Hunton Employment & Labor Perspectives

Section 203 of the Labor-Management Reporting and Disclosure Act requires employers to annually report via Form LM-10 any agreement or arrangement with a third-party consultant to persuade employees as to collective bargaining rights, or to obtain certain information about the activities of employees or a labor organization involved in a labor dispute with the employer. The retained consultant must also file a report concerning the agreement or arrangement (Form LM-20). However, one statutory exception in section 203(c) provides that no report need be filed when the consultant gives “advice” to the employer.

For many years, the Department of Labor has interpreted the “advice exception” broadly to exclude arrangements where the consultant has no direct contact with employees.  However, as we reported last spring and summer, the DOL has decided to move away from a broad interpretation of the advice exception and, as a result, held public meetings regarding its desire to narrow the advice exception.

The DOL has now taken the next step in its efforts to narrow the advice exception.  Specifically, on Tuesday June 21, 2011, the DOL issued a Notice of Proposed Rulemaking, which attempts to remedy what the DOL refers to as a “significant underreporting” problem.  According to the proposed rule, the term “advice” would be limited to “an oral or written recommendation regarding a decision or course of conduct.”  Under this narrower definition, if a consultant engages in actions or communications that would indirectly or directly persuade employees regarding organizing, such activity is reportable under section 203 notwithstanding the fact that the consultant did not have direct contact with the workers.  Thus, for example, when a consultant prepares or provides a persuasive script, letter, or videotape for use by an employer in communicating with employees, or if the consultant makes revisions to such items to enhance their persuasive message, the advice exception may not apply, and the duty to report could be triggered.

The impact of this proposed rule will be significant if it is adopted.  Employers may no longer be able to shield third-party arrangements from reporting simply by isolating consultants from direct employee contact.  Moreover, the rule may interfere with employers’ ability to obtain legal advice from law firms out of fear that both the employer and the law firm may incur reporting obligations as a result. 

Comments to the proposed rule are due no later than August 22, 2011.  We encourage all employers potentially affected by the proposed rule to review the rule closely and submit comments to the rule.