New Persuader Rule Creates Labor Law Dilemma for Employers

New Persuader Rule Creates Labor Law Dilemma for Employers

Small businesses will be put in a "no-win" situation as new rules discourage the use of legal guidance.

When the Department of Labor released its new “Persuader Rule” in late March the Secretary of Labor and unions greeted it as a major tool promoting union organizing, while Republicans in Congress and employer groups said it will discourage companies from obtaining needed legal advice.

The basis for the rule has been around since 1959 when a law was passed requiring employers to report to DOL contracts with what were termed “labor persuaders,” including attorneys. Those reports were limited to situations where the consultant or attorney communicated directly with the workforce during an organizing campaign.

The new rule says that after July 1 companies must reveal to their employees any arrangements and payments with outside consultants who supply advice on dealing with labor unions—and not just in regard to organizing efforts. Employers are required to file annual electronic reports with DOL that will be available to the public about how much they paid for all “labor relations advice and services.”

Consultants are defined as lawyers, law firms, public relations firms and even trade associations. The new rule includes seminars covering “labor-management relations matters, including how to persuade employees concerning their organizing and bargaining rights.” However, unions are not required to report the law firms and outside consultants they use.

The American Bar Association and other organizations representing lawyers oppose the rule because disclosing a client's identity, financial arrangements and the services rendered are all considered violations of attorney-client confidentiality.

Small businesses lacking in-house legal and labor relations staff “may have difficulty responding to a union organizing campaign and lawfully communicating with their employees,” says attorney Harold Coxson of the law firm of Ogletree Deakins. This difficulty is amplified by the ambush election rules the National Labor Relations Board imposed last year that shorten to just seven days the time for an employer to respond to a union petition for a representation election.

On the DOL website Labor Secretary Thomas Perez made it clear that he believes labor advisors are the equivalent of the errant con man who was the Wizard of Oz. “If you believe in what an outside expert drafted for you to say to your employees, if you were willing to pay the outsider to help you say it, then open the curtain and reveal who scripted the message and managed its delivery,” he declared.

Teamsters president James Hoffa said, “Greater disclosure is needed so workers can be informed about their employer’s activities—and monies spent—to fight the workers’ efforts to form a union.”

Employer groups condemn the rule, including the U.S. Chamber of Commerce, National Retail Federation, International Franchise Association and National Association of Manufacturers. They argue that it discourages the use of outside counsel to deal with proliferating and complicated labor regulations federal agencies are continually imposing on employers.

Several law firms and industry associations have already mounted lawsuits against the rule in federal court in Arkansas, Minnesota and Texas. One of the plaintiffs, the Coalition for a Democratic Workplace, represents more than 600 industry organizations. It says the rule interferes with small businesses’ their right to confidential legal advice and other counsel, adding “it also will make it harder for them to lawfully communicate with employees about unions and other workforce issues.”

Small retailers will be among the first to suffer, says David French, NRF senior vice president for government relations, stressing that the new standard will discourage employers from seeking legal advice in areas that have nothing to do with traditional persuader activities.

Kelly Kolb, vice president of government affairs for the Retail Industry Leaders Association, observes, “DOL is putting employers in a no-win situation where seeking the guidance they need will almost certainly be used against them by organizers.”

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