The U.S. Labor Department is close to finalizing a rule that, according to employment law experts, will force employers to file complex and detailed disclosure reports with the government any time they receive "advice" from their labor relations consultants.
For more than 50 years, compliance with a somewhat obscure law—the Labor-Management Reporting and Disclosure Act, or LMRDA—has not been unduly onerous.
The law's reporting requirements contain an "advice" exception for many of the activities consultants and lawyers have undertaken in representing employers. The exception was broadly interpreted to make "persuader activities" reportable only when a labor consultant spoke directly to employees in an effort to persuade them to reject union representation.
But in June 2011, the Labor Department dropped a bombshell. It proposed that the advice exception be substantially narrowed because the broad reading of the exception had resulted in the "underreporting" of persuader activity. The proposed rule rejects the distinction between direct and indirect activity, making "all actions, conduct or communications that have a direct or indirect object to persuade employees" subject to the reporting requirement, including writing speeches for employers to give to employees and training supervisors how to conduct employee meetings.
The publication of the proposed rule provoked an unusually vociferous response. More than 8,000 comments were posted on the government's regulations.gov website during the public comment period. The Labor Department could present a final rule for review by the Office of Management and Budget as early as April.
"We believe that the [proposed rule] is way too broad," says Michael Lotito, co-chair of the Workplace Policy Institute at law firm Littler Mendelson. The expanded reporting requirement, he says, "intrudes into the confidentiality between lawyer and client" and will leave HR managers uncertain as to what does and does not constitute "advice."
"They're going to have to decide whether a particular interaction is reportable," Lotito says. "A lot of this is not necessarily advice."
Employers will have to be "much more cautious about getting help from any outsider," says Maurice Baskin, an employment law specialist at Venable LLP.
LMRDA, which was enacted in 1959, grew out of concerns that some employers and their labor relations consultants were interfering with the right of employees to organize unions and bargain collectively under the National Labor Relations Act. Following the recommendations of a Senate investigation, it sought to promote transparency by requiring employers to report any arrangement with a consultant undertaken to persuade employees not to exercise their right to organize and bargain collectively.
A provision of the law created an exception for consultants who merely give "advice" to an employer. The term "advice" was not, however, specifically defined, making it, as one early commentator noted, "susceptible of several different interpretations."
"When the statute passed, DoL issued their interpretation of the advice exception: As long as the third-party lawyer or consultant did not talk directly to employees ... it was not necessary to report the nature of financial arrangement between employer and the third party," Lotito says.
"A "usual indication that an employer-consultant agreement is exempt is the fact that the consultant has no direct contact with employees and limits his activity to providing to the employer or his supervisors [sic] advice or materials for use in persuading employees which the employer has the right to accept or reject," the Labor Department said in a 1989 memorandum.
The Labor Department now wants to change the rules. "We now believe that the 'department's current interpretation of the advice exemption may be overbroad, and could sweep within it agreements and arrangements between employers and labor consultants that involve certain persuader activity that Congress intended to be reported under the LMRDA," it said in announcing the proposed rule.
Employment lawyers fear the Labor Department has created a minefield for employers by eliminating the direct contact distinction and bringing the providing of "advice or materials for use in persuading employees" within the scope of LMRDA's reporting requirement.
"When an employer calls a lawyer ... the lawyer is really doing two things at once," Lotito says. "He's providing the employer with legal advice, and he's providing advice designed to persuade. ... The problem is you can't separate the legal advice from the persuasion because they're one and the same thing."
Both Lotito and Baskin foresee extensive litigation if the Labor Department's proposals are adopted into a final rule. "As a threshold matter, HR people are going to have to familiarize themselves with the requirements and educate their organization about those requirements," Lotito says.
Matthew Heller is a writer based in Los Angeles. Comment below or email firstname.lastname@example.org.