Urgent Message on Union Persuader Rules

by Varnum LLP

In anticipation of the July 1, 2016 effective date of the new "persuader rules" from the U.S. Department of Labor, Varnum has prepared an agreement that would allow existing clients to avoid the new reporting requirements on labor advice and fees.

Although on June 27, 2016 a Texas federal court issued a nationwide injunction barring the DOL from enforcing the new "persuader rule," it is still advisable to consider this opportunity now. In the event the injunction is ever lifted, entering into a specific engagement agreement for labor-relations services prior to July 1, 2016 will preserve the opportunity for exemption. 

Time is short to consider this agreement, as it must be signed by this Thursday, June 30, 2016.

Clients who are interested in this option should contact a Varnum attorney to discuss whether entering such an agreement makes sense for them. Signing the agreement does not obligate a client to use Varnum's services in the future for such events, but would allow the client to choose to do so, without the obligation to report such use to the federal government according to recent communications by the USDOL.

As background, on July 1, 2016, the much debated "persuader rules" will go into effect. The rules revise and expand the reporting and disclosure requirements for employers and their advisers, typically consultants and attorneys, under the "persuader activity" regulations of the Labor-Management Reporting and Disclosure Act ("LMRDA"). Under the current regulations, employers and consultants are required to report agreements where the consultants communicate and deal directly with the employer's employees with regard to union organizing, e.g., "persuade". Communications and dealings with management, where the consultant or attorney provides advice to the employer, is not currently reportable under the LMRDA's advice exemption. Reports must include the fees paid or received for "persuader" services. Reports are accessible to the public.

Under the new "persuader rules," employers and consultants will be required to report both direct and also indirect activities that have an object to "persuade" employees with regard to union organizing. The new rules will include typical labor relations advice and services to the employer regarding union/labor issues that have historically fallen under the advice exemption, including services that have frequently been provided to clients by their lawyers. This prospective change has caused significant concern about the impact of reporting on the attorney-client privilege, and has generated a number of lawsuits challenging the new rule. The outcome of those suits is still undetermined.

In a significant development, however, the DOL recently stated in a Status Report filed in the Associated Builders v. Perez, 4:16-cv-169 (E.D. Ark. 2016) matter, that "the [persuader] 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" (emphasis added), and that "the Department will not apply the rule to arrangements or agreements entered into prior to July 1, 2016, or to payments made pursuant to such arrangements or agreements." (emphasis added) Id. Accordingly, multi-year arrangements entered into between an employer and labor relations consultants before July 1, 2016, for labor relations services performed during the life of the arrangement, will not be reportable. Employers and consultants will continue to report services historically considered as "persuader services."

Based on the DOL's clarification above, employers who have pre-July 1, 2016 engagement agreements with their counsel for labor relations services may be able to assert an exemption to the new reporting requirements in the event they ever require assistance from their lawyers that would otherwise be covered by the rule. Employers should consider whether it makes sense to avail themselves of this added line of protection.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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