Interpretation of the “Advice” Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act

Federal RegisterMar 24, 2016

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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Parts 405 and 406

RIN 1215-AB79; 1245-AA03

Interpretation of the “Advice” Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act

AGENCY:

Office of Labor-Management Standards, Department of Labor.

ACTION:

Final rule.

SUMMARY:

The Office of Labor-Management Standards of the Department of Labor (“Department”) is revising the Form LM-20 Agreement and Activities Report and the Form LM-10 Employer Report upon review of the comments received in response to its June 21, 2011 Notice of Proposed Rulemaking (NPRM). In the NPRM, the Department proposed to revise its interpretation of the advice exemption in section 203(c) of the Labor-Management Reporting and Disclosure Act (LMRDA) to better effectuate section 203's requirement that employers and their labor relations consultants report activities undertaken with an object, directly or indirectly, to persuade employees about how to exercise their rights to union representation and collective bargaining. Under the prior interpretation, reporting was effectively triggered only when a consultant communicated directly with employees. This interpretation left a broad category of persuader activities unreported, thereby denying employees important information that would enable them to consider the source of the information about union representation directed at them when assessing the merits of the arguments and deciding how to exercise their rights. The Department proposed to eliminate this reporting gap. The final rule adopts the proposed rule, with modifications, and provides increased transparency to workers without imposing any restraints on the content, timing, or method by which an employer chooses to make known to its employees its position on matters relating to union representation or collective bargaining. The final rule also maintains the LMRDA's section 203(c) advice exemption and the traditional privileges and disclosure requirements associated with the attorney-client relationship. The Department has also revised the forms and instructions to make them more user-friendly and to require more detailed reporting on employer and consultant agreements. Sections of the Department's regulations have also been amended consistent with the instructions. Additionally, with this rule, the Department requires that Forms LM-10 and LM-20 be filed electronically. This rule largely implements the Department's proposal in the NPRM, with modifications of several aspects of the revised instructions as proposed.

DATES:

This final rule is effective on April 25, 2016. The rule will be applicable to arrangements and agreements as well as payments (including reimbursed expenses) made on or after July 1, 2016.

FOR FURTHER INFORMATION CONTACT:

Andrew R. Davis, Chief of the Division of Interpretations and Standards, Office of Labor-Management Standards, U.S. Department of Labor, 200 Constitution Avenue NW., Room N-5609, Washington, DC 20210;

olms-public@dol.gov

; (202) 693-0123 (this is not a toll-free number), (800) 877-8339 (TTY/TDD).

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary

A. Purpose, Justification, and Summary of the Rule

B. Benefits of the Rule and Estimated Compliance Costs

II. Authority

III. Statutory and Regulatory Background/Justification for the Final Rule

A. Statutory and Regulatory Requirements for Employer and Labor Relations Consultant Reporting

B. History of the LMRDA's Reporting Requirements and Justification for the Final Rule

1. Dealing With a Growing Phenomenon—1960 and Earlier

2. A Disclosure Vacuum—From 1962 Until Today

3. Transparency Promotes Worker Rights by Creating a More Informed Electorate

4. Underreporting of Persuader Agreements

5. Transparency Promotes Peaceful and Stable Labor-Management Relations, a Central Goal of the Statute

C. History of the Department's Interpretation of Section 203(c)

IV. Revised “Advice” Exemption Interpretation

A. Summary of the Revised Interpretation

B. Revised Advice Exemption Overview

1. Categories of Persuasion

2. Exempt Agreements or Arrangements

3. Changes From the NPRM

4. Reportable Information-Supplying Agreements

C. The Statutory Basis for the Revised Interpretation

D. Revised Form LM-20, LM-10, and Instructions

1. Mandatory Electronic Filing for Form LM-20 and Form LM-10 Filers

2. Detailing the Activities Undertaken Pursuant to a Reportable Agreement or Arrangement

3. Revised Form LM-20 and Instructions

4. Revised Form LM-10 and Instructions

V. Review of Comments Received

A. General Comments

B. Comments on the Statutory Analysis of LMRDA Justifying the Revised “Advice” Exemption Interpretation

1. Comments That the Revised Interpretation Is Contrary to Statute

2. Department's Response to Comments on the Statutory Analysis

a. General Response

b. How To Read Section 203

c. Legislative History

d. “Advice” or “Legal advice”

C. Comments Concerning Department's Policy Justification for Revised Interpretation

1. Benefit to Workers

a. Comments in Support of NPRM

b. Comments in Opposition to NPRM

c. Comments on the Disclosure of the Source of Persuader Communications

d. Comments on the Term, ”Middlemen,” in the Legislative History

e. Comments on the Comparisons of Persuader Disclosure to Other Disclosure Regimes

f. Comments on Timeliness of Disclosure

2. Underreporting of Persuader Agreements and Research Studies

a. Review of Comments Received

b. Comments on Research Studies

c. Comments on the Underreporting of Persuader Agreements

d. Comments on the Consultant Industry Growth

e. Comments on Election Outcomes

3. Disclosure as a Benefit to Harmonious Labor Relations

D. Comments on Clarity of Revised Interpretation

E. Comments on Scope of Persuader Activities and Other Provisions of Section 203

1. Comments on Specific Persuader Activities and Changes Made to Proposed Advice Exemption Instructions

a. Direct Interaction by Consultant With Employees

b. Planning, Directing, or Coordinating Supervisors and Other Employer Representatives

c. Providing and Revising Materials

d. Seminars

e. Personnel Policies

f. Employee Attitude Surveys/Employer Vulnerability Assessments

2. Comments on the Scope of Employee Labor Rights Included in Section 203

3. Comments on the Scope of “Agreement or Arrangement”

4. Comments on the Scope of “Labor Relations Consultant” and the Perception by Some Commenters That the Proposed Rule Favors Unions

a. Reporting by Employer's “In-House” Labor Relations Staff

b. Industry-Specific Reporting Requirements

c. Perceived Bias Between Reporting Requirements for Employers and Those for Unions

d. Railway Labor Act

e. Extraterritorial Application

F. Comments on Revised Forms and Instructions

1. Proposed Form LM-20/Form LM-10, Part C

a. Contact and Identifying Information

b. Hardship Exemption

c. Reporting the Terms and Conditions of the Agreement or Arrangement

d. Identifying Persuader Activities

e. Identifying Information-Supplying Activities

f. Identifying Targeted Employees

2. Comments Received on Other Aspects of Form LM-10

G. Comments Asserting Constitutional Infirmities With Revised Interpretation, Including First Amendment Concerns, and Alleged Inconsistency With Employer Free Speech Rights Under NLRA

1. Comments Involving First Amendment Concerns

2. Comments on Revised Interpretation's Impact on NLRA Section 8(c)

3. Comments Alleging Vagueness of Revised Interpretation

H. Comments Alleging Conflict Between Revised Interpretation and Attorney-Client Privilege and Attorney's Duty To Protect Confidential Information

1. Comments Involving the Attorney-Client Privilege and LMRDA Section 204

2. Confidential Information and Attorneys' Ethical Obligations

3. “Chilling” the Ability To Obtain Attorneys

4. Comments on Form LM-21 and Client Confidentiality

VI. Regulatory Procedures

A. Executive Orders 13563 and 12866

B. Unfunded Mandates Reform

C. Small Business Regulatory Enforcement Fairness Act of 1996

D. Executive Order 13132 (Federalism)

E. Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments)

F. Executive Orders 12866 and 13563

G. Paperwork Reduction Act

1. Overview and Response to Comments Received

2. Overview of the Revised Form LM-20, LM-10, and Instructions

3. Methodology for the Burden Estimates

H. Regulatory Flexibility Analysis and Executive Order 13272

Appendix A: Revised Form LM-10 and Instructions

Appendix B: Revised Form LM-20 and Instructions

I. Executive Summary

A. Purpose, Justification, and Summary of the Rule

The purpose of this rule is to revise the Department's interpretation of section 203 of the Labor-Management Reporting and Disclosure Act (LMRDA) to require reporting of “indirect” persuader activities and agreements. The LMRDA and the National Labor Relations Act (NLRA) address generally the obligations of unions and employers to conduct labor-management relations in a manner that protects the rights of employees to exercise their right to choose whether to be represented by a union for purposes of collective bargaining. While the NLRA, enforced by the National Labor Relations Board (NLRB), ensures compliance with these rights by investigating and prosecuting unfair labor practice complaints, the LMRDA promotes these rights by requiring unions, employers, and labor relations consultants to publicly disclose information about certain financial transactions, agreements, and arrangements.

Section 203(b) of the Labor Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. 433(b), requires employers and labor relations consultants to report their agreements pursuant to which the consultant undertakes activities with “an object . . . ,

directly or indirectly”

to persuade employees concerning their rights to organize and bargain collectively. (Emphasis added). The Department's authority to promulgate regulations implementing section 203 is established by sections 203 and 208 of the LMRDA. The Secretary of Labor has delegated this authority to the Office of Labor-Management Standards (OLMS).

Section 203(c) of the LMRDA exempts “advice” from triggering the reporting requirement. Specifically, employers and consultants are not required to file a report covering the services of a consultant “by reason of his giving or agreeing to give advice” to the employer. Under the Department's original, 1960 interpretation of the “advice” exemption, labor relations consultants were required to report arrangements to draft speeches or other written materials to be delivered or disseminated to employees for the purpose of persuading them as to their right to organize and bargain collectively. Two years later, the Department revised its position to say that reporting was not required if the consultant limited his or her activity to providing the employer with materials that the employer had the right to accept or reject. In the early 1980s, the Department again reduced the reporting obligation of contractors: No reporting was required unless they had direct contact with employees. Under this interpretation, labor relations consultants to employers avoided reporting a broad category of activities undertaken with a clear object to persuade employees regarding their rights to organize or bargain collectively. In this rule, the Department revises its interpretation of the advice exemption, consistent with the Department's original interpretation of section 203, to better effectuate section 203's requirement that consultants report persuader activities. Based upon the Department's consideration of contemporary practices under the federal labor-management relations system, and the comments received on its proposal, the final rule expands reporting of persuader agreements and provides employees with information about the use of labor relations consultants by employers, both openly and behind the scenes, to shape how employees exercise their union representation and collective bargaining rights. The final rule promotes the statute's purposes while also protecting employer free speech rights and the relationship between an attorney and his or her client. Although employees may hear a strong message from their employer about how they should make choices concerning the exercise of their rights, in the absence of indirect persuader reporting requirements, they generally do not know the source of the message. By knowing that a third party—the consultant hired by their employer—is the source of the information, employees will be better able to assess the merits of the arguments directed at them and make an informed choice about how to exercise their rights. This information promotes transparency and helps employees assess the applicability of those messages and the extent to which they reflect the genuine view of their employer and supervisors about issues in their particular workplace or instead, may reflect a strategy designed by the consultant to counter union representation whenever its services are hired.

As noted above, this rule requires employers and their consultants to report not only their agreements for “direct persuader activities,” but also to report their agreements for “indirect persuader activities.” The rule takes fully into account section 203(c), which exempts from reporting “services of [a consultant] by reason of his giving or agreeing to give advice to [an] employer.” Based on the traditional meaning of “advice,” the Department believes, contrary to its prior interpretation, that section 203(c) (known as the “advice exemption”) does not shield employers and their consultants from reporting agreements in which the consultant has no face-to-face contact with employees but nonetheless engages in activities behind the scenes (known as indirect persuader activities) where an object is to persuade employees concerning their rights to organize and bargain collectively.

This rule ensures that indirect reporter activity, as intended by Congress, is reported and disclosed to

workers and the public. Indirect persuader activity occurs when an employer hires a consultant to help defeat a union organizing campaign. The consultant has no direct contact with employees, but it directs a campaign, often formulaic in its design and implementation, for the employer to persuade employees to vote against union representation. Under this arrangement, the consultant often scripts the campaign, including drafting letters, flyers, leaflets, and emails that the employer distributes to its employees, writing speeches that management gives to employees in mandatory meetings, providing statements for supervisors to use in meetings they are required to hold with employees who report to them, often in one-on-one settings, and controlling the timing, sequence, and frequency of each of these events. Employers hire consultants to engage in this type of indirect persuasion in over 70 percent of organizing campaigns. See n. 9, 76 FR 36186.

Although the statute explicitly requires reporting of agreements involving the consultant's direct or indirect persuasion of employees, the Department's prior interpretation had the practical effect of relieving employers and labor relations consultants from reporting any persuader agreements, except those involving direct communication with employees. The Department had based its position on its interpretation of section 203(c), known as the “advice” exemption. The previous interpretation left workers unaware of the majority of persuader agreements. In fact, the Department only receives a small number of direct persuader reports, covering only a fraction of organizing campaigns. This lack of awareness by workers of consultant activity is reflected in many of the comments submitted on the NPRM.

It is the Department's view, based on its experience in administering and enforcing the LMRDA and its review of comments submitted in response to the proposed rule, that full disclosure of both direct and indirect persuasion activities protects employee rights to organize and bargain collectively and promotes transparency and the peaceful and stable labor-management relations sought by Congress. The disclosure required under this rule will provide employees with essential information about the underlying source of the views, materials, and policies directed at them and designed to influence how they exercise their statutory rights to union representation and collective bargaining. They will be better able to understand the role that labor relations consultants play in their employers' efforts to shape their views about union representation and collective bargaining.

As explained in the NPRM and in this preamble, the Department maintains that section 203 is better read to require employers and labor relations consultants to report activities that clearly are undertaken with an object to persuade employees, but which were viewed under the prior interpretation as the giving of “advice” to the employer. The prior interpretation failed to achieve the very purpose for which section 203 was enacted—to disclose to workers, the public, and the Government activities undertaken by labor relations consultants to persuade employees—directly or indirectly, as to how to exercise their rights to union representation and collective bargaining. Under this rule, exempt “advice” activities are now limited to those activities that meet the plain meaning of the term: An oral or written recommendation regarding a decision or course of conduct. The rule restores the traditional meaning to the term whereby an attorney or a labor relations consultant does not need to report, for example, when he counsels a business about its plans to undertake a particular action or course of action, advises the business about its legal vulnerabilities and how to minimize those vulnerabilities, identifies unsettled areas of the law, and represents the business in any disputes and negotiations that may arise. It draws a line between these activities, which do not have to be reported, and those activities that have as their object the persuasion of employees—activities that manage or direct the business's campaign to sway workers against choosing a union—that must be reported. An employer's ability to “accept or reject” materials provided, or other actions undertaken, by a consultant, common to the usual relationship between an employer and a consultant and central to the prior interpretation's narrow scope of reportable activity, no longer shields indirect persuader activities from disclosure.

The prior interpretation construed the advice exemption in a manner that failed to give full effect to the requirement that indirect persuasion of employees, as well as direct persuasion, triggers reporting. It did so in a manner that allowed the advice exemption to override this requirement. Upon our consideration of the comments received on the proposal and further review of the issue, we can find no policy justification, and only slender legal support, for the Department's earlier interpretation of section 203. The position effectively denied employees, the public, and the Government information about labor relations consultants that Congress had determined was necessary for employees to effectively exercise their rights to support or refrain from supporting a union as their collective bargaining representative, thereby impeding the national labor policy as established in the NLRA and the LMRDA. Under the interpretation embodied in this final rule, both the language of the advice exemption and the other components of section 203 are given effect in a manner that clearly tracks the language of section 203 more closely and better effectuates the purposes underlying the section.

The rule imposes no restrictions on what employers may say or do when faced with a union organizing campaign. Rather, the premise of the rule is that with knowledge that the source of the information received is an anti-union campaign managed by an outsider, workers will be better able to assess the merits of the arguments directed at them and make an informed choice about how to exercise their rights. With this information, they will be able to better discern whether the views and specific arguments of their supervisors about the benefits and drawbacks of union representation are truly the supervisors' own, reflect their company's views, or rather reflect a scripted industrywide (or even wider) antipathy towards union representation and collective bargaining. Once they have learned that a consultant has been hired to persuade them, employees will be able to consider whether the consultant is serving as a neutral, disinterested third party, hired to guide the employer in adhering to NLRB election rules or rather as one who has been hired as a specialist in defeating union organizing campaigns. They will also be better able to consider the weight to attach to the common claim in representational campaigns that bringing a union, as a third party, into the workplace will be counterproductive to the employees' interests. In the context of an employer's reliance on a third party to assist it on a matter of central importance, it is possible that an employee may weigh differently any messages characterizing the union as a third party. In these instances, it is important for employees to know that if the employer claims that employees are family—a relationship will be impaired, if not destroyed, by

the intrusion of a third party into family matters—it has brought a third party, the consultant, into the fold to achieve its goals. Similarly, with knowledge that its employer has hired a consultant, at substantial expense, to persuade them to oppose union representation or the union's position on an economic issue, employees may weigh differently a claim that the employer has no money to deal with a union at the bargaining table.

In crafting the final rule, the Department has focused on providing workers with information about the source of persuader activities so they can make informed decisions. The Department has been careful, just as Congress was in prescribing reporting by employers and consultants, to allow unions and employers to engage in an informed debate about the advantages and disadvantages of union representation, consistent with the First Amendment and the NLRA. Neither the statute nor the final rule restrains in any way the content of an employer's message—whether delivered by itself or with the assistance, directly or indirectly of a consultant—its timing, or the means by which it is delivered on matters relating to union representation and collective bargaining. Likewise, as discussed below, the rule also does not infringe upon the attorney-client relationship. The affected employees and the public interest benefit from the exchange of competing ideas. This can best be done by requiring that employers and labor relations consultants disclose their agreement to engage in persuader activities. Both the statute and this regulation fulfill the Government's important interest in ensuring that workers and the public are informed about such agreements. Regardless of the choices made by employees on whether to support or oppose representation in their workplace, the rule will ensure that they are more informed decision makers, which will result in more stable and peaceful labor-management relations.

The Department recognizes that most employers and their consultants, like most unions, conduct their affairs in a manner consistent with federal law. The law encourages debate, imposing only broad bounds in the labor relations context, imposing sanctions only in limited circumstances and without prior restraint—where employers “interfere with, restrain or coerce employees in the exercise of their rights guaranteed in [29 U.S.C. 157] or unions “to restrain or coerce” employees in the exercise of those rights. 29 U.S.C. 158(a)(1); 29 U.S.C. 158(b)(1). Congress intended the LMRDA, including the reporting requirements, to complement the NLRA, a result achieved by the final rule without abridging the right of employers and their consultants to engage in a robust debate about the advantages and disadvantages of union representation and collective bargaining. Thus, it is important to note that the Department has not attempted to regulate the content, timing, or veracity of communications by labor relations consultants or employers.

Research indicates that the number of firms engaged in persuader activities has grown substantially since the LMRDA was enacted. Recent studies show that in somewhere between 71% and 87% of employee organizing drives, the employer retains one or more consultants. See n. 9. 76 FR 36186. The size of the industry, per se, is not a concern of the Department's, but its growth exacerbates the transparency concerns: As the size has increased, employees in a substantial majority of representation campaigns are increasingly left unaware of information that may be important to them and may affect their decisions to support or oppose union representation in their workplaces. As noted in the NPRM, these studies demonstrate that employer campaigns against unions have become standardized, almost formulaic, because employers frequently turn to labor relations consultants, including law firms, to manage their efforts to oppose unionization. Those efforts utilize indirect persuasion almost exclusively. Despite the growth of this industry, historically, only a relatively small number of reports about persuader agreements and arrangements have been filed with the Department. The Department attributes this fact to the overly narrow view of the activities reportable under the prior interpretation, which essentially restricted reporting to just direct persuasion. By issuing this rule, the Department ensures that persuader activities receive the transparency that Congress intended, but was never attained under the prior rule—a need that has become more important over time as the use of consultants by employers to resist union representation has become the norm.

The rule, by revising the instructions to forms filed by employers (Form LM-10) and labor relations consultants (Form LM-20) to report persuader agreements and arrangements, helps them to comply with their reporting obligations. Reports must be filed if the labor relations consultant undertakes activities that fall within the categories described below:

Direct Persuasion

• The obligation to report direct persuasion by consultants remains. Consultants must report if they engage in any conversation or other direct communication with any employee, where the consultant has an object to persuade the employee about how he or she should exercise representation or collective bargaining rights. For example, reporting would be required if the consultant speaks directly with employees (in person or by telephone or other medium) or disseminates materials directly (such as by email or mail) that are intended to persuade. This contrasts, as it also does in indirect persuader activities, with situations in which the employer or its regular staff communicates directly with employees, a situation in which reporting is not required, as provided by 29 U.S.C. 433(e). This aspect of the rule is unchanged from the Department's prior interpretations.

Indirect Persuasion

• Planning, Directing, or Coordinating Supervisors or Managers. Reporting is required if the consultant—with an object to persuade—plans, directs, or coordinates activities undertaken by supervisors or other employer representatives. This includes both meetings and other less structured interactions with employees.

• Providing Persuader Materials. Reporting is required if the consultant provides—with an object to persuade—material or communications to the employer, in oral, electronic (including,

e.g.,

email, Internet, or video documents or images), or written form, for dissemination or distribution to employees. Reporting would be required, for example, if the consultant drafted, revised, or selected persuader materials for the employer to disseminate or distribute to employees. In revising employer-created materials, including edits, additions, and translations, a consultant must report such activities only if an “object” of the revisions is to enhance persuasion, as opposed to ensuring legality. The sale, rental, or other use of “off-the-shelf” persuader materials, such as videos or stock campaign literature, which are not created for the particular employer who is party to the agreement, will not be reportable unless the consultant helps the employer select the materials. A consultant who created literature previously, without any knowledge of the specific employer requesting the literature, including the labor union involved, industry, or employees, and has no role thereafter in disseminating

the literature for the specific employer, cannot be said to have acted, pursuant to an agreement with the employer in question, with a purpose of persuading these employees.

• Conducting a Seminar for Supervisors or Other Employer Representatives. Some labor relations consultants hold seminars on a range of labor-management relations matters, including how to persuade employees concerning their organizing and bargaining rights. Seminar agreements must be reported if the consultant develops or assists the attending employers in developing anti-union tactics and strategies for use by the employer, the employers' supervisors or other representatives. As explained below, however, employers whose representatives attend such seminars generally will have no reporting obligation. Additionally, trade associations are required to report only if they organize and conduct the seminars themselves, rather than subcontract their presentation to a law firm or other consultant. We note that not all seminars will be reportable. For example, a seminar where the consultant conducts the seminar without developing or assisting the employer-attendees in developing a plan to persuade their employees would not be reportable, nor would a seminar where a consultant merely makes a sales pitch to employers about persuader services it could provide.

• Developing or Implementing Personnel Policies or Actions. Reporting is only required if the consultant develops or implements personnel policies or actions for the employer with an object to persuade employees. For example, a consultant's identification of specific employees for disciplinary action, or reward, or other targeting based on their involvement with a union representation campaign or perceived support for the union would be reportable. As a further example, a consultant's development of a personnel policy during a union organizing campaign in which the employer issues bonuses to employees equal to the first month of union dues, would be reportable. On the other hand, a consultant's development of personnel policies and actions are not reportable merely because they improve the pay, benefits, or working conditions of employees, even where they could subtly affect or influence the attitudes or views of the employees. Rather, to be reportable, the consultant must undertake the activities with an object to persuade employees, as evidenced by the agreement, any accompanying communication, the timing, or other circumstances relevant to the undertaking.

These aspects of the rule effectuate the statute's requirement, largely negated by the Department's longstanding interpretation, that “indirect activities” undertaken by a labor relations consultant must be reported. The final rule, however, ensures that no reporting is required by reason of a consultant merely giving “advice” to the employer, such as, for example, when a consultant offers guidance on employer personnel policies and best practices, conducts a vulnerability assessment for an employer, conducts a survey of employees (other than a push survey,

i.e.,

one designed to influence participants and thus undertaken with an object to persuade), counsels employer representatives on what they may lawfully say to employees, conducts a seminar without developing or assisting the employer in developing anti-union tactics or strategies, or makes a sales pitch to undertake persuader activities. Reporting is also not required for merely representing an employer in court or during collective bargaining, or otherwise providing legal services to an employer.

As noted above, the final rule does not require employers to file a report solely by reason of their attendance at a union avoidance seminar. The Department determined that the aggregated burden associated with such reporting by large numbers of employers outweighed the marginal benefit that would be derived by requiring reports from both attendees and the firms presenting the seminars. Under the rule, the firms presenting the seminar will report essentially the same information that would have been reported by the attending employers.

To further reduce burden under the rule, the Department has determined that it is appropriate to treat trade associations somewhat differently than other entities insofar as reporting is concerned. Trade associations as a general rule will only be required to report in two situations—where the trade association's employees serve as presenters in union avoidance seminars or where they undertake persuader activities for a particular employer or employers (other than by providing off-the shelf materials to employer-members). The Department expects that trade associations typically will sponsor union avoidance seminars but rely on other consultants to actually present the seminar.

In response to comments, the Department emphasizes that the interpretation embodied in this rule does not interfere with free speech or other rights under the U.S. Constitution or free speech under section 8(c) of the National Labor Relations Act. Similarly, contrary to the view of some commenters, the Department's revised interpretation does not infringe on the common law attorney-client privilege, which is still preserved by section 204, or on an attorney's ethical duty of confidentiality. None of the information required to be reported under the revised interpretation is protected by the attorney-client privilege. To the extent the agreement provides confidential details about services other than reportable persuader/information-supplying activities, the principles of attorney-client privilege would apply and such information is not reportable absent consent of the client. We have carefully reviewed comments submitted by the American Bar Association (ABA), other associations of attorneys, law firms representing employers, and other commenters, urging the Department to adopt an interpretation that would differentiate between attorneys and other labor relations consultants and essentially exempt attorneys from reporting any activities other than those in which they communicate directly with employees. Importantly, although the ABA sought to include a provision in the bill that became the LMRDA that would have achieved this result, Congress struck that provision from what became law. The commenters' position has been rejected by the courts in cases where attorneys engaged in persuader activities unsuccessfully raised this privilege argument as a defense to their failure to report such activities. Moreover, the ABA and other commenters on this point have failed to advance any argument that attorneys who engage in the same activities as non-attorney consultants to counter union organizing campaigns—activities and circumstances significantly different from those typically involved with legal practice—should be able to avoid disclosing activities identical to those performed by their non-attorney colleagues in guiding employers through such campaigns. While some of the comments submitted in this rulemaking concern issues that may arise in connection with the Form LM-21 Receipts and Disbursements Report, such as the scope and detail of reporting about service provided to other employer clients, that report is not the subject of this rulemaking.

In the final rule, the Department has eliminated the term “protected concerted activities” from the definition of “object to persuade employees,” as

had been proposed in the NPRM. Instead, reporting is required only for agreements in which the consultant engages in activities with an object to persuade employees concerning representational and collective bargaining activities, but not “other protected concerted activities.” This better comports with the language of section 203, which, in contrast to the National Labor Relations Act, does not expressly refer to “concerted activities.”

Finally, the Department has revised the forms and instructions to require more detailed reporting on persuader agreements and to make the forms and instructions more user-friendly. The final rule requires that they be filed electronically with the Department.

B. Benefits of the Rule and Estimated Compliance Costs

The qualitative benefits associated with the rule are substantial. As discussed in the preceding section and throughout the preamble, employees, unions, the public, and this Department will benefit from the disclosure associated with this rule by requiring that both direct and indirect persuader activities be reported. This disclosure will particularly benefit employees involved in a representation campaign, enabling them to better consider the role that labor relations consultants play in their employer's efforts to persuade them about how they should exercise their rights as employees to union representation and collective bargaining matters. This rule promotes the important interests of the Government and the public by ensuring that employees will be better informed and thus better able to exercise their rights under the NLRA.

The Department estimates annual totals of 4,194 Form LM-20 reports and 2,777 Form LM-10 reports under this rule (the first number compares to the 2,601 estimate in the NPRM; the second figure compares to 3,414 in the NPRM). The Form LM-20 total represents an increase of 3,807 Form LM-20 reports over the total of 387 reports estimated in the Department's most recent Information Collection Request (ICR) submission to the Office of Management and Budget (OMB). The Form LM-10 total represents a 1,820 increase over the average of 957 Form LM-10 reports estimated in the Department's most recent ICR submission to OMB. The total estimated annual burden for all reports is approximately 6,851 hours for Form LM-20 reports and 6,804 hours for Form LM-10 reports. The total annual cost for the estimated 4,194 Form LM-20 reports is $633,932.16, which is $576,743.16 greater than the $57,189 estimated for the most recent ICR submission. The total annual cost for the estimated 2,777 Form LM-10 reports/filers is $629,567.34, which is $417,003.34 greater than the $212,564 estimated for the most recent ICR submission. The average cost per Form LM-20 form is $151.14. The average annual cost per Form LM-10 filer is $226.70.

II. Authority

The legal authority for this rule is set forth in sections 203 and 208 of the LMRDA, 29 U.S.C. 432, 438. Section 208 of the LMRDA provides that the Secretary of Labor shall have authority to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under Title II of the Act and such other reasonable rules and regulations as she may find necessary to prevent the circumvention or evasion of the reporting requirements. 29 U.S.C. 438. The Secretary has delegated her authority under the LMRDA to the Director of the Office of Labor-Management Standards and permits re-delegation of such authority. See Secretary's Order 8-2009, 74 FR 58835 (Nov. 13, 2009).

III. Statutory and Regulatory Background

A. Statutory and Regulatory Requirements for Employer and Labor Relations Consultant Reporting

Section 203(a) of the LMRDA, 29 U.S.C. 433(a), requires employers to report to the Department of Labor “any agreement or arrangement with a labor relations consultant or other independent contractor or organization” under which such person“undertakes activities where an object thereof, directly or indirectly, is to persuade employees to exercise or not to exercise,” or how to exercise, their rights to union representation and collective bargaining. 29 U.S.C. 433(a)(4).

“[A]ny payment (including reimbursed expenses) pursuant to such an agreement or arrangement must also be reported. 29 U.S.C. 433(a)(5).

The LMRDA defines a “labor relations consultant” as “any person who, for compensation, advises or represents an employer, employer organization, or labor organization concerning employee organizing, concerted activities, or collective bargaining activities.” 29 U.S.C. 402(m).

The report must be one “showing in detail the date and amount of each such payment, . . . agreement, or arrangement . . . and a full explanation of the circumstances of all such payments, including the terms of any agreement or understanding pursuant to which they were made.” 29 U.S.C. 433. The Department of Labor's implementing regulations require employers to file a Form LM-10 (“Employer Report”) that contains this information in a prescribed form. See 29 CFR part 405.

LMRDA section 203(b) imposes a similar reporting requirement on labor relations consultants and other persons. It provides, in part, that every person who enters into an agreement or arrangement with an employer and undertakes activities where an object thereof, directly or indirectly, is to persuade employees to exercise or not to exercise, or how to exercise, their rights to union representation and collective bargaining “shall file within thirty days after entering into such agreement or arrangement a report with the Secretary . . . containing . . . a detailed statement of the terms and conditions of such agreement or arrangement.” 29 U.S.C. 433(b). Section 203(b) also requires persons subject to this requirement to report receipts and disbursements of any kind “on account of labor relations advice and services.”

The Department of Labor's implementing regulations require labor relations consultants and other persons who have engaged in reportable activity to file a Form LM-20 “Agreement and Activities Report” within 30 days of entering into the reportable agreement or arrangement, and a Form LM-21 “Receipts and Disbursements Report” within 90 days of the end of the consultant's fiscal year, if during that year the consultant received any receipts as a result of a reportable agreement or arrangement. See 29 CFR part 406.

Under LMRDA section 202, 29 U.S.C. 432, union officers and employees are required to report anything of value received “directly or indirectly” from an employer (including payments or benefits received by an official's spouse or minor child) that would present a conflict of interest with their obligation to the union. The reason for this requirement, as explained in the legislative history, is similar to the reason given for consultant reporting. See S. Rep. No. 86-187, at 38 (1959), reprinted in 1 NLRB, Legislative History of the Labor-Management Reporting and Disclosure Act of 1959 (1 LMRDA Leg. Hist.), at 397, 434 (“Reports are required as to matters which should be public knowledge so that their propriety can be explored in the light of known facts and conditions”).

LMRDA section 203(c) ensures that sections 203(a) and 203(b) are not construed to require reporting of “advice.” Section 203(c) provides in pertinent part that “nothing in this section shall be construed to require any employer or other person to file a report covering the services of such person by reason of his giving or agreeing to give advice to such employer.” 29 U.S.C.

433(c). Section 203(c) is referred, in this final rule, as the “advice” exemption.

Finally, LMRDA section 204 exempts from reporting attorney-client communications, which are defined as “information which was lawfully communicated to [an] . . . attorney by any of his clients in the course of a legitimate attorney-client relationship.” 29 U.S.C. 434.

B. History of the LMRDA's Reporting Requirements and Justification for the Final Rule

The Secretary of Labor administers and enforces the Labor-Management Reporting and Disclosure Act of 1959, as amended (LMRDA), Public Law 86-257, 73 Stat. 519-546, codified at 29 U.S.C. 401-531. The LMRDA, in part, establishes labor-management transparency through reporting and disclosure requirements for labor organizations and their officials, employers, labor relations consultants, and surety companies.

The LMRDA and the NLRA are the two federal statutes that address generally the obligations of unions and employers to refrain from actions that interfere with the exercise by employees of their rights to union representation, collective bargaining, and union membership. While the NLRA, enforced by the NLRB, ensures compliance with these rights by investigating and prosecuting unfair labor practice complaints, the LMRDA promotes these rights by requiring unions, employers, and labor relations consultants to publicly disclose information about identified financial transactions, agreements, and arrangements. These foundational statutes are discussed in many texts and scholarly articles, too numerous to mention. To appreciate the historical significance of the statutes, see generally Philip Taft,

Organized Labor in American History

(1964), chapters 36, 44, and 51.

1. Dealing With a Growing Phenomenon—1960 and Earlier

In enacting the LMRDA in 1959, a bipartisan Congress expressed the conclusion that the public interest is served by continuing “to protect employees' rights to organize, choose their own representatives, bargain collectively . . . that it is essential that labor organizations, employers, and their officials adhere to the highest standards of responsibility and ethical conduct in administering the affairs of their organizations, particularly as they affect labor-management relations,” and that “[this Act] will afford necessary protection of the rights and interests of employees and the public generally as they relate to the activities of labor organizations, employers, labor relations consultants, and their officers and representatives.” 29 U.S.C. 401(a), (b).

The LMRDA was the direct outgrowth of a highly-publicized investigation conducted by the Senate Select Committee on Improper Activities in the Labor or Management Field, commonly known as the McClellan Committee, which convened in 1958. The committee's investigation focused on racketeering and corruption among certain unions, union officials, employers, and labor relations consultants. See generally,

Interim Report of the Select Committee on Improper Activities in the Labor or Management Field,

S. Rep. No. 85-1417 (1957). Enacted in 1959 in response to the report of the McClellan Committee, the LMRDA addressed various issues identified by the Committee through a set of integrated provisions aimed, among other areas, at shedding light on labor-management relations, governance, and management. These provisions include financial reporting and disclosure requirements for labor organizations, their officers and employees, employers, labor relations consultants, and surety companies. See 29 U.S.C. 431-36, 441.

Among the concerns that prompted Congress to enact the LMRDA was conduct by some labor relations consultants retained by employers, usually undertaken behind the scenes, that Congress had found impeded the right of employees to organize labor unions and to bargain collectively under the National Labor Relations Act (NLRA), 29 U.S.C. 151

et. seq.

See,

e.g.,

S. No. 86-187. Rep, at 6, 10-12, reprinted in 1 LMRDA Leg. Hist., at 397, 402, 406-408. Congress was concerned that some labor consultants, acting on behalf of management, worked directly or indirectly to discourage legitimate employee organizing drives and engage in activities with the aim to undercut employee support for unions. S. Rep. No. 86-187, at 10, 1 LMRDA Leg. Hist., at 406. The Senate Report explained that under section 203 “every person who enters into an agreement with an employer to persuade employees as regards the exercise of their right to organize and bargain collectively or to supply an employer with information concerning the activity of the employees or labor organizations in connection with a labor dispute would be required to file a detailed report.”

The report explained that “this public disclosure will accomplish the same purpose as public disclosure of conflicts of interest and other union transactions which are required to be reported” under other sections of the bill that was to become the LMRDA. S. Rep. No. 86-187, at 5, 12, reprinted in 1 LMRDA Leg. Hist., at 401, 408. (Emphasis added).

Congress was clearly aware that some consultant activity designed to be reported was accomplished “indirectly.” See S. Rep. No. 86-187, at 10, 12; 1 LMRDA Leg. Hist., at 406-407 (there have been

direct or indirect

management involvements involving middlemen; “[i]n

some cases

they work directly on employees or through committees to discourage” organizing efforts). The report noted an exception from reporting: “An attorney or consultant who confines himself to giving legal advice, taking part in collective bargaining and appearing in court or administrative proceedings would not be included among those required to file reports.” S. Rep. No. 86-187, at 5, 12, reprinted in 1 LMRDA Leg. Hist., at 401, 408.

Congress recognized that some of the persuader activities occupied a “gray area” between proper and improper conduct and chose to rely on disclosure rather than proscription, to ensure harmony and stability in labor-management relations. See S. Rep. No. 86-187, at 5, 12; 1 LMRDA Leg. Hist., at 401, 408.

H.R. Rep. No. 86-741 (1959), at 12-13, 35-37, reprinted in 1 LMRDA Leg. Hist., at 770-771, 793-795, contained similar statements. However, it should be noted that the House bill contained a much narrower reporting requirement—reports would be required only if the persuader activity interfered with, restrained, or coerced employees in the exercise of their rights,

i.e.,

if the activity would constitute an unfair labor practice. The House bill also contained a broad provision that would have essentially exempted attorneys, serving as consultants, from any reporting. In conference, the Senate version prevailed in both instances, restoring the full disclosure provided in the Senate bill. See H. Rep. No. 86-1147 (Conference Report), at 32-33; 1 LMRDA Legis. Hist., at 936-937.

The reporting requirements on employers and their consultants under LMRDA section 203 resemble those prescribed for labor organizations and their officials under LMRDA sections 201 and 202, respectively. 29 U.S.C. 431, 432. Under LMRDA section 208, the Secretary of Labor is authorized to issue, amend, and rescind rules and regulations prescribing the form and publication of required reports, as well as “such other reasonable rules and regulations . . . as he may find necessary to prevent the circumvention or evasion of such reporting requirements.” 29 U.S.C. 438. The Secretary also is authorized to bring civil actions to enforce the LMRDA's reporting requirements. 29 U.S.C. 440. Willful violations of the reporting requirements, knowing false statements made in a report, and knowing failures to disclose a material fact in a report are subject to criminal penalties. 29 U.S.C. 439.

A notable, contemporary account of the McClellan hearings demonstrates the breadth of the activities to be reported. Prior to becoming Attorney General and then Senator, Robert F. Kennedy served as staff director for the special committee that conducted those hearings. In his book,

The Enemy

Within

(1961), Kennedy discussed the activities that had been engaged in by Nathan Shefferman, who had served as labor relations consultant for several prominent companies. Kennedy's description of Shefferman's activities and those of his associates belies any notion that Congress, in later enacting the LMRDA, was limiting reporting to activities involving direct communication with employees. As described by Kennedy, Shefferman regularly hid his firm's activities in opposing union representation, preferring instead to orchestrate behind the scene an employer's actions to oppose a union. To illustrate Shefferman's advice to employers, Kennedy draws from a memorandum prepared by Shefferman for one of his clients: “Don't dignify them. Call them bums and hoodlums. Cheap common bums. Don't argue wage differential. Don't answer it. Stay away from it. Ridicule leaders.”

The Enemy Within,

at 218-219. Against this backdrop, it is clear that Congress intended that employers and their labor relations consultants were to report both their direct and indirect persuader activities. Moreover, as will be discussed in the next section of the preamble, the same activities that Shefferman was among the first to “perfect” continue to be utilized by labor relations consultants today.

2. A Disclosure Vacuum—From 1962 Until Today

With the Department's 1962 interpretation of the advice exemption to require reporting in only limited circumstances in which the employer was not free to “accept or reject” materials offered by the consultant, the reporting of persuader activities (activities which, by their nature, are most often “indirect”) largely came to an end. At the same time, the consultant industry expanded as employer use of its services became increasingly common until the present day, where an employer's decision to rely solely on its own existing staff to meet a union campaign is uncommon. As a consequence, without the disclosure intended by Congress in enacting section 203, the work of consultants in helping employers oppose union representation remains undisclosed to employees.

Many employers engage consultants to conduct union avoidance or counter-organizing efforts to prevent workers from successfully organizing and bargaining collectively. In recent times, the use of law firms in particular to orchestrate such campaigns has been documented by several industrial relations scholars. John Logan,

The Union Avoidance Industry in the U.S.A.,

44 British Journal of Industrial Relations 651, 658 (2006),

citing

Bruce E. Kaufman and Paula E. Stephan,

The Role of Management Attorneys in Union Organizing Campaigns,

16 Journal of Labor Research 439 (1995); John Logan, Trades Union Congress,

U.S. Anti-Union Consultants: A Threat to the Rights of British Workers

11 (2008) (hereafter “Logan,

U.S. Anti-Union Consultants”

); 1984 Subcommittee Report, at 2; John Logan,

Consultants, Lawyers, and the

Union Free' Movement in the U.S.A.,

33 Industrial Relations Journal, 197, 199-212 (2002) (hereafter “Logan,

Union Free Movement”

); Terry A. Bethel,

Profiting from Unfair Labor Practices: A Proposal to Regulate Management Representatives,

79 Nw. U. L. Rev. 506, 519-525 (1984). As Kaufman and Stephan reported, consultants, who often are attorneys, provide employers with a range of services, and have varying degrees of involvement with employees, during union avoidance campaigns:

Typically at the first sign of union activity at a facility management seeks the advice and counsel of one or more attorneys. In some cases the attorney's role is largely one of providing legal assistance, such as advising supervisors on what constitutes an unfair labor practice under the NLRA, with overall direction of the firm's campaign entrusted to either top management or an outside consultant. In other situations, the attorney not only provides legal counsel but also plays an important (sometimes dominant) role in developing and implementing the company's anti-union strategy and campaign tactics.

Kaufman and Stephan, at 440.

The literature reports a wide range of activities conducted or directed by consultants, many of which are lawful means to oppose the formation of the union (though some are not). To provide a sense of the kinds of activities engaged in by a labor relations consultant, we have compiled a list from activities mentioned in a study about union organizing and representation in the United States. The list does not differentiate between “persuader activities” and non-persuader activities, whether a particular activity would constitute “direct” or “indirect” persuasion,” or whether the undertaking of a particular activity, by itself, would trigger reporting. The activities mentioned in the study include—

A 1980 Congressional subcommittee report noted the increase in the use of law firms to assist employers in their union avoidance activities:

Many lawyers no longer confine their practice to traditional services such as representing employers in administrative and judicial proceedings or advising them about the requirements of the law. They also advise employers and orchestrate the same strategies as non-lawyer consultants for union “prevention,” union representation election campaigns, and union decertification and de-authorization. Lawyers conduct management seminars, publish widely, and often form their own consulting organizations.

Subcommittee on Labor-Management Relations, H. Comm. on Education and Labor,

Pressures in Today's Workplace

(Comm. Print 1980) (“1980 Subcommittee Report”), at 28-29.

• Monitor NLRB daily dockets to get a jump on union activity and to offer their services to the targeted employer even before it is aware of the union's activity

• Encourage employers to write, publicize and enforce a clear policy against solicitation on a company premises by non-employees

• Inform employees that signing a union authorization card is akin to a power of attorney or blank check

• Have supervisors (falsely) state the union's campaign is going badly and that the union has been intimidating, harassing, and pressuring employees to sign union authorization cards

• Convey the false impression that support for a union is eroding by distributing sample letters to employees asking the union to return signed authorization cards

• Argue in favor of bargaining units that group together employees opposed to the union

• Argue that union advocates are supervisors, thereby removing them from voting and advocating on behalf of the union

• Tell supervisors that union representation will be “a personal calamity” for them by undermining their authority on the shop floor

• Warn supervisors they can be terminated for refusing to participate in the employer's anti-union campaign

• Relieve supervisors from any concern that they could be held culpable for their actions during the campaign by explaining that the NLRB holds the employer, not individual supervisors, responsible for any violation of the law

• Require supervisors to talk daily to employees on a one-to-one basis to gauge their support for the union, requiring that they report to the consultant on a daily or more frequent basis

• Organize “vote no” committees

• Script messages that predict violent strikes and permanent replacement of workers, highlight restrictive clauses in union constitutions, emphasize high salaries of union officials, the union's interest in obtaining dues payments from employees, and alleging union corruption

• “[W]rite or help employers to write anti-union letters signed by senior

management, which are delivered to employees on the job by supervisors in order to witness each employee's response and to `stimulate discussion' between supervisors and employees”

• “Utiliz[e] gimmicks such as anti-union comic books, cartoons, competitions and `vote-no' t-shirts and buttons. Competitions typically include `the longest Union Strike contest' (the correct answer being the greatest to three possible choices) or `true or false' quizzes (sample question: the union president earns $150,000 per year and has a chauffeur-driven limousine') with a cash prize worth six months union dues money”

• Train employers how to conduct captive audience meetings with large and small groups of employees, taking place on the company premises on paid time

Adapted from

Logan, Union Free Movement,

at 203-205.

Consultants offer a complete slate of persuader services. As described by one consultant: “[We] prepare all counter union speeches, small group meeting talks, letters to employees' homes, bulletin board posters, handouts to employee, etc., and schedules dates for each counter union communication media piece to be used. We have assembled a very large library of counter union materials, much of what is customized to a particular union.” Logan,

Union Free Movement,

at 203.

3. Transparency Promotes Worker Rights by Creating a More Informed Electorate

Employees are often unaware that their employer has retained a third party to orchestrate a campaign against the union. See Logan,

Union Free Movement,

at 201. As described by Logan: “[E]mployees are often blissfully unaware of the consultant's presence in the workplace because consultants use first-line supervisors to spearhead their anti-union campaigns. This allows the consultant to remain in the background, avoid becoming the focus of the union reporting requirements of the LMRDA.” Logan,

Union Free Movement,

at 201. Quoting a lawyer-consultant about the importance of remaining anonymous: “I don't want the union to have the political advantage. They will tell the workers, “Look the company hired this guy from New York City.” Id. Later, the article states; “Management's efforts to label the union an outside influence indicates the importance of keeping the consultant, obviously an outsider, well hidden during the counter-[organizing] campaign.” Id. at 206. Further, even if employees know that a consultant has been hired, they may be unaware that the consultant is in the business of defeating employee efforts to form, join, or assist a union, rather than only serving the employer as an advisor on legal requirements.

The purpose of this rule is disclosure—not to express a view regarding the hire of labor relations consultants, the utility of their services, the growth of the industry, nor to single out particular firms or tactics for praise or criticism. The Department agrees with comments submitted in this rulemaking suggesting diversity in the labor relations consultant arena—both in terms of the types of services offered by consultants and the reasons employers seek to retain consultants. We acknowledge that the consultants may, in fact, be hired solely to help employers adhere to the law. The disclosure of the employer's persuader agreement or arrangement with a consultant allows workers to evaluate the source of the arguments and information designed to influence the exercise of their representation and collective bargaining rights. With this information, employees can better evaluate the merits of the views expressed by the employer's supervisors and managers, allowing employees to make more informed choices regarding their protected rights.

Union avoidance efforts often utilize supervisors and other management representatives to persuade employees. The reason for this approach is that these individuals, as co-workers, are generally known and more easily trusted by the employees than would be an outside consultant. See Logan,

Union Free Movement,

at 201-203. Employees may evaluate the message and methods of their supervisors and managers differently when they have information that reveals that a consultant is coaching these supervisors, drafting talking points, and scripting their interactions with employees. Without this information, employees are unable to provide necessary context to a common employer argument that a union is a “third party” that employees do not need to further their interests. Id. at 201, 206.

In contrast to the limited information available to employees about consultants under the Department's prior interpretation, employees already have a great deal of information available to them concerning the union or unions seeking to represent or currently representing them, including the amount that unions spend on organizing activities and who they engage to assist them in those organizing activities.

This information is publicly available in reports filed by unions with OLMS pursuant to section 201 of the LMRDA. For example, a union that files the Form LM-2 annual financial report is required to identify the percentage of time that its officers and employees spend on “Representational Activities.” See the Instructions for Form LM-2 Labor Organization Annual Report, at 19-20. On Schedule 15 of the Form LM-2, the union provides a further accounting of its direct and indirect disbursements related to representational activities, which include organizing efforts and collective bargaining. If a disbursement of $5,000 or more was made in this category, the union is required to itemize the disbursement by identifying the full name and address, and the type, of business or individual that received the disbursement and a statement of the reason for the disbursement. Id. at 25-26. Additionally, workers may view Form LM-30 reports from union officials disclosing potential conflicts of interest, as well as the results of union audits, union officer elections and civil and criminal cases against union officials, and Office of Labor-Management Standards (OLMS) annual reports and enforcement data. See LM reports and other information on the Department's Web site at

www.dol.gov/olms

; see also S. Rep. No. 86-187, at 39-40, 1 LMRDA Leg. Hist., at 435-436, stating, in part, that “if unions are required to report all their expenditures, including expenses in organizing campaigns, reports should be required from employers who” use consultants. This disclosure advances the goals of an informed electorate able to distinguish between well-reasoned and accurate information and campaign pressure. It is a reasonable approach to restore more transparency for workers.

As noted by an international union in its comments on the proposed rule, it is routine for labor relations consultants to include information from Form LM-2 reports in their efforts to undermine employee support for a union.

Under this rule, employees, as intended by Congress in requiring the reporting of direct and indirect persuader activities, will gain considerable information about the amount of money involved in disbursements to the consultant, and many details about the nature and extent of the persuader agreement. They will benefit from publicly-available information that bears on the exercise of their rights as employees. Employers and consultants already have access to comprehensive reports filed with the Department pursuant to the LMRDA by unions and union officers that detail various financial arrangements and transactions. This rule restores the

missing piece from overall reporting requirements—by unions, union officers, employers, and labor relations consultants—established by the LMRDA.

The Department addresses comments concerning the rule's impact on employees' need for transparent information in Sections V.C.1, 3.

4. Underreporting of Persuader Agreements

The impetus for this rulemaking was the Department's recognition that, while employers routinely use consultants to orchestrate counter-organizing campaigns, most agreements or arrangements with such consultants went unreported. Underlying the paucity of reports was the Department's interpretation to essentially require consultants to report only agreements in which a consultant agrees to directly persuade employees on matters relating to union representation and collective bargaining. We recognized that despite the significant growth of the persuader industry and employers' increasing reliance on their services since the LMRDA's enactment, there had been no uptick in the number of reports received on persuader activity.

The use of consultants to orchestrate union avoidance and counter-campaigns appears to have increased tremendously since 1959. See the NPRM at 76 FR 36182, 85-86.

As stated in the NPRM, recent studies place the contemporary consultant-utilization rate of employers who face employee organizing drives somewhere between 71% and 87%.

76 FR 36186. Although there is some variation from year to year, the average number of representation cases filed with the National Mediation Board (NMB) during fiscal years 2010 to 2014 is 40; the average number of NLRB representation petitions filed during the most recent period available, 2009-2013, is 2,658.

Using the mean utilization rate of consultants by employers from the studies discussed above, the Department would expect that 78% of the combined NLRB and NMB representation matters would result in about 2,104 arrangements or agreements requiring a Form LM-20 consultant report annually during the same five-year period.

However, the Department received an average of about 545 LM-20's annually,

only 25.9% of those it could expect.

It appears clear that only a small fraction of the organizing campaigns in which consultants were utilized to manage counter-organizing campaigns resulted in the filing of a Form LM-20. When such a small proportion of persuader consulting activity is reported, employees are not receiving the information that would enable them to make an informed decision on organizing and collective bargaining.

See Kate L. Bronfenbrenner,

Employer Behavior in Certification Elections and First-Contract Campaigns: Implications for Labor Law Reform,

in Restoring the Promise of American Labor Law 80 (Sheldon Friedman et al. eds. ILR Press 1994) (hereafter “Bronfenbrenner,

Employer Behavior

”) (71% of employers); Logan,

Union Avoidance Industry,

at 669 (75% of employers); Kate Bronfenbrenner, Economic Policy Institute,

No Holds Barred: The Intensification of Employer Opposition to Organizing

13 (2009) (hereafter “Bronfenbrenner,

No Holds Barred

”) (75% of employers in period 1999-2003); Chirag Mehta and Nik Theodore, American Rights at Work,

Undermining the Right to Organize: Employer Behavior during Union Representation Campaigns

5 (2005) (hereafter “Mehta and Theodore,

Undermining the Right to Organize

”) (82% of employers); James Rundle,

Winning Hearts and Minds in the Era of Employee Involvement Programs,

in Organizing to Win: New Research on Union Strategies 213, 219 (Kate Bronfenbrenner, et al. eds., Cornell University Press 1998) (hereafter “Rundle,

Winning Hearts and Minds

”) (87% of employers). See also Subcommittee on Health, Employment, Labor and Pensions, H. Comm. on Education and Labor,

The Employee Free Choice Act

(Feb. 8, 2007) (testimony by Professor Harley Shaiken, quoting an article in

Fortune,

finding that most employers hire consultants to block organizing drives).

See NLRB Annual Report Data, Table 1, for FYs 2009-10 at

http://www.nlrb.gov/reports-guidance/reports/annual-reports

, as well as the NLRB Summary of Operations for FYs 2011-12 at

http://www.nlrb.gov/reports-guidance/reports/summary-operations

. See also NLRB data for FY 2013 at

http://www.nlrb.gov/news-outreach/graphs-data/petitions-and-elections

. See also the NMB FY 2014 Annual Report at

https://storage.googleapis.com/dakota-dev-content/NMB-2014-Annual-Report.pdf

for NMB FY 2010-2014 data.

This figure may still under represent the total, as it does not take into account employers who hire multiple consultants or consultants who hire sub-consultants, each of whom would need to file separate Form LM-20 reports.

Information on the number of LM reports received for FYs 2010-14 is available through the Department's Electronic Labor Organization Reporting System (e.LORS).

The Department notes that it has updated the NLRB, NMB, and LM reports data used in the NPRM. The data in the final rule reflects the most recent fiscal years: 2010-14 (2009-2013 for the NLRB data), whereas the NPRM utilized a prior period: FYs 2005-09. See the Paperwork Reduction Act analysis in Section VI.G.1.

See Charles B. Craver,

The Application of the LMRDA “Labor Consultant” Reporting Requirements to Management Attorneys: Benign Neglect Personified,

73 Nw. U. L. Rev. 605 (1978) (reporting on survey of lawyers engaged in legal advice and persuader activities, noting pervasive noncompliance with disclosure even where activity obviously involved direct persuader activity and noting the particular problems where employees are unaware that an attorney is acting as the employer's representative).

The lack of reporting of employer-consultant agreements, despite the increase in employer utilization of consultants to orchestrate anti-union campaigns and programs, stems from the interpretative decisions of the Department. The prior interpretation effectively exempts agreements for activities consisting of indirect persuasion of employees. Indeed, the prior interpretation did not properly take into account the widespread use of indirect tactics, such as directing the persuader activities of the employer's supervisors and providing persuasive materials to the employer for dissemination to employees, and thus did not result in the reporting of most persuader agreements. This conclusion has also been reached by observers of the consultant industry. See John Logan, “

Lifting the Veil

”

on Anti-Union Campaigns: Employer and Consultant Reporting under the LMRDA, 1959-2001,

15 Advances in Industrial and Labor Relations 295, 297 (2007) (hereafter Logan,

Lifting the Veil

) (“As the size and sophistication of the consultant industry has grown, the effectiveness of the law on consultant disclosure and reporting has diminished.”). Indeed, the charge is that “[e]nforcement of the consultant reporting requirements had practically ground to a halt by the mid-1980s—all during a time when, according to organized labor, employers and consultants were ever more actively, boldly, and creatively fighting unionization.” Id. at 311.

See also Assistant Secretary Hobgood's testimony, discussed supra, “acknowledg[ing] that Department [enforcement] activity had `declined significantly' since the first few years after the enactment of [the LMRDA].” 1980 Subcommittee Report, at 45.

Members of the consultant industry have also cited the Department's interpretation as the cause of underreporting of persuader agreements. A former consultant, Martin Jay Levitt, observed:

The law states that management consultants only have to file financial disclosures if they engage in certain kinds of activities, essentially attempting to persuade employees not to join a union or supplying the employer with information regarding the activities of employees or a union in connection with a labor relations matter. Of course, that is precisely what anti-union consultants do, have always done. Yet I never filed with [LMRDA] in my life, and few union busters do . . . As long as [the consultant] deals directly only with supervisors and management, [the consultant] can easily slide out from under the scrutiny of the Department of Labor, which collects the [LMRDA] reports.

Martin Jay Levitt (with Terry Conrow),

Confessions of a Union Buster,

at 41-42 (New York: Crown Publishers, Inc. 1993). Mr. Levitt describes consultant strategies that he employed to avoid reporting his activities:

Within a couple of weeks I had identified the few supervisors who were willing to

work extra hard for me . . . . Through that handful of good soldiers I set to work establishing a network of rank-and-file employees who would serve as spies, informants, and saboteurs. Those so-called loyal employees would be called upon to lobby against the union, report on union meetings, hand over union literature to their bosses, tattle on their co-workers, help spread rumors, and make general pests of themselves within the organizing drive. I rarely knew who my company plants were. . . . It was cleaner that way. Nobody could connect me to the activities, I steered clear of the reporting requirements of [the LMRDA], and the workers' `pro-company' counter campaign was believed to be a grass-roots movement.

Id. at 181.

Mr. Levitt's description of the actual practice of labor relations consultants is consistent with prior statements by other consultants. See 1980 Subcommittee Report, at 44 (quoting testimony of labor relations consultant and stating that the “current interpretation of the law has enabled employers and consultants to shield their arrangements and activities”). See also

Unionbusting in the United States,

at 112, which states that “most modern union busters employed a standardized three-pronged attack. Cognizant of LMRDA guidelines requiring consultants to report their activity only when engaged

directly

in persuading employees in regards to their right to bargain collectively, most consulting teams utilized supervisory personnel as `the critical link in the communications network.'” (Italics in original.)

As discussed further below, a congressional subcommittee concluded that there is significant underreporting of persuader agreements, as a result of the Department's interpretation. The 1980 Subcommittee Report characterizes the extent and effectiveness of employer and consultant reporting under the LMRDA as a “virtual dead letter, ignored by employers and consultants and unenforced by the Department of Labor.” 1980 Subcommittee Report, at 27. The Subcommittee concluded that the “current interpretation of the law has enabled employers and consultants to shield their arrangements and activities[,]” and called upon the Department to “adopt . . . a more reasonable interpretation so the Act can reach consultants who set and control the strategy for employer anti-union efforts but who do not themselves communicate directly with employees.” Id. at 44.

This recommendation came about, in part, as the result of testimony before the Subcommittee by Assistant Secretary of Labor for Labor-Management Relations William Hobgood, who “acknowledged that Department [enforcement] activity had `declined significantly' since the first few years after the enactment of [the LMRDA].” 1980 Subcommittee Report at 45. Hobgood testified that the Department's interpretation of advice “ `troubles' him,” and that the Department was “reviewing the question of where advice ends and persuasion begins to make sure the Department's position is consistent with the law and adequate to deal with the approaches to persuader activities that have evolved since the law was enacted more than 20 years ago.” Id. at 44.

Subsequent subcommittee hearings, conducted in 1984, also addressed labor relations consultants' and employers' compliance with the LMRDA's reporting and disclosure requirements. Subcommittee on Labor-Management Relations, H. Comm. on Education and Labor,

The Forgotten Law: Disclosure of Consultant and Employer Activity Under the L.M.R.D.A.

(Comm. Print 1984) (1984 Subcommittee Report). The 1984 Subcommittee admonished the Labor Department for failing to act on its recommendations from 1980 regarding the need for more vigorous enforcement of employer and consultant reporting requirements, 1984 Subcommittee Report at 4, and suggested that lack of robust enforcement of employer and consultant reporting requirements of section 203 “frustrated Congress' intent that labor-management relations be conducted in the open.” Id. at 18.

The Department addresses comments concerning the underreporting of persuader agreements in Section V.C.2.

5. Transparency Promotes Peaceful and Stable Labor-Management Relations, a Central Goal of the Statute

The Department views disclosure of third-party persuader agreements, as did Congress, as a key “to protect employee rights to organize, choose their own representatives, [and] bargain collectively.” 29 U.S.C. 401(a). The Senate Labor Committee explained why the provision that ultimately became section 203(b) of the LMRDA was necessary, stating that just as “unions are required to report all their expenditures, including expenses in organizing campaigns, reports should be required from employers who carry on, or engage such persons to carry on, various types of activity, often surreptitious, designed to interfere with the free choice of bargaining representatives by employees and to provide the employer with information concerning the activities of employees or a union in connection with a labor dispute.” S. Rep. No. 86-187, at 39-40, 1 LMRDA Leg. Hist., at 435-436. As this passage suggests, section 203(b) requires not only the disclosure of consultant activity that interferes with, restrains, or coerces employees in their protected rights under the NLRA,

i.e.,

constitutes an unfair labor practice, but also requires reporting of activity to persuade employees that involves conduct that is otherwise legal under the NLRA. S. Rep. No. 86-187, at 11, 12, 1 LMRDA Leg. Hist., at 406, 407.

Only by providing such information would the interest of workers, the public, and the government be protected. Anything less would deny employees information necessary for them to fully exercise their rights to union representation and collective bargaining.

Labor relations consultants may be held liable by the National Labor Relations Board for unfair labor practices committed on behalf of employers. See,

e.g., Blankenship and Associates, Inc.

N.L.R.B.,

999 F.2d 248 (7th Cir. 1993), enforcing 306 N.L.R.B. 994 (1992). Employers may also be held liable, based on the actions of their consultants. See,

e.g., Wire Products Manufacturing Corp.,

326 N.L.R.B. No. 62 (1998).

Although the Department's primary role insofar as Title II of the Act is concerned is to prescribe, administer, and enforce regulations implementing the Act's reporting and disclosure provisions, this role also comes within the Department's charge in its organic statute “to foster promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment,” a role congruent with the Department's responsibility to assist in ensuring “industrial peace.” Act to Create the Department of Labor, Public Law 426, 37 Stat. 736 (1913), sections 1, 8 (codified as amended at 29 U.S.C. 551). As we have noted, this rule effectuates the intention of Congress to require the disclosure of persuader activity—both direct and indirect. In fashioning this rule, our target has been to achieve this purpose—not to encourage or discourage the use of labor relations consultants, nor to attribute to the industry as a whole the recognized failure by some members of the industry to adhere to responsible, lawful standards.

Insofar as questions concerning employee choice about union representation are concerned, the integrity of the union election certification process is strengthened when voters become better informed—by virtue of union disclosure, as well as by consultant and employer disclosure. Even if the votes of certain workers are not affected by the knowledge of the persuader agreement with a consultant where this information is provided to the employees, they, along with the employer and the public, can be more confident in the integrity of the election process and that the election outcomes reflect the sound and informed intent of

the voters. Such a process for determining union representation issues creates more stable and peaceful labor-management relations. Even if a union is defeated in its efforts to gain representation, an informed workforce will be in a better position to maintain stable labor-management relations.

The need to disclose an employer's use of consultants during an organizing campaign is a pivotal theme in this rulemaking. However, such disclosure also is important where an employer has engaged the persuader services of a consultant following a union's certification while the parties are negotiating a first contract. See 29 U.S.C. 401(a) (a purpose of LMRDA is to protect employees right to bargain collectively); 29 U.S.C. 143 (under the NLRA, it is the declared policy of the United States to “encourage[ ] the practice and procedure of collective bargaining . . . for the purpose of negotiating the terms and conditions of their employment”). As further explained in the margin, industrial relations research demonstrates that newly certified unions are much less likely to secure a first contract in cases in which the employer has hired a consultant.

See Logan,

Union Free Movement

at 198, citing R. Hurd,

Union Free Bargaining Strategies and First Contract Failures,

in Proceedings of the 48th Meeting of the Industrial Relations Research Ass'n 145 (P. Voos ed. IRRA 1996), and G. Pavy,

Winning NLRB Elections and Establishing Collective Bargaining Relationships,

in Restoring the Promise of American Labor Law 110 (Sheldon Friedman et al. eds. ILR Press 1994); Bronfenbrenner,

Employer Behavior,

at 84 (citing probability of winning first contract declining by 10 to 30 percent in bargaining units in which the employer utilizes a labor relations consultant). See 76 FR 36189. See also note 17 and text accompanying (describing the strategies used by a noted former consultant). Knowing that the employer has engaged the persuader services of a consultant will help employees assess the employer's position on unresolved issues and its characterization of the union's negotiating stance.

First-contracts are crucial to newly certified unions. Under section 9(c)(3) of the NLRA, no elections may be held within one year of the election of an incumbent employee representative. 29 U.S.C. 159(c)(3). Employers understand that unions that do not show results in bargaining during that first year are more vulnerable to challenges, including decertification petitions. As a result, employers may adopt strategies, with the assistance of consultants, to stall bargaining and prevent the adoption of a first contract. One year after an election in which employees voted in favor of union representation, only 48% of bargaining units with certified representatives have executed an initial collective bargaining agreement. Bronfenbrenner,

No Holds Barred,

at 22. The Department notes that the observed effects may not be entirely attributable to the use of a consultant, as some employers may be less supportive of unionization and may choose certain tactics and strategies independent of the use of a consultant.

Concern about the impact of consultant activity on labor-management relations emanated from the Executive Branch as well. In March 1993, the Secretaries of Labor and Commerce announced the establishment of the U.S. Commission on the Future of Worker-Management Relations (Commission), which was charged with investigating and making recommendations regarding enhancement of workplace productivity and labor-management cooperation, among other areas. The Commission, also called the Dunlop Commission after its chairman, former Labor Secretary and Professor John T. Dunlop of Harvard University, held public hearings and took testimony on the state of labor relations in the early 1990s. The Commission issued a fact-finding report in June 1994 and a final report in December of the same year, and the reports provide further support for the need for the revision of the interpretations involving consultant reporting.

In assessing economic costs that labor and management face in the competition surrounding representation elections, the Commission found that “[f]irms spend considerable internal resources and often hire management consulting firms to defeat unions in organizing campaigns at sizable cost.”

Commission on the Future of Worker-Management Relations, Fact-Finding

Report, at 74 (May 1994). Indeed, the Commission concluded, the “NLRA process of representation elections is often highly confrontational with conflictual activity for workers, unions, and firms that thereby colors labor-management relations.” Id. at 75.

The Department concludes that, as was true in the 1950s, the

undisclosed

use of labor relations consultants by employers—even where their activities are undertaken in strict accordance with the law—impedes employees' exercise of their protected rights to organize and bargain collectively and disrupts labor-management relations.

C. History of the Department's Interpretation of Section 203(c)

The “advice” exemption of LMRDA section 203(c) is reflected in the Department's implementing regulations, but, historically, the regulations simply tracked the language of the statute and did not set forth the Department's interpretation of the exemption. 29 CFR 405.6(b), 406.5(b). Before this rule, the Department's interpretation of the advice exemption had been communicated primarily in documents intended to guide Department staff in administering the statute. See 76 FR 36179-82.

In 1960, one year after the passage of the Act, the Department issued its initial interpretation (sometimes referred to herein as the “original interpretation”), which was reflected in a 1960 technical assistance publication to guide employers. In this interpretation, the Department took the position that employers were required to report any “arrangement with a `labor relations consultant' or other third party to draft speeches or written material to be delivered or disseminated to employees for the purpose of persuading such employees as to their right to organize and bargain collectively.” Department of Labor, Bureau of Labor-Management Reports,

Technical Assistance Aid No. 4: Guide for Employer Reporting,

at 18 (1960). The Department also took the position that a lawyer or consultant's revision of a document prepared by an employer was reportable activity. See Benjamin Naumoff,

Reporting Requirements under the Labor-Management Reporting and Disclosure Act,

in Fourteenth Annual Proceedings of the New York University Conference on Labor, at 129, 140-141 (1961).

The Bureau of Labor-Management Reports is a predecessor agency to OLMS.

In 1962, the Department changed its view of what must be reported. It limited reporting by construing the advice exemption more broadly, excluding from reporting the provision of materials to the employer that the employer could then “accept or reject.” This interpretation appeared as guidance in section 265.005 (Scope of the “Advice” Exemption) (1962) of the LMRDA Interpretative Manual (IM or Manual). The Manual reflects the Department's official interpretations of the LMRDA. The IM was prepared by OLMS predecessor agencies for use by staff in administering the LMRDA. OLMS maintains the IM and makes it available to the public upon request. Section 265.005 of the Manual stated:

The question of application of the “advice” exemption requires an examination of the intrinsic nature and purpose of the arrangement to ascertain whether it essentially calls exclusively for advice or other services in whole or in part. Such a test cannot be mechanically or perfunctorily applied. It involves a careful scrutiny of the basic fundamental characteristics of any arrangement to determine whether giving advice or furnishing some other services is the real underlying motivation for it.

[I]t is plain that the preparation of written material by a lawyer, consultant, or other independent contractor which he directly delivers or disseminates to employees for the purpose of persuading them with respect to their organizational or bargaining rights is reportable. . . .

However, it is equally plain that where an employer drafts a speech, letter or document which he intends to deliver or disseminate to his employees for the purpose of persuading them in the exercise of their rights, and asks a lawyer or other person for advice concerning its legality, the giving of such advice, whether in written or oral form, is not in itself sufficient to require a report. Furthermore, we are now of the opinion that the revision of the material by the lawyer or other person is a form of written advice given the employer which would not necessitate a report.

A more difficult problem is presented where the lawyer or middleman prepares an entire speech or document for the employer. We have concluded that such an activity can reasonably be regarded as a form of written advice where it is carried out as part of a bona fide undertaking which contemplates the furnishing of advice to an employer. Consequently, such activity in itself will not ordinarily require reporting unless there is some indication that the underlying motive is not to advise the employer.

In a situation where the employer is free to accept or reject the written material prepared for him

and there is no indication that the middleman is operating under a deceptive arrangement with the employer,

the fact that the middleman drafts the material in its entirety will not in itself generally be sufficient to require a report.

(Italics added). In later years, the Department reiterated the 1962 position (also referred to herein as the “accept or reject” test, or in distinction from the position taken in this rule, the “prior” interpretation), sometimes expressing doubts about its soundness. See Subcommittee on Labor-Management Relations, H. Comm. on Education and Labor,

The Forgotten Law: Disclosure of Consultant and Employer Activity Under the L.M.R.D.A.

(Comm. Print 1984) (statement of Richard Hunsucker, Director, Office of Labor-Management Standards Enforcement, Labor-Management Standards Administration, U.S. Department of Labor); Subcommittee on Labor-Management Relations, H. Comm. on Education and Labor,

Pressures in Today's Workplace,

at 4, 5 (Comm. Print 1980) (statement of William Hobgood, Assistant Secretary of Labor for Labor-Management Relations). (The current interpretation “when stretched to its extreme, . . . permits a consultant to prepare and orchestrate the dissemination of an entire package of persuader material while sidestepping the reporting requirement merely by using the employer's name and letterhead or avoiding direct contact with employees”). More recently, in 1989 the Department revisited the issue, stating in an internal memorandum:

[T]here is no purely mechanical test for determining whether an employer-consultant agreement is exempt from reporting under the section 203(c) advice exemption. However, 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 advice or materials for use in persuading employees which the employer has the right to accept or reject.

March 24, 1989 memorandum from then Acting Deputy Assistant Secretary for Labor-Management Standards Mario A. Lauro, Jr. As a result of the Lauro memorandum, the approach that limited reporting to “direct contact” situations, while not strictly required by the 1962 interpretation, became part of the Department's view of the advice exemption and has been generally followed since 1989 (with the exception of a brief period in early 2001).

The Department is aware of two instances where it took the position that indirect persuader activities triggered reporting. In 1975, the Department filed suit against a consultant who directed and coordinated supervisors in a system of gathering information on union sympathies without direct contact. The case was settled after the consultants agreed to file the reports. See Statement of Richard G. Hunsucker on Labor Department Enforcement of Consultant Reporting Provisions of Landrum-Griffin Act, DLR No. 27, G-2 (Feb. 9, 1984) (BNA). In 1981, the Department brought suit arguing that the consultant engaged in indirect persuader activity. In this case, the employer consented to the entry of a court order requiring it to file reports. Id. Additionally, the Department

may

have taken that position in

Martin

Power, Inc.,

Civ. A. No. 92-385J (W.D. Pa.), 1992 WL 252264. Although the opinion on a request to stay the Secretary's enforcement action is not entirely clear on this point, the Secretary may have argued that indirect contact by the consultant, as distinct from direct contact also involved in that case, had to be reported pursuant to section 203. Notwithstanding these actions, the Department's stance since has been that a consultant incurs a reporting obligation only when it directly communicates with employees with an object to persuade them. See

International Union, United Auto., Aerospace, and Agricultural Implement Workers of America, UAW

Donovan,

577 F. Supp. 398 (D.D.C. 1983), aff'd in part, remanded in part by

International Union, United Auto., Aerospace & Agr. Implement Workers of America

Dole,

783 F.2d 237 (D.C. Cir. 1986); on remand,

International Union

Secretary of Labor,

678 F.Supp. 4 (D.D.C. 1988), rev'd,

International Union, United Auto., Aerospace & Agr. Implement Workers of America

Dole,

869 F.2d 616 (D.C. Cir. 1989). In these cases, the UAW challenged the Department's interpretation that a consultant-attorney's drafting of personnel policies to discourage unionization—an indirect persuader activity—did not trigger a reporting obligation. See

International Union, United Auto., Aerospace & Agr. Implement Workers of America

Dole,

869 F.2d at 619. These cases are discussed in later sections of the preamble. See Sections V.B.1, .2.a.

In 2001, the Department, without seeking public comment, published a revised interpretation, which expanded the scope of reportable activities, by focusing on whether an activity constitutes “direct or indirect” persuasion of employees, rather than categorically exempting activities in which a consultant had no direct contact with employees. See Interpretation of the “Advice” Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act, 66 FR 2782 (Jan. 11, 2001). However, later in 2001 this interpretation was rescinded, and the Department returned to its prior view. See Interpretation of the “Advice” Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act, 66 FR 18864 (Apr. 11, 2001).

In its Fall 2009 Regulatory Agenda, the Department stated that it would revisit the interpretation to ensure that agreements involving persuader activities were not improperly excluded from reporting. On May 24, 2010, a public meeting was held on this issue. See 75 FR 27366. On June 21, 2011, the Department published the notice of proposed rulemaking (NPRM) on this issue. The comment period on the proposed rule closed on September 21, 2011.

IV. Revised “Advice” Exemption Interpretation

A. Summary of the Revised Interpretation

This final rule adopts with some modifications the interpretation of the “advice” exemption outlined in the NPRM. The revised interpretation gives full effect to the statutory language, which requires disclosure of consultant activities that are intended “directly or

indirectly

” to persuade employees concerning their organizing or collective bargaining rights. See 29 U.S.C. 433(a)(3) and (b) (emphasis added). Section 203 of the LMRDA is designed, in principal part, to shed light on the hidden activities of persuaders. Activities performed directly by consultants—such as delivering a speech to employees about why they should “vote no” in a union election, meeting with employees to dissuade them from joining the union, or sending a letter to employees, under his or her own signature, for the same purpose, have always triggered reporting, even under the Department's prior interpretation of the advice exemption, but that interpretation was so broad that it enabled consultants who undertook indirect persuader activities (such as writing a speech to be delivered by the employer or drafting a letter to employees for the employer's signature)

to skirt reporting, a result that contravenes the text and purpose of the LMRDA. The revised interpretation now brings to light those indirect persuader activities that have been hidden from public view. This rule adjusts how the Department construes the term “advice,” an interpretation that furthers the LMRDA's goals of transparency and labor-management stability. It is also consistent with the Department's initial, 1960 interpretation of the “advice” exemption.

Under the revised interpretation, like the prior interpretation, activities that are clearly advice do not trigger reporting. Thus, “an oral or written recommendation regarding a decision or course of conduct”—what traditionally has been viewed as the role of a consultant or attorney in counseling a client—does not trigger reporting.

Agreements under which a consultant exclusively provides legal services or representation in court or in collective bargaining negotiations are not to be reported. “Advice” does not include persuader activities,

i.e.,

actions, conduct, or communications by a consultant on behalf of an employer that are undertaken with an object, directly or indirectly, to persuade employees concerning their rights to organize or bargain collectively. If the consultant engages in both advice and persuader activities, however, the entire agreement or arrangement must be reported.

As noted, both “agreements” and “arrangements” whereby the consultant undertakes activities with an object to persuade must be reported. For simplicity, this preamble often refers only to agreements. However, the same obligations attach to arrangements to persuade. Additionally, every “person” who, pursuant to an agreement with an employer, undertakes persuader activities is required to report pursuant to section 203(b). For simplicity, this preamble often refers only to “consultants” and their obligations to report persuader agreements pursuant to the section, but the same obligations attaches to all persons who enter into such agreements.

No longer exempt from reporting are those agreements or arrangements in which the consultant engages in the indirect persuasion of employees. Such indirect persuader activities are no longer considered to be “advice” under LMRDA section 203(c), and, if undertaken, they now trigger reporting under sections 203(a) and (b). With this rule, the Department effectively reverses its prior interpretation of the advice exemption and will, accordingly, no longer utilize the “accept or reject” test. See Section III.C.

The revised instructions to the Form LM-10 Employer Report and the Form LM-20 Agreement and Activities Report provide examples of reportable and non-reportable agreements or arrangements. See Section IV.E and Appendices. The revised instructions largely implement those proposed by the Department in the NPRM, but in response to comments received there are six changes: (1) Modifications to the text and layout of the instructions to ensure clarity, such as the inclusion of examples of indirect persuader activities that are now grouped into four categories (directing and coordinating supervisors' activities; providing persuasive materials; conducting union avoidance seminars for supervisors or other employer representatives; and developing and implementing personnel policies or actions); (2) restriction of the term “object to persuade employees” to only organizing and collective bargaining rights, and not the larger category of “protected concerted activity”; (3) clarification regarding the reportability of union avoidance seminars and the elimination of duplicative reporting by employer-attendees;

(4) distinguishing between trade associations and other labor relations consultants for some reporting purposes, including the elimination of reporting by trade associations where they merely sponsor union avoidance seminars or select “off-the-shelf” persuader materials for member-employers;

(5) elimination of reporting for employee attitude surveys and related vulnerability assessments; and (6) clarification that reporting is not triggered by the employer's mere purchase or other acquisition of “off-the-shelf” persuader materials from a consultant without any input by the consultant concerning the selection or dissemination of the materials.

Section 406.2 of the Department's regulations, 29 CFR 406.2, has been revised, consistent with the instructions, to accommodate the adjusted filing date for reports concerning union avoidance seminars.

“Off-the-shelf” materials refer to pre-existing material not created for the particular employer who is party to the agreement.

This rule also implements changes to the employer and consultant reporting standards on the Forms LM-10 and LM-20 by expanding the reporting detail concerning reportable agreements and arrangements. The Department also modifies the layout of the LM-10 and LM-20 forms and instructions to better set forth the reporting requirements and improve the readability of the information. Finally, this rule requires that Form LM-10 and Form LM-20 reports be submitted to the Department electronically and provides a process to apply for an electronic filing exemption on the basis of specified criteria. These changes to the forms are discussed in more detail in Section IV.D.

This rule supersedes any inconsistent interpretation or other guidance issued by the Department concerning the persuader reporting requirements of the Act insofar as Forms LM-10 and LM-20 are concerned.

Section 265.005 of the IM contains the Department's prior interpretation of the advice exemption, and it therefore is superseded in its entirety. Section 255.600 is inconsistent with the final rule to the extent the former provides in its third example that an indirect persuader activity is non-reportable as “advice.” Sections 257.100, 258.005, 260.500, 260.600 of the IM will need to be read in conjunction with the final rule insofar as reporting by a trade association is concerned. Similarly, section 262.005 will need to be read in conjunction with the final rule in addressing the timeliness of reports triggered by presenting a union avoidance seminar. OLMS intends to update these and other sections of the IM to reflect the most current reporting requirements.

The comments submitted on the proposed rule reflected strongly divergent views as to how the reporting requirements of section 203 should be applied, how section 203 and the proposed interpretation squares with the NLRA, whether the proposed interpretation unconstitutionally impedes the First Amendment rights of employers, and whether it is inconsistent with the principles protecting the attorney-client relationship. The Department has carefully considered the comments, which have been helpful in informing the Department's judgment. For the reasons stated in this preamble, however, the Department has concluded that the proposed and final rules correctly effectuate the purposes of section 203 and faithfully adhere to national labor policy, as articulated in the NLRA and the LMRDA, without impeding any constitutional rights of employers or interfering with the attorney-client relationship as properly understood in the context of sections 203 and 204 of the LMRDA.

B. Revised Advice Exemption Overview

This rule restores the focus of section 203 persuader reporting to whether a consultant's activities, undertaken pursuant to an agreement or arrangement with the employer, have an object to persuade employees about their union representation and collective bargaining rights. This focus forecloses an interpretation that allowed non-reporting of most activities simply by avoiding direct contact with employees. The revised instructions, consistent with the language and purpose of sections 203 and 204 of the LMRDA, provide that an agreement or arrangement is reportable if the consultant undertakes activities with an object to persuade employees, for example, by managing a union

avoidance or counter-organizing campaign. In practical terms, employers and consultants must report all direct and indirect activities undertaken by the consultant with an object to persuade employees, exempting only activities that come within the plain meaning of “advice” to the employer, as well as the employer representation services enumerated in section 203(c), other legal services for the employer, and other consultant activities that, similarly, do not have an object to persuade employees.

There are five general scenarios in which the underlying test for persuasion is to be applied, one in which the consultant engages in direct contact with employees and four in which the consultant does not engage in direct contact:

Reporting of an agreement or arrangement is triggered when:

(1) A consultant engages in

direct

contact or communication with any employee, with an object to persuade such employee; or

(2) A consultant who has no direct contact with employees undertakes the following activities with an object to persuade employees:

(a) Plans, directs, or coordinates activities undertaken by supervisors or other employer representatives, including meetings and interactions with employees;

(b) provides material or communications to the employer, in oral, written, or electronic form, for dissemination or distribution to employees;

(d) develops or implements personnel policies, practices, or actions for the employer.

In this connection, the instructions to the forms, which include these scenarios, also provide:

The consultant's development or implementation of personnel policies or actions that improve employee pay, benefits, or working conditions do not trigger reporting merely because the policies or actions could subtly affect or influence the attitudes or views of the employees; rather, to be reportable, the consultant must undertake such activities with an object to persuade employees, as evidenced by the agreement, any accompanying communications, the timing, or other circumstances relevant to the undertaking.

The activity that triggers the consultant's requirement to file the Form LM-20 also triggers the employer's obligation to report the agreement on the Form LM-10, with the exception of union avoidance seminars, as explained below.

1. Categories of Persuasion

Direct Persuasion.

Consultants must report if they engage in any conversation or other direct communication with any employee where the consultant has an object to persuade. For example, reporting would be required if the consultant speaks directly with employees (in person or by telephone or other medium) or disseminates materials directly (such as emailing or mailing) with an intent to persuade.

Indirect Persuasion: Planning, Directing, or Coordinating Supervisors or Managers.

Reporting is required if the consultant, with an object to persuade, plans, directs, or coordinates activities undertaken by supervisors or other employer representatives. This includes both meetings and other less structured interactions with employees. The following nonexclusive factors are indicia of a consultant using supervisors to engage in indirect persuasion: The consultant plans, directs or coordinates which employees they meet; where they meet them; when they meet; for how long they meet; the topics discussed and the manner in which they are presented; the information gathered from the employees and how they should gather it; debriefing with the supervisor to orchestrate the next steps in the campaign; and identifying materials to disseminate to employees.

Indirect Persuasion: The Provision of Persuader Materials.

Reporting is required if the consultant provides, with an object to persuade, material or communications to the employer, in oral, electronic (including,

e.g.,

email, Internet, or video documents or images), or written form, for dissemination or distribution to employees. While a lawyer who exclusively counsels an employer-client may provide examples or descriptions of statements found by the National Labor Relations Board (NLRB) to be lawful, this differs from the attorney or other consultant affirmatively drafting or otherwise providing to the employer a communication tailored to the employer's employees and intended for distribution to them. The latter is reportable; the former is not.

As to a consultant's revision of employer-created materials, including edits, additions, and translations, if an “object” of the revisions is to ensure legality as opposed to persuasion, then they do not trigger reporting. An object to persuade is also not present if the consultant merely corrects typographical or grammatical errors or translates the document. In contrast, if such revisions are intended to increase the persuasiveness of the material, then they trigger reporting. The principle here is that the revision of materials is no different than the initial creation of the materials: The consultant still plays a role in completing them. The only issue is whether there is an object to persuade.

As for the provision of “off-the-shelf” materials, as explained below, the Department has revised the application of the advice exemption in these situations. As noted, “off-the-shelf” materials refer to pre-existing material not created for the particular employer who is party to the agreement. Where a consultant merely provides an employer with such material selected by the employer from a library or other collection of pre-existing materials prepared by the consultant for all employer clients, then no reporting is required. The consultant may provide information concerning the materials, such as explaining their content and origin, but such guidance does not trigger reporting. As mentioned above, the provision of off-the-shelf materials, without more, is not reportable. In contrast, if the consultant plays an active role in selecting the materials for its client's employees from among pre-existing materials based on the specific circumstances faced by the employer-client, then this activity would trigger reporting, because it demonstrates the consultant's intent to influence the decisions of those employees. However, where a trade association selects off-the-shelf materials for its members, no reporting is required. See Section V.E.3, discussing trade associations.

Indirect Persuasion: Conducting a Seminar for Supervisors or Other Employer Representatives.

Some labor relations consultants and attorneys hold seminars on a range of labor-management relations matters, including how to persuade employees concerning their organizing and bargaining rights. The types of services offered by the consultants to the employer representatives vary with each seminar, but often include presentations, activities, and the distribution of materials on how to contest or avoid unionization.

Seminar agreements must be reported when the consultant develops or assists the attending employers in developing anti-union tactics and strategies for use by the employers' supervisors or other representatives. In those cases, the consultant is not advising an employer as the term “advise” is traditionally defined and understood (

i.e.,

recommending a decision or course of action), but instead is undertaking activities that have as their object influencing that employers' employees in their representation and collective bargaining rights. In contrast, a consultant who, for example, merely

solicits business by recommending that the employer hire the contractor to engage in persuasive activities does not trigger reporting.

In no case, however, is the employer required to file a Form LM-10 for attendance at a multiple-employer union avoidance seminar. Additionally, see below, under “Exempt Agreements or Arrangements,” for specific application to trade associations.

Indirect Persuasion: Developing or Implementing Personnel Policies or Actions.

Reporting is required only if the consultant develops or implements personnel policies or actions for the employer that have as an object to, directly or indirectly, persuade employees (

e.g.,

the identification of specific employees for disciplinary action, or reward, or other targeting, based on their involvement with a union representation campaign or perceived support for the union, or implementation of personnel policies or practices during a union organizing campaign). This encompasses two types of activities: (a) Creating persuasive personnel policies; and (b) identifying particular employees (or groups of employees) for personnel action, with an object to persuade employees about how they should exercise their rights to support (or not) union representation or a union's collective bargaining proposal.

As an example, if the consultant, in response to employee statements about the need for a union to protect against firings, develops a policy under which employees may arbitrate grievances, reporting would be required. On the other hand, if the grievance process was set up in response to a request by employees—without any history of a desire by them for union representation—or as a policy developed as part of a company's startup of operations, without any indication in the agreement or accompanying communications that the policy was established to avoid union representation of the employer's workforce, no reporting would be required. The key questions to ask in this situation are: Did the consultant develop the policy? If so, did the consultant develop the policy with an object to persuade employees? To reiterate, one must look at the object of the consultant, as evidenced in the agreement or arrangement, any communication accompanying the policy or action, the timing (including any labor dispute involving the employer), or other circumstances relevant to the undertaking.

For personnel actions, this rule requires reporting if the consultant identifies or assists in identifying specific employees for reward or discipline, or other targeted persuasion, because of the employees' exercise or potential exercise of organizing and collective bargaining rights or the employees' views concerning such rights. Even if another motive for a personnel action is shown, as long as an object is to persuade, then reporting is triggered. In contrast, if a lawyer merely reviews proposed employee actions presented by the employer, drafts notices, and settles any litigation, the lawyer has not triggered reporting.

As a result, the Department clarifies in this rule that the consultant's development of personnel policies and actions is not reportable merely because the consultant develops policies or implements actions that improve the pay, benefits, or working conditions of employees, even where they could subtly affect or influence the attitudes or views of the employees. To be reportable, as with the other categories of persuasion, the

consultant

must undertake the activities with an object to persuade employees, as evidenced by the agreement, any accompanying communication, the timing, or other circumstances relevant to the undertaking.

2. Exempt Agreements or Arrangements

Agreements or arrangements in which the consultant does not undertake activities with an object to persuade employees are not reportable. A lawyer or other consultant who exclusively counsels employer representatives on what they may lawfully say to employees, ensures a client's compliance with the law, offers guidance on employer personnel policies and best practices, or provides guidance on NLRB or National Mediation Board (NMB) practice or precedent is providing “advice.” “Advice” means an oral or written recommendation regarding a decision or a course of conduct.

The revised instructions also clarify that a lawyer's review of documents, as a general rule, does not trigger the reporting requirements. For example, the revision of an employer-created persuasive document to ensure its legality does not trigger reporting. Further, a consultant explaining to the employer NLRB decisions concerning lawful and unlawful conduct would not trigger reporting. Correcting spelling or grammar mistakes in the document will also not trigger reporting. However, the creation of a speech or flyer by the consultant or revising an employer created document to further dissuade employees from supporting the union, will trigger reporting. Similarly, other services outlined in section 203(c), concerning representation of the employer before a court or similar tribunal or during collective bargaining negotiations, do not trigger reporting, as they also do not evidence an object to persuade employees. Instead, these services involve the representation of employers.

Additionally, as stated, this rule clarifies the reporting of seminars. (Seminars that are reportable are explained above and in this section; differences with the NPRM are explained in “Changes from the NPRM,” below, and Part V.E.1 (Seminars).) No consultant report is required for an agreement or arrangement to offer a seminar in which the consultant does not develop or assist the attending employers in developing anti-union tactics or strategies for use by the employers' supervisors or other representatives. Such seminars consist of only guidance to the employers in attendance, and therefore do not demonstrate that the consultant has an object to persuade employees. Moreover, as explained in the next section of the rule focusing on the remainder of the revised instructions, employers will not be required to file reports concerning their attendance at union avoidance seminars.

The Department has also revisited the reportability of employee attitude surveys and, in the larger context, union “vulnerability assessments,” in which a consultant evaluates an employer's proneness to union-related activity and offers possible courses of action. The Department concludes that agreements or arrangements for consultants to conduct these types of surveys and assessments are generally not reportable. The use of employee attitude surveys do not ordinarily evince an object to persuade employees, although they may do so in rare circumstances, such as with “push surveys,” which seek to persuade employees rather than gather insight into their views. Certain employee attitude surveys could nonetheless trigger reporting as an information-supplying activity, if the feedback more specifically concerns employee activities during a labor dispute. However, generally speaking, such employee attitude surveys are not reportable, as they consist of general guidance and recommendations to the employer.

Also, no reporting is required for an agreement or arrangement that exclusively includes an employer's purchase or acquisition of pre-existing or off-the-shelf persuasive materials, without coordination by the consultant concerning the selection, tailoring, or

dissemination of the materials. (However, the Department notes that this general policy on pre-existing materials applies only to persuasive communications, not information-supplying concerning the employees or union involved in a labor dispute. For example, pursuant to longstanding Departmental policy, if the employer and consultant have an agreement whereby the consultant agrees to provide information on the bargaining practices of a union in connection with a labor dispute involving the employer, the agreement must be reported unless the information is derived solely from public sources). See

Employer and Consultant Reporting, Technical Assistance Aid No. 6,

U.S. Department of Labor, Labor-Management Services Administration (1964), at 12.

Where, however, a consultant drafts for an employer, in whole or part, a persuasive speech or creates a persuasive video or any other communication intended to be disseminated to particular employees, such activity triggers reporting because the activity has an object to persuade. Similarly, if an employer contacts a consultant to coordinate the selection and purchase of pre-existing persuasive materials, or to direct or coordinate the use of the materials by the employer, then this would be evidence of an object to persuade by the consultant, and such an activity would trigger reporting of the underlying agreement or arrangement.

Finally, trade associations are not required to file a report, where by reason of their membership agreements, the associations select off-the-shelf persuader materials for their member-employers, or distribute newsletters addressed to their member-employers.

As explained in more depth below in Section V.E.3, there are significant practical difficulties associated with requiring trade associations to report such activities and such reporting would impose substantial burden on such associations without corresponding disclosure benefits to employees and the public. Accordingly, under the final rule trade associations as a general rule will only be required to report in two situations—where the trade association's employees serve as presenters in union avoidance seminars or where they undertake persuader activities for a particular employer or employers (other than by providing off-the shelf materials to employer-members). See Section V.E.3.

Where an association publishes a newsletter for

employees

of their member-employers, the inclusion of any material with an object to persuade would trigger reporting as has always been the case under the Department's regulations. See

Master Printers of America

Donovan,

751 F.2d 700 (4th Cir. 1984) (discussed further in Sections V.E.3. G.1).

3. Changes From the NPRM

As explained in more detail in Part V of this rule, the Department has made several changes to the revised advice exemption instructions, in response to comments received.

First, the Department has made significant changes to the text and format of the instructions in order to ensure clarity. These changes include the categorizing of indirect persuasion; the determination to not infer an “object to persuade” from a consultant's development or implementation of personnel policies that merely improve pay, benefits, or working conditions; and other rewording and reorganization, including additional material on information-supplying and further examples in the exempt agreements or arrangements section.

Second, the Department clarifies that consultant-led seminars are reportable if the consultant develops or assists the employers in developing anti-union tactics and strategies to be utilized by their supervisors and other representatives. In this regard, the Department has also limited the reporting of union avoidance seminars sponsored by trade associations and eliminates the obligation for employers to report their attendance. Where reporting is triggered by presenting a union avoidance seminar, a report is not due until 30 days after the date of the seminar. Section 406.2(a) has been revised to reflect this change from the general rule that a report is due within 30 days after a persuader agreement is reached, rather than the date on which the activity undertaken by the agreement occurs.

Third, the Department exempts from reporting agreements or arrangements exclusively involving vulnerability assessments, including employee surveys other than the “push” variety. Generally these assessments are not reportable as they provide guidance on an employer's proneness to union-related activity by its employees. Surveys would only trigger reporting if they are persuasive, such as push surveys, or if they are information-supplying activities in the context of a labor dispute, such as information gained through the consultant's use of surveillance technology. See Section V.E.1 (Employee Attitude Surveys/Employer Vulnerability Assessments).

Fourth, the Department has exempted agreements exclusively consisting of providing pre-existing or off-the-shelf materials, unless the materials were selected by the consultant. (As noted above, a trade association is not required to file a report if it selects such materials for its member-employers.)

Fifth, the Department in this rule distinguishes between trade associations and other labor relations consultants for some reporting purposes, including the elimination of reporting by trade associations where they merely sponsor union avoidance seminars or select off-the-shelf persuader materials for member-employers.

Finally, the Department has dropped the term “protected concerted activities” from the definition of “object to persuade employees.” Instead, reporting is required only for agreements in which the consultant engages in activities with an object to persuade employees concerning representational and collective bargaining activities, but not “other protected concerted activities.” This better comports with the language of section 203, which, in contrast to the NLRA, does not expressly refer to “concerted activities.”

4. Reportable Information-Supplying Agreements

The final rule does not make any changes to reporting requirements for information-supplying activities, including the information-supplying checklist on Form LM-10 and LM-20. In the revised advice exemption section of the Form LM-10 and LM-20 instructions, however, the Department has added language that explains reporting in such situations, and has included a description of the term “labor dispute” from section 3(g) of the statute.

The amended Form LM-10 and LM-20 instructions appear in full in the appendices to this rule.

C. The Statutory Basis for the Revised Interpretation

This topic is discussed at greater length in Section V.B of the preamble.

This rule reflects the language and purpose of sections 203 and 204 of the LMRDA, effectuating the intent of Congress and resolving any tension or ambiguity in those sections, consistent with the authority and discretion embodied in the statute.

Section 203(a) requires employers to report to

the Department of Labor “any agreement or arrangement with a labor relations consultant . . . pursuant to which such person undertakes activities where an object thereof, directly or indirectly, is to persuade employees . . .” with respect to their organizing and collective bargaining rights. 29 U.S.C. 433(a)(4). Section 203(b) imposes a similar reporting requirement on labor relations consultants and other persons who undertake such persuader activities on behalf of an employer. 29 U.S.C. 433(b).

That the “advice” exemption of LMRDA section 203(c) might pose interpretive challenges was quickly clear to at least some observers. See,

e.g.,

Bureau of National Affairs,

The Labor Reform Law

36 (1959) (“The exemption applicable to consultants who merely give advice is susceptible of several different interpretations . . . It is questionable whether the exemption would also cover payments to a consultant who drafted anti-union letters and otherwise mapped out a campaign to combat union organizing”).

Section 203(c) exempts any employer, labor relations consultant, or other person from filing a report under section 203(a) or (b) “covering the services of such person by reason of his giving or agreeing to give advice to such employer.” 29 U.S.C. 433(c). Section 203(c) makes explicit what is left implicit in section 203(a) and (b): The statute exempts an employer or its labor relations consultant from having to file the Form LM-10 or LM-20, respectively, if the activities undertaken by the consultant on behalf of the employer merely constitute “advice.”

The Department recognizes, however, as it has in the past, that the LMRDA is ambiguous as to whether the coverage provisions in sections 203(a) and (b) or the advice exemption in section 203(c) control in situations where the consultant undertakes indirect activities to persuade employees. See

International Union

Secretary of Labor,

678 F. Supp. 4, 6 (D.D.C. 1988) (“The Secretary argues that the juxtaposition of the two provisions creates an ambiguity which he is entitled to resolve and the resolution of which the courts must respect”). This ambiguity arises, in part, because of the statute's silence with respect to the definitions of “advice” and “persuade,” creating confusion as to what indirect consultant activities can or should be categorized as nonreportable advice or reportable persuasion. A review of the legislative history confirms that Congress did not speak directly, through the statutory text or otherwise, to the application of the reporting requirements in situations involving the indirect persuasion of employees. While Congress intended a “broad” exemption for activities constituting the giving of advice, the legislative history confirms that Congress also did not wish to do so at the expense of reporting persuader activities. It did not, by way of example, limit reporting to just situations that constituted unfair labor practices, but, rather, required reporting for the broader category of persuader activity. See discussion herein at Section III.B.

As discussed in the NPRM, the Department originally interpreted section 203 to require reporting of all persuader activities, but it changed that interpretation in 1962 by establishing the “accept or reject” test, which over time essentially limited reporting to activities involving direct communication between consultants and employees. 76 FR 36180. In this rule, we have identified both direct and indirect persuader activities and distinguished these from activities that constitute non-reportable “advice.” “Advice” ordinarily is understood to mean a recommendation regarding a decision or a course of conduct. See,

e.g.,

Merriam-Webster's Collegiate Dictionary (10th ed. 2002) (defining “advice” as “recommendation regarding a decision or course of conduct: counsel”); Black's Law Dictionary (online) (8th ed. 2004) (defining “advice” as “guidance offered by one person, esp. a lawyer, to another”); The Oxford English Dictionary (2d ed. 1989) (defining “advice” as “opinion given or offered as to action; counsel. spec. medical or legal counsel”). This common construction of “advice” does not rely on the employer's ability to accept or reject materials obtained from the consultant, an element viewed as significant under the prior interpretation. As noted in the NPRM, a consultant's preparation and supply of persuader materials to an employer goes beyond offering a recommendation or counsel about an issue to the employer; instead its services provide the means by which the employer communicates its views to employees in order to persuade them how to exercise their choice on matters affecting representation and collective bargaining rights. See 76 FR 36183.

The prior “advice” standard in section 265.005 of the IM treats as advice not only the situation in which a lawyer consultant reviews drafts of persuasive material for compliance with the NLRA—actions which under this rule continue to not trigger reporting—but also covers the preparation of persuasive material to be disseminated or distributed to employees—actions which under this rule do trigger reporting. As discussed in the NPRM, the Department views preparation of material designed to persuade employees as “quintessential persuader activity.” See 76 FR 36183.

Under this rule, reporting is required when, pursuant to an arrangement or agreement, the consultant does not limit its activities to advising the employer, but engages in activities, either directly or indirectly, aimed at persuading or influencing, or attempting to persuade or influence, employees as to how to exercise their union representation and collective bargaining rights. See discussion in Section V.B.

The Department notes that section 203(c) exempts from the reporting requirement a consultant's services “

by reason of

his giving or agreeing to give advice” (emphasis added), indicating that reporting would be required

by reason of

other consultant activities that do have an object to persuade. Further, sections 203(a) and (b) specifically require reporting when a consultant undertakes activities with an object to “directly or indirectly” persuade employees, indicating that indirect methods of consultant persuasion also trigger reporting. The statute also specifies that

object of the consultant's activity must be to persuade, not

the

object, thus further supporting the view that the coverage provision applies in the case of indirect activities.

The Department has carefully considered the comments that discussed the interpretative questions presented in this rulemaking, and we conclude that the prior interpretation of the advice exemption, while permissible, was not the best interpretation. The Department remains of the view that its revised approach is faithful to the language and purpose of the LMRDA. This approach restores a more appropriate balance between reportable persuader activities and those that are properly characterized as “advice” than achieved under the Department's prior interpretation. The prior interpretation largely exempted from reporting persuader agreements that exclusively involved indirect persuasion. As a consequence, despite the widespread growth of the labor relations consultant industry—and its extensive involvement in all but a small and shrinking number of campaigns to persuade employees to reject union representation—very few reports are being filed by consultants or employers. Further, the literature discussed in this preamble and the NPRM and the experiences related by many commenters indicate that this practical impact is quite large because most employers hire consultants to manage anti-union campaigns or programs, with most of these consultants using exclusively indirect persuasion. This information illustrates why the prior interpretation did not implement the full persuader-reporting regime envisioned by Congress. The prior interpretation therefore resulted in underreporting of persuader agreements, to the detriment of an informed workforce, collective bargaining rights, and stable labor relations.

D. Revised Form LM-20, LM-10, and Instructions

The Department has not revised the Form LM-20 and Form LM-10 since the republication of the forms in 1963. See 28 FR 14381. With these changes to the interpretation of the advice exemption of section 203(c), the Department revises Form LM-20 and Form LM-10 and their instructions. The Department is also revising §§ 405.5 and 405.7 of title 29 of the Code of Federal Regulations to update cross-references in those sections to the instructions.

While some of the revisions are minor stylistic and layout modifications there are four significant changes: (1) The revised interpretation of the advice exemption, including examples of activities that will trigger reporting and those that do not; (2) the mandating of electronic filing for each form, with language in each set of instructions depicting such process and guidance concerning the application for a hardship exemption from such electronic filing; (3) the addition of a detailed checklist that Form LM-20 and Form LM-10 filers must complete to disclose the scope of activities that consultants have engaged, or intend to engage, in under a reportable agreement or arrangement; (3) the changes to the Forms LM-20 and LM-10 and their instructions, including the requirement for filers to report their Employee Identification Number, as applicable, and explanations for terms “agreement or arrangement” and “employer”; and (4) a revamped layout for the Form LM-10, which divides the report into four parts, each presenting aspects of the reportable transactions, agreements, and arrangements required by sections 203(a)(1)-(5) of the LMRDA, in a more user-friendly manner.

Unless otherwise noted in this preamble, each of these changes is identical to what the Department proposed in the NPRM.

See 76 FR 36193-96. In addition to the changes to the “advice” interpretation instructions, the other significant area of substantive change concerns consultants' reporting of seminars on the Form LM-20. (Note: employers are not required to report attendance at union avoidance seminars on the Form LM-10.) The Department's response to comments is discussed below, in Section V, and the complete, revised Forms LM-20 and LM-10, including instructions, are contained in the appendices to this rule.

The Department has also made minor, non-substantive changes throughout the revised Form LM-20 and Form LM-10 instructions, as compared with the proposed instructions.

1. Mandatory Electronic Filing for Form LM-20 and Form LM-10 Filers

This rule requires that employers and consultants file Form LM-20 and Form LM-10 reports electronically. An electronic filing option is planned for all LMRDA reports as part of an information technology enhancement. Electronic reporting contains error-checking and trapping functionality, as well as online, context-sensitive help, which improves the completeness of the reporting. Electronic filing is more efficient for reporting entities, results in more immediate availability of the reports on the agency's public disclosure Web site, and improves the efficiency of OLMS in processing the reports and in reviewing them for reporting compliance. In contrast, paper reports must be scanned and processed for data entry before they can be posted online for disclosure, which delays their availability for public review.

Currently, labor organizations that file the Form LM-2 Labor Organization Annual Report are required by regulation to file electronically, and there has been good compliance with this requirement. Like labor unions, employers and consultants have the information technology resources and capacity to file electronically. Further, OLMS has improved the technology utilized in its electronic filing process and eliminated the expenses formerly associated with such filing.

The revised forms will be completed online, signed electronically, and submitted with any required attachments to the Department using the OLMS Electronic Forms System (EFS). The electronic forms can be downloaded from the OLMS Web site at

www.olms.dol.gov

The revised Form LM-20 and Form LM-10 instructions outline a process for seeking an exemption from the electronic filing requirement that is identical to the Form LM-2 process. See Form LM-2 Instructions, Part IV: How to File, located at:

www.dol.gov/olms/regs/compliance/EFS/LM-2_InstructionsEFS.pdf

. A filer will be able to file a report in paper format only if the filer asserts a temporary hardship exemption or applies for and is granted a continuing hardship exemption. The temporary hardship exemption process, which is currently in place for Form LM-2 filing,

will be applied to mandatory electronic filing of the Forms LM-20 and LM-10. The process is set out in full in the instructions. See Appendices.

See

http://www.dol.gov/olms/regs/compliance/GPEA_Forms/LM-2_Instructions4-2015_techrev.pdf

, at 2.

2. Detailing the Activities Undertaken Pursuant to a Reportable Agreement or Arrangement

The prior instructions to the Form LM-20 and Form LM-10 did not provide detailed guidance to the filer concerning how to report the nature of the activities undertaken by a consultant pursuant to an agreement or arrangement to persuade. For example, the prior Form LM-20 instructions

for Item 11, Description of Activities, stated:

The prior Form LM-20 form and instructions are available on the OLMS Web site at:

http://www.dol.gov/olms/regs/compliance/GPEA_Forms/lm-20p.pdf

and

http://www.dol.gov/olms/regs/compliance/GPEA_Forms/lm-20_Instructions_3_2015.pdf

For each activity to be performed, give a detailed explanation of the following:

11a.

Nature of Activity.

Describe the nature of the activity to be performed. For example, if the object of the activity is to persuade the employees of Employer X to vote “no” on a representation election, so state.

Similarly, the prior Form LM-10 instructions

in Item 12, Circumstances of all Payments, states:

The prior Form LM-10 form and instructions are available on the OLMS Web site at:

http://www.dol.gov/olms/regs/compliance/GPEA_Forms/lm-10p.pdf

and

http://www.dol.gov/olms/regs/compliance/GPEA_Forms/lm-10_instructions_3_2015.pdf

[You] must provide a full explanation identifying the purpose and circumstances of the payments, promises, agreements, or arrangements included in the report. Your explanation must contain a detailed account of services rendered or promised in exchange for promises or payments you have already made or agreed to make. Your explanation must fully outline the conditions and terms of all listed agreements.

In practice, the Department received only vague descriptions of persuader or information-supplying activity, such as “employed to give speeches to employees regarding their rights to organize and bargain collectively” and “presented informational meetings to company employees relative to the process of unionization, the role of the NLRB, and collective bargaining.”

As the review of the literature above has demonstrated, a wide range of activities and tactics have been utilized by employers, and employees and the public have a need to know in detail the types of activities in which consultants engage.

Vague and brief narrative

descriptions and characterizations that have been permitted on the prior Form LM-20 serve little utility, and a checklist of activities is the best way to ensure more complete reporting of such persuader activities. Additionally, filers are provided an “Other” box on the checklist, and will be required to check this box and separately identify any other persuader or information-supplying activities that are not listed in the checklist. In the Department's view, the use of the checkboxes and the revised instructions for completing the form will make it easier for filers to comply with their reporting obligation.

Various studies reflect the types of activities typically used by employers (as noted above, usually working with consultants) in response to union organizing campaigns: Between 82% and 93% of employers held “captive audience” meetings; between 70% and 75% of employers

distribute leaflets in the workplace; between 76% and 98% of employers utilize supervisor one-on-one sessions; between 48% and 59% of employers promised improvements; and between 20% and 30% of employers granted unscheduled raises. See Logan, U

.S. Anti-Union Consultants,

at 5, Table 1, compiling and citing results from Bronfenbrenner,

Employer Behavior,

at 75-89; Kate Bronfenbrenner, U.S. Trade Deficit Review Commission,

Uneasy Terrain

(2000); Rundle,

Winning Hearts and Minds,

at 213-231; and Mehta and Theodore,

Undermining the Right to Organize.

3. Revised Form LM-20 and Instructions

The revised Form LM-20 and instructions (see Appendix A) largely follow the layout of the prior form and instructions, although the style has been altered. The revised form is two pages in length and contains 14 items. The first page includes the first five items, which detail contact and identifying information for the consultant: The file number (Item 1.a.) and contact information for the consultant (Item 2), including information detailing alternative locations for records (Item 3), the date the consultant's fiscal year ends (Item 4), and the type of filer (Item 5),

i.e.,

an individual, partnership, or corporation. The revised new Item 2 requires the consultant to provide, if applicable, its Employer Identification Number (EIN), which assists the Department and the public in identifying and analyzing other filings by the consultant and any individuals and entities reported on the form. The new Items 1.b. and 1.c. are for the filer to indicate if the report is filed pursuant to a hardship exemption from the electronic filing requirement or is amended, respectively. These items were not in the previous form.

Additionally, the first page includes three items describing the employer agreement: The employer's contact information, which adds the requirement to report the employer's EIN (Item 6), the date the agreement was entered into (Item 7), and the person(s) through whom the agreement was made (Item 8). Item 8 has been amended to distinguish between the employer representative through whom the reported agreement or arrangement has been made and a prime consultant through whom an indirect party entered the agreement or arrangement. As revised, an indirect party to an employer-consultant agreement or arrangement must identify in a new Item 8.b the consultant with whom he or she entered into the reportable agreement or arrangement. This specificity is added to clarify the reporting that continues to be required on the Form LM-20 when such indirect parties, or “sub-consultants,” are engaged by a primary consultant to assist in implementing a reportable agreement or arrangement. The primary consultant would report the employer representative in a new Item 8.a. This requirement has been included in the Form LM-20 Instructions in Part II, Who Must File, but its addition on the form itself will enable the Department, employees, and the public to more easily understand the nature of the activities conducted pursuant to the agreement or arrangement and determine if additional reports are owed.

In response to comments received on the NPRM, the revised Form LM-20 instructions also clarify, in Items 6-8, the manner in which the consultant reports agreements or arrangements concerning reportable union avoidance seminars, webinars, and conferences. The consultant is not required to file separate Form LM-20 reports for each employer attendee to a seminar. Rather, the consultant will identify each employer attendee in Item 6 by checking the box indicating that the report covers a reportable union avoidance seminar. The consultant will be able to either enter the necessary information manually, or it can import the data through a CSV file. For seminar reporting, the consultant is not required to provide the EIN for each attending employer, because there is no corresponding Form LM-10 reporting for the employers. While more employers may register for a seminar than actually attend, the consultant must identify each

attendee

to the seminar, through whatever tracking system it uses for such purposes. Further, the instructions clarify that only the seminar presenter needs to file the Form LM-20 report, not the organizer. If the presenter is a trade association, then it is not required to complete Item 8.

As proposed, the front page also includes the signature blocks for the president (Item 13) and the treasurer (Item 14), including the date signed and telephone number.

The second page provides more detail concerning the agreement. Items 9 and 10 are unchanged. Item 9 requires the filer to indicate if the agreement called for activities concerning persuading employees, supplying the employer with information concerning employees or a labor organization during a labor dispute, or both. Item 10 asks for the terms and conditions of the agreement, and requires written agreements to be attached. In response to comments received on the NPRM, information has been added to the instructions for Item 10 concerning the reporting of persuader seminars, webinars, or conferences, as well as clarification on the scope of the “detailed explanation” required in this item. For example, the instructions now state that filers must explain whether the consultant was hired to manage a union-avoidance campaign, to provide assistance to an employer in such a campaign through the persuader activities identified in Item 11, or conduct a union avoidance seminar. An attorney who provides legal advice and representation, in addition to persuader services, is only required to describe such portion of the agreement as the provision of “legal services,” without any further description.

Item 11 calls for the provision of certain details concerning any covered agreement or arrangement, and a new Item 11.a, as described above in Section IV.B, requires filers to check boxes indicating specific activities undertaken as part of the agreement or arrangement. There is also an “Other” box, which requires the filer to provide a narrative explanation of any other reportable activities planned or undertaken that are not specifically contained on the list.

Additionally, Items 11.b, 11.c, and 11.d, respectively, require the consultant, as before the proposed revisions, to indicate the period during which activity was performed, the extent of performance, and the name and address of the person(s) through whom the activity was performed. Item 11.d. has been revised to ask filers to specify if the person or persons performing the activities is employed by the consultant or serves as an independent contractor. In the latter scenario, the person or persons performing the activities is an indirect party to an employer-consultant agreement or arrangement, who would owe a separate Form LM-20 report. This requirement is not new, and it has been incorporated in the Form LM-20 instructions in Part II, Who Must File, but this addition on the form itself will enable the Department, employees, and

the public to more easily understand the nature of the activities conducted pursuant to the agreement or arrangement and determine if additional reports are owed. Finally, Items 12.a and 12.b require the consultant to identify the employees that are targets of the persuader activity and the labor organizations that represent or are seeking to represent them, respectively. To achieve more specificity, Item 12.a as proposed would include a description of the department, job classification(s), work location, and/or shift(s) of the employees targeted. In response to comments received on the NPRM, information has been added to the instructions for item 12 concerning the reporting of persuader seminars, webinars, or conferences.

The revised Form LM-20 instructions are similar to the previous version, and they follow the layout of the revised form. There are five significant modifications. First, a clarification of the term “agreement or arrangement” has been added to Part II, Who Must File. As there stated: “The term `agreement or arrangement' should be construed broadly and does not need to be in writing.” Second, as discussed above, the revised form would be submitted electronically, and the Department has made changes to the instructions describing the signature and submission process, as well as a procedure for filers to apply for an exemption from the electronic filing requirement. This procedure is modeled on the procedure for filers of the Form LM-2, Labor Organization Annual Report. Third, the revised instructions include guidance on the application of the “advice” exemption, in the general guidance on reporting agreements, arrangements, and activities section. The revised instructions provide examples, beyond those contained in the proposed rule, of activities that would trigger reporting requirements and those that will not. Fourth, as discussed, the revised instructions refer to the new checklist of activities undertaken pursuant to the reportable agreement or arrangement (see Item 11.a). Fifth, the instructions address new exceptions from certain reporting requirements applicable to trade associations, franchisors and franchisees, and special reporting procedures for union avoidance seminars.

Additionally, the Department has clarified in Part V (When to File) that, for reporting of union avoidance seminars, reporting is not required until 30 days after the conclusion of the seminar. Section 406.2(a) of the Department's regulations, 29 CFR 406.2(a), has been revised to reflect this change from the general rule that a report is due within 30 days after a persuader agreement is reached, rather than the date on which the activity undertaken by the agreement occurs.

Similarly, as explained in Section V.E.3 concerning trade association reporting, the association and its member-employers are not required to report simply by reason of the membership agreement with member-employers, but only if they engage in the limited activities that will trigger reporting by them (which must be reported within 30 days of entering into agreements to engage in the reportable persuader activities). The Department has also made other, non-substantive changes throughout the instructions to ensure clarity or consistency with the OLMS electronic reporting system.

In the NPRM, the Department had proposed to update and revise the authority citations to section 406.2. Since the NPRM was published, however, the Department has updated various authority citations in numerous regulations administered by the Department, including those pertaining to LMRDA reports, thereby obviating any need to revise this part of section 406.2. See Final Rule, Technical Amendments Relating to Reorganization and Delegation of Authority, 78 FR 8022, February 5, 2013.

4. Revised Form LM-10 and Instructions

The revised Form LM-10 and Instructions (see Appendix B) are significantly different in layout and style from the previous form and instructions, although the reporting requirements have been altered only in two respects: The interpretation of the “advice” exemption is now included, and the form now requires detailed information regarding specific activities undertaken pursuant to the agreement or arrangement.

The revised form is four pages in length and contains 19 items. It is to be filed electronically. The first page includes the first seven items (and the signature block), which provide the contact information for the employer. This information includes the file number (Item 1.a.), fiscal year covered (Item 2), contact information for the employer (Item 3), employer's president or corresponding principal officer (Item 4), any other address where records necessary to verify the report will be available for examination (Item 5), at which of the listed addresses records are kept (Item 6), and type of organization that the employer is, such as an individual, partnership, or corporation (Item 7). Item 3 is revised to require the employer to provide its EIN, which will assist the Department and public in identifying the employer and an

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