Most employers know that the National Labor Relations Board (NLRB) has been on a years-long tear to make it easier for workers to unionize and harder for employers to resist those efforts. This post in two parts is the latest from the battlefront, with two key developments that impact unionization campaigns and employers’ responses to them. (If you missed Part One of the post, it can be found here).
Implementation of Expanded “Persuader Rule” Is Blocked
A federal court has blocked implementation of a new U.S. Department of Labor rule that would require lawyers to report the details of their engagement with clients who hire them to help address unionization efforts, finding that the rule inappropriately curtails employers’ rights to seek confidential counsel when a union is attempting to organize a workforce. Go figure.
One of the most controversial actions taken by the Department of Labor in recent years was to expand the definition of a “persuader” under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). For those of you who have a “who cares” reaction to that news, here’s a very brief labor history of the LMRDA and what a “persuader” is:
Congress passed the National Labor Relations Act (NLRA) in 1935. For the first time, workers’ rights to unionize were guaranteed as a matter of federal law. The unions did pretty well; so well, in fact, that in 1947 Congress had to pass the Labor-Management Relations Act (LMRA, also known as the “Taft-Hartley Act”), which curtailed what had come to be viewed as the overreaching power of labor unions. In a similar vein, the LMRDA, passed in 1959, was a reaction to widespread union corruption and racketeering, and it further regulated labor unions’ internal affairs. But the LMRDA also contained rules for employers, since the point was to limit bad behavior: if an employer resisting unionization efforts hired “persuaders” to convince its employees not to unionize, it would need to publicly disclose those paid relationships to the Department of Labor. This became known as the LMRDA’s “persuader rule.”
The idea of the persuader rule was, as I said, to force employers, not just unions, to keep it on the up-and-up and avoid deceit. The deception was this: the original persuaders were paid hacks hired by employers to pose as workers on the shop floor. These “friendly” colleagues would socialize in the workplace and bemoan the evils of the union, gravely assure their “co-workers” that the company would shut down if they unionized, etc. In creating the persuader rule, Congress rightly felt that employees deserved to know that the persuader was not just some guy who had strong opinions, but was actually a mouthpiece for the employer.
Of course, union organizing campaigns aren’t just social events. They are a legal process through NLRB-run elections, with lots of rules, do’s and don’ts, and procedures for which companies usually seek attorney advice. Over the years, many management-side labor attorneys would help companies resist unionization efforts, but the advice went beyond just how to navigate the NLRB legal process. Attorneys would also train managers on what to say and not to say. From the management-side attorney perspective, this is really about ensuring legal compliance: the training has always been mostly about making sure that aggressive or clueless supervisors don’t violate federal labor law by, for example, threatening or coercing employees in their choice to support a union or not.
Back to the LMRDA, attorneys doing this did not have to disclose their paid relationships with the employer under the so-called “advice and counsel” exception. The reason for the exception is obvious: attorneys do not need to disclose (and, in fact, are ethically bound not to disclose) client confidences, so confidential attorney-client communications about unionization efforts were not subject to the reporting requirements of the persuader rule.
In the eyes of organized labor (and a closely-aligned NLRB), these lawyers were just another sub-species of bare-knuckled, union-busting persuaders. And, without naming names, they may have been right about at least some of those lawyers, at least in times past. In the eyes of every sophisticated, management-side labor attorney I know nowadays, this kind of legal representation actually prevents violations of the law by instructing uninitiated employers to keep it clean and play fair. The real-world difference between those points of view is that the NLRB is part of the federal government, which makes the rules, and management-side labor attorneys are not.
The NLRB’s open agenda has been to limit employers’ ability to resist unionization, including by creating rules for much faster union elections. The new persuader rule fits into that agenda. After languishing in controversy for several years, the new rule requires that employer-consultant agreements be reported even if the consultant has no direct contact with employees, like the old-school persuaders, and is merely working behind the scenes.
So, potentially, the new rule covers every management-side labor attorney in the country. What’s more, the rule would require employers not only to report the existence of the relationship, but the details of the paid relationship (read: attorneys’ fees). The new reporting rules would have become fully effective on July 1, 2016.
Three lawsuits were filed immediately after implementation of the rule, which took effect on April 25, 2016. A federal judge in one of the cases, proceeding in Texas, issued an injunction temporarily barring full implementation of the rule. Judge Sam R. Cummings, sitting in the Northern District of Texas, didn’t mince words about the rule, calling it “defective to the core,” and finding that it exceeded the Department of Labor’s authority, was “arbitrary and capricious” and violates free speech rights, among other things. The case is National Federation of Independent Business et al. v. Perez, 16-cv-00066 (N.D. Tex. June 27, 2016).
The injunction is only temporary in nature, and we expect to see more news from the litigation front. Check back with Kelley Drye’s labordaysblog.com for updates.