New Rule Requires Businesses to Disclose When They Bring in Anti-Union Consultants- and It’s Already Under Attack

Secretary of Labor Thomas Perez (U.S. D.O.L. via Flickr.com)

The Department of Labor issued its new “persuader rule” on anti-union consulting at the end of last month- and business groups have already brought suit to block the rule in federal court.

In Associated Builders and Contractors of Arkansas v. U.S. Department of Labor, a group of business-interest groups is challenging a new Department of Labor rule called the “Labor Management Reporting and Disclosure Act, Interpretation of the Advice Exemption,” or the “persuader rule.” The rule will increase how often employers must disclose when they bring in outside counsel for persuading their employees to join or (more likely) not join a union during an organizing campaign. The business groups, in their lawsuit, are asking the federal court to enjoin the rule, saying it violates their First and Fifth Amendment rights.

Background: Outside Counsel and Anti-Union Campaigns

When a union begins an organizing drive at a workplace, an employer will often enlist outside counsel for advice on combating the drive, with the end goal of preventing the workforce from forming a union. There is a thriving industry of law firms and consultants geared towards helping an employer keep their workplace union-free; Secretary of Labor Thomas Perez told the New York Times that “About 75 percent of employers hire such persuaders, and too often, workers do not know.”

To address this, Congress passed the Labor Management Reporting and Disclosure Act (LMRDA) in 1959. The LMRDA, among other things, requires an employer to disclose when they had enlisted outside counsel or assistance to “persuade employees to exercise or not to exercise… the right to organize and bargain collectively” (§ 203(b)(1)). The operative theory behind these disclosures was that employees should know when an experienced anti-union firm was helping their employer persuade them against joining the union. Allowing the employees to know who the anti-union information was coming from would allow the employees to make a fully-informed choice on whether or not they wanted to join the union.

Congress added a major exception to the disclosure rule, however, called the “advice exemption.” In § 203(c) of the LMRDA, Congress allowed that no employer would have “to file a [disclosure] report covering the services of such person by reason of his giving or agreeing to give advice to such employer.” In other words, an employer would not have to disclose to employees when they had simply received advice from or consulted with an anti-union firm; the Department of Labor interpreted the clause very broadly so that disclosures were only required when the outside firm contacted the employees directly. The clause was meant to protect the attorney-client privilege of employers with the outside firms they hired.

As a result, much of the advice anti-union firms provided to employers has been shielded from disclosure. As long as the outside firm did not contact the employees, the employer could continue to receive advice from the anti-union firm on combating the union without disclosing the relationship at all.

The Persuader Rule

Recognizing this, the Department of Labor moved to change its own interpretation of the advice exemption. In June of 2011, the Department issued a “Notice of Proposed Rulemaking” in which it proposed to narrow its own interpretation of the exemption, so that more anti-union persuading work would have to be disclosed.

Naturally, the proposed change was met with significant opposition and criticism from business groups who sought to keep anti-union consulting secret. It was also met with opposition from the American Bar Association and other attorneys’ groups on the grounds that it infringed on attorney-client confidentiality. Nevertheless, the Department of Labor forged ahead with the proposed rule, and the persuader rule was effectuated on March 24, 2016.

Under the new rule, the Department of Labor states that “what traditionally has been viewed as the role of a consultant or attorney in counseling a client… does not trigger reporting.” In other words, simple advice or consulting provided to employers will still not be reportable.

What the new rule does make reportable is “those agreements or arrangements in which the consultant engages in the indirect persuasion of employees.” Thus, when the outside firm or consultant is deemed to have persuaded employees, even indirectly, the activity must be disclosed so that employees know who has been behind the persuasion.

Associated Builders and Contractors of Arkansas v. U.S. Department of Labor

In short order, business groups have moved to block the persuader rule from taking effect. Associated Builders and Contractors was filed in the US District Court for the Eastern District of Arkansas less than a week after the rule was announced, and seeks to block the rule on constitutional and statutory grounds.

On constitutional grounds, the lawsuit alleges that the persuader rule violates the Freedom of Speech and Freedom of Association guaranteed to the business groups in the First Amendment. The businesses say that the rule “will chill employers in obtaining information from advisors for the purpose of communicating lawfully with employees on the subject of unions.” They additionally argue that the required disclosures are a form of “compelled speech” forbidden by the First Amendment.

The lawsuit additionally alleges that the rule is overly vague, and thus violates the Due Process clause of the Fifth Amendment. According to the complaint, the rule “fails to give a person of ordinary intelligence fair notice as to what contemplated conduct is forbidden” and thus violates the Due Process clause, which has been held to require government rules and regulations give fair warning of their requirements.

On statutory grounds, the business groups challenge the rule as exceeding the statutory authority of the LMRDA, as a violation of the National Labor Relations Act, and as an infringement on attorney-client privilege.

Conclusion: What the Rule, and the Lawsuit, Mean for Unions and Organizers

Despite the aggressive backlash from business groups, unions and their organizers should for now consider the new rule a relatively moderate step forward when it comes to combating anti-union campaigns. As stated above, the Department of Labor explicitly states in the rule that the “traditional role of a consultant” will not be a required disclosure under the new rule. Should the rule survive legal challenges like Associated Builders and Contractors, careful anti-union firms will likely be able to tailor the advice they provide to employers to remain within this “traditional role” and outside what the Department of Labor would consider “indirect persuasion” of employees- thus keeping the advice they provide undisclosed.

Nevertheless, the rule is a victory for transparency in the union organizing process. When the employer discloses the anti-union consultants brought in to persuade employees, even if indirectly, it allows the employees to make a more fully-informed decision as to whether to join the union or not. Thus, the persuader rule better fulfills the purposes of the Labor-Management Reporting and Disclosure Act.

Associated Builders and Contractors, which has been supported by the Chamber of Commerce and management-side attorneys’ groups, will face significant obstacles towards enjoining the rule. It will likely stand a better chance of success on the allegations of vagueness, attorney-client privilege infringement, and Due Process violations than on the argument that the rule violates the Freedom of Speech or Association. A key issue will be distinguishing between the “traditional role” of “advice” in an attorney-client relationship and the “indirect persuasion” the Department seeks to have disclosed. If the court can readily distinguish the two, it will be unlikely to find the rule overly vague; if not, it may enjoin the rule on the above grounds.

Thus, unions should keep an eye on the case during the run-up to the rule taking effect this summer. A victory for the Department of Labor in the case would be a victory for transparency and accountability in organizing drives everywhere.

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