a) and (b), employers and their “labor relations consultants” must report to the DOL:

[a]ny agreement or arrangement with a labor relations consultant or other independent contractor or organization pursuant to which such person undertakes activities where an object thereof, directly or indirectly, 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 ….

Current Rule

For decades, essentially, only (1) direct persuasive communications between consultants (or attorneys) and employees and (2) indirect communications that did not meet the broad definition of the “advice exception” were reportable to the DOL. The advice exception in LMRDA Section 203(c) exempts from the reporting requirements “the services of such [consultant] by reason of his giving or agreeing to give advice to such employer….”

The current rule, in effect since 1962, is easily understood and simply applied. Direct persuasive communications between a consultant (or attorney) and an employee must be reported. However, communications between a consultant (or attorney) and an employer, manager or supervisor (although persuasive) is deemed advice and is not reportable so long as the client may review, revise and/or reject the advice.

New Rule

Unless halted or delayed by litigation, government action or the next administration, the new DOL rule will compromise the advice exception. In short, the rule’s revised interpretation will attempt to convert into “persuader activity” some of what is now accepted as legal advice. Under the new DOL rule, both the employer/client and its consultant/attorney would be required to report to the DOL all arrangements in which an “object” (directly or indirectly) of the services provided by the consultant/attorney is to persuade employees about the manner of exercising the employees’ “right to organize and bargain collectively through representatives of their own choosing” under federal labor law. The DOL takes the position that the “advice exemption” still applies to an arrangement where the consultant/attorney “exclusively provides legal services.”

Implications

The DOL’s new “persuader activity” rule will make it more difficult for employers to communicate effectively facts and opinions on labor relations matters to employees — a right provided to employers by the National Labor Relations Act (NLRA) — without incurring a reporting obligation. It also likely will interfere with an employer’s right to effective representation by legal counsel, particularly in obtaining legal advice and preserving the confidentiality of attorney-client communications. This advice often is necessary when employers speak to their employees to avoid unlawful or objectionable conduct under the NLRA.

The DOL’s Notice of Proposed Rulemaking that preceded the new rule has been controversial, generating approximately 9,000 comments when it was originally published in 2011 (76 Fed. Reg. 36178). Since then, the DOL has postponed issuing a final rule a number of times as it weighed comments opposing the rule as it would impact on (among other things) attorney-client privilege and confidentiality.

Jackson Lewis will continue to monitor this process and provide updates as new information becomes available prior to the implementation date. We will continue to provide our clients with the full range of workplace law advice and representation, including on any matters under the NLRA. If you have questions about the new rule or any related matters, please contact Philip Rosen, Jim Prozzi, Dan Schudroff, or the Jackson Lewis attorney with whom you regularly work.

©2016 Jackson Lewis P.C. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of Jackson Lewis.

This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.

Jackson Lewis P.C. represents management exclusively in workplace law and related litigation. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Jackson Lewis attorney with whom you regularly work.

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