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UPDATE—Action May Be Required Prior to July 1 To Secure Exemption From New DOL Persuader Rule Reporting Requirements

on Monday, 27 June 2016 in Labor & Employment Law Update: Sarah M. Huyck, Editor

The U.S. Department of Labor recently changed the rule governing the obligation of private-sector employers and third-party consultants (including attorneys) to report “arrangements or agreements” between them where “an object” of the consultant’s/attorney’s services is to persuade employees in the exercise of their rights to be represented by a union or collectively bargain.  Under the new rule, both employers and their consultants/attorneys must report to the Labor Department not just “direct” persuader activity by the consultant/attorney (as was the case under the old rule), but also “indirect persuader activity.”  Although an injunction was entered yesterday which temporarily prevents enforcement of the new rule, the rule as written applies to “arrangements or agreements” for such services that are entered into after June 30 of this year.

The problem for employers is that the new definition of “indirect persuader activity” is very broad and could easily include a variety of services which they may ask their consultants/attorneys to provide to their organization (and which never before required reporting).  Examples include union avoidance training for supervisors and the preparation of written materials, talking points, and personnel policies aimed at educating employees about unions and union representation.

The reports that employers and their consultants/attorneys will file with the Labor Department will be burdensome.  They will need to include a detailed description of the services provided by the consultant/attorney and the fees paid by the employer for those services.  Upon filing, the reports become public records accessible to any union, employee, or member of the public who knows how to request them.

Exemption From Reporting

The Labor Department recently announced that the new rule will not apply to any arrangement or agreement between an employer and a consultant/attorney entered into before July 1, 2016 in which the consultant/attorney agrees to provide indirect persuader services in the future. According to the Labor Department, services provided and payments made pursuant to pre-July 1, 2016 arrangements or agreements are exempt from the reporting requirement.  While we are skeptical that this will be the Labor Department’s interpretation for the long term, it appears for now that it will be beneficial to private-sector employers to have written agreements with their consultants/attorneys in place prior to July 1 to provide “indirect persuader activity” services, should those employers have the future need for indirect persuader services.  Such agreements will give both the employers and their consultants/attorneys a basis to avoid future reporting to the Labor Department.

Legal Challenges to The New Rule

Business groups, industry associations, law firms, and the American Bar Association have opposed the new rule.  At least three lawsuits have been filed in federal courts in Arkansas, Minnesota, and Texas seeking to enjoin its implementation.  Yesterday, June 27, 2016, the federal court in the Texas case issued a nationwide preliminary injunction which prevents the Labor Department from implementing the new rule pending further judicial proceedings.  While we hope that this preliminary ruling will become permanent and be upheld on appeal, we cannot guarantee that will occur.  Moreover, if the courts eventually allow the Labor Department to implement the new rule, the Labor Department may take the position that only arrangements or agreements entered into prior to July 1 are exempt from the reporting requirements (as opposed to arrangements or agreements entered into prior to the implementation date).  Therefore we believe it is prudent for private-sector employers to enter into an engagement letter or other written agreement with their third-party consultants/attorneys prior to July 1 in the event the new rule ultimately withstands judicial scrutiny and the July 1 date remains relevant.

R.J. (Randy) Stevenson

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500

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