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Advice or persuasion—which is which?
That question is at the heart of a long-anticipated Department of Labor (DOL) final rule on when an employer must report to the government about union-avoidance activity that its lawyers or consultants engage in. In 2011, the DOL first proposed shrinking its interpretation of the “advice exemption” and requiring employers to report more “persuader activity.”
In December, the rule was sent to the Office of Management and Budget (OMB)—the last step before a rule is released to the public as final. The DOL has predicted in its regulatory agenda that the final rule will be published in March.
“Rules sometimes sit at OMB for 30 days and sometimes for months and months. No one knows for sure what will happen,” said Michael Lotito, an attorney with Littler and co-chair of Littler’s Workplace Policy Institute, in an interview with
SHRM Online. (The Workplace Policy Institute engages with the government and courts on critical employment, labor and benefits issues.)
What is certain is that if the final rule resembles the proposed rule, employers will be required to report much more activity than ever before.
Thirteen state attorneys general
wrote OMB on Feb. 4, encouraging it to reject the DOL's persuader rule. “As proposed, we believe this new rule would undermine long-standing protections for confidential attorney-client communications and would place undue burdens on small businesses within our state,” the letter said.
Calling the current interpretation of the advice exemption from reportable persuader activity “overly broad,” the proposed rule states, “ ’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.”
“Something as simple as a third party conducting an engagement survey may be reportable” persuader activity, noted Jim Gray, owner of Jim Gray Consultants in Charleston, S.C., a consultancy committed to helping business leaders with union-organizing exposure.
Legal consultation, clients’ identities, attorney fees, and the scope and nature of the employment are not deemed privileged or exempt from the reporting requirement, according to the DOL in its proposed rule.
“Not only is traditional union activity covered, but [also] all matters arising under Section 7” of the National Labor Relations Act (NLRA), Lotito added. “Thus, a review of a policy manual or handbook would be reportable.”
Benefits to Employees
Employees would benefit from information concerning persuader agreements, according to the DOL in its proposed rule.
Union-avoidance persuasion often occurs through supervisors, who are frequently more trusted by employees than consultants. “Employees may evaluate their choices differently when they have information concerning persuader agreements that reveal that a third-party consultant is coordinating the activities of the supervisors by, for example, drafting speeches for one-on-one meetings and directing other day-to-day interactions with employees,” the proposed rule stated.
“Employers have been estimated to spend approximately $200 million per year in direct payments to defeat organizing drives, with the actual value closer to $1 billion when factoring indirect costs,” the DOL said, stating that under the current broad advice exemption, much persuader activity goes unreported.
Types of Covered Persuaders
The proposed rule would “vastly expand what has to be reported as persuader advice. For over 50 years, if the attorney or consultant did not talk directly to employees and the employer was free to accept or reject the opinion being given, there was no ‘persuadable’ event,” Lotito noted. “Under the proposal, if ‘an object’ of the opinion might be to ‘persuade,’ then it is reportable.”
Types of covered persuaders under the proposed rule include, according to Lotito:
Infringement on Attorney-Client Privilege
As written, “the rule obliterates attorney-client confidentiality enshrined in attorney-client relationships,” Lotito said.
Suppose company leaders go to a lawyer and ask about union activity and how to lawfully respond. Under the proposed rule, both the leaders and the lawyer must complete forms that reveal the contact was made and by whom, how much was paid, the particulars of what areas were discussed, the salaries of all people who work for the law firm, and all other income received from all clients for “other labor relations advice,” even if no persuader advice was given to the other clients, Lotito said. “If the law firm does not comply, it risks criminal penalties. If the law firm does comply, the lawyer can be disbarred,” he said.
“Feeling the outrage yet?” Lotito asked.
Some law firms, not willing to take the chance of the ethical dilemma, may stop providing advice on labor matters, making it more difficult for small businesses to obtain competent advice, he predicted. Those businesses then may refrain from taking any action in the face of union organizing or choose to maintain a neutral status, making it easier for unions to prevail.
“Larger employers have in-house counsel and experienced HR departments,” he added. “As the rule does not apply to in-house folks, these large organizations may not be impacted as frequently as smaller businesses with none or few of those in-house resources. Small businesses must therefore rely more on outside help, and those ‘outsiders’ are potential ‘persuaders.’ ”
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him
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