United States Department of Labor to Revise Regulations on Reporting of Costs Related to Union Organizing Campaigns

August 2, 2010

By: Colin M. Leonard

As part of its Spring 2010 regulatory agenda, the U.S. Department of Labor (“USDOL”) has indicated it plans to revise its longstanding interpretation of federal law on the reporting and disclosure requirements for employers in connection with a union’s organizing campaign. Such reporting is required under the Labor-Management Reporting and Disclosure Act (“LMRDA”), which contains various financial disclosure requirements for employers, unions and others. Among other things, the LMRDA requires employers to file annual reports with the federal government to disclose agreements made with third parties (and any associated payments), where a purpose of the agreement is to persuade employees with respect to their right to unionize. A willful failure to submit a required report or material false statements made on the report are crimes.

However, the LMRDA does not require reporting to the federal government where the services rendered relate to the “giving or agreeing to give advice” to an employer. Since at least 1962, the long-standing interpretation of the “advice exception” excludes from reporting various persuader activities performed by third party consultants, including the preparation of documents and materials to be used by the employer during the organizing campaign. As long as the third party consultant does not meet directly with employees in connection with persuader activities, agreements relating to these types of services need not be reported. The Office of Labor-Management Standards, which enforces the LMRDA, states that the advice exception has been “broadly interpreted to exclude from reporting any agreement under which a consultant engages in activities on behalf of the employer to persuade employees concerning their bargaining rights but has no direct contact with employees, even where the consultant is orchestrating a campaign to defeat a union organizing effort.” (Emphasis added). In fact, Judge (now Justice) Ruth Bader Ginsburg upheld this interpretation of the “advice exception” when the United Auto Workers sought to challenge the agency’s position in the late 1980s. U.A.W. v. Dole, 869 F.2d 616 (D.C. Cir. 1989).
 

The Obama administration now seeks to narrow the scope of the “advice exception” to require greater reporting and disclosure of an employer’s use of consultants in connection with union organizing efforts. Given the dramatic decline in union membership (now just 7.2% of private sector workers), unions are exploring every avenue to stem the losses. And the Obama administration apparently believes that changing the USDOL's long-standing interpretation of the “advice exception” may help unions reverse that trend by requiring employers to disclose the dollars spent in opposing a union organizing effort.

Because the process of notice and comment rule-making is currently ongoing, with initial promulgation of the draft regulation slated for November 2010, it is not clear exactly what form the revised regulation will take. Many believe that the administration will attempt to revive some version of the regulation that was promulgated in the last days of the Clinton administration and quickly rescinded by the Bush administration. Were the proposed Clinton administration regulation adopted, all services related to the preparation of materials would be reportable, if a purpose of the materials was to persuade employees – even if the consultant never engaged in persuader activities directly with employees.