New DOL Rule Would Require More Disclosure of Employer Consultants

Department of Labor headquartersThe consultants who advise employers on how to avert union organizing or collective bargaining demands soon may have to reveal a good deal more about themselves and their operations. This past Tuesday, June 21, the U.S. Department of Labor (DOL), to the delight of labor officials, published a proposal in the Federal Register to expand the circumstances forcing companies to disclose information about their advisers. Because the rule change would not apply to union consultants, it appears to be motivated heavily by politics.  The proposal, whose public comment period ends August 22, was issued to coincide with an even more ambitious proposal from the National Labor Relations Board that would allow unions to hold "quickie" workplace elections; the latter proposal will be discussed in a separate article. 

Union officials long have pressed the Labor Department to mandate more transparency on an employer's use of outside consultants. They often label these consultants "union busters" because their job, as paid advisers, is to keep workplaces union-free. This, the unions argue, is the main reason for the falling rate of the unionized private-sector work force. Studies by labor economists Kate Bronfenbrenner (Cornell University) and Chirag Mehta and Nik Theodore (University of Illinois at Chicago) have revealed that employers, based on third-party advice, have used a variety of tactics to keep workplace organizing at bay. They include : bribes or favors; promises to improve wages; threats to close or relocate all or part of the business; and threats of firing. Some are legal – that is, they aren't in conflict with Section 7 of the National Labor Relations Act (NLRA), which sets forth the right of employees to form or join a union. Some are in conflict. Either way, employers ought to have every right to explain to employees the cons as well as the pros of unionization. There is no reason why collective bargaining should be forced upon any company.

The new proposal, known informally as the "persuader rule," has elicited a predictable range of responses. An unnamed AFL-CIO official called it "a commonsense proposal to close a gaping loophole." Employer groups take a different view. "This is probably the most significant handout to organized labor that we've seen in this administration," said Michael Eastman, executive director of labor law policy for the U.S. Chamber of Commerce. "What they're trying to do here is radically change employers' behavior through disclosure requirements." Such comments suggest the need for a closer look at how union consultants, or "busters," are regulated at present and why the proposed rule change is hardly an arcane issue.

The Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), Title II, Sections 203(a) and 203(b), stipulates that employers must report to the Department of Labor their business relationships with persons or groups whom they hire to influence employee representation or collective bargaining decisions. But there is also an exemption: Section 203(c). This section states that neither employer nor consultant have to file a report if the consultant directly advises the employer. In other words, only consulting that communicates directly with employees will trigger mandatory reporting. This exemption – union officials call it a loophole – is based on the bedrock principle of attorney-client privilege. This is logical given that many "union busters" themselves are lawyers. As it takes experts in labor law to give advice on the subject, it would be surprising if lawyers weren't prominent in the field.

The proposed rule, issued by Labor Department's Office of Labor-Management Standards (OLMS), effectively would eliminate Section 203(c) of LMRDA, requiring disclosure for communications that "directly or indirectly persuade workers concerning their rights to organize or bargain collectively." This would include so-called "union avoidance" seminars and conferences, which inevitably involve persuasion. Whether or not consultants contact workers directly would be irrelevant. Here is the wording of the rule change:

With respect to persuader agreements or arrangements, "advice" means an oral or written recommendation regarding a decision or a course of conduct. In contrast to advice, "persuader activity" refers to a consultant's providing material or communications to, or engaging in other actions, conduct, or communications on behalf of an employer that, in whole or in part, have the object directly or indirectly to persuade employees concerning their rights to organize or bargain collectively. Reporting is thus required in any case in which the agreement or arrangement, in whole or in part, calls for the consultant to engage in persuader activities, regardless of whether or not advice is also given.

The Labor Department believes that the longstanding interpretation of the "advice exception" is vague, thus allowing employers to avoid disclosing outside working relationships. Failure to report could result in criminal penalties.

Actually, for a brief time, this was the law. On January 11, 2001, in the waning days of the Clinton administration and without prior notification, the Labor Department, at President Clinton's request, issued a formal interpretation of Section 203(c). The definition of "advice" was restricted to mean only "recommendations regarding a decision or course of conduct." The preparation and presentation of speeches, notices and videos for the first time would be subject to reporting requirements. The Labor Department under President Bush, however, following a 60-day review, rescinded this interpretation in April 2001.

It isn't too difficult to predict the consequences of restoring the Clinton initiative. Union-avoidance consultants, knowing their confidentiality would be jeopardized, would have fewer opportunities to consult. And to the extent that they do give advice to clients, they will charge exorbitant fees, since the knowledge on union avoidance would be more specialized. This would make employers less likely to hire this help, which in turn would facilitate union organizing; i.e., the whole point behind organized labor's pressure upon the Obama administration to promulgate the new rule.

Beyond this problem is that the proposed DOL rule fairly reeks of "free speech for me, but not for thee." For one thing, unions have their own lawyers and consultants, yet would not be affected by the rule. Second, NLRA already protects freedom of speech of union organizers, employers and employees alike. Section 8(c) reads: "The expressing of any views, argument, or opinion, or the dissemination thereof…shall not be evidence of an unfair labor practice under any of the provisions of this Act, if such expression contains no threat of reprisal or force or promise of benefit." Third and related, two Sixties-era Supreme Court rulings interpreted Section 8(c) so as to favor unions. In Labor Board v. Exchange Parts Co. [375 U.S. 405 (1964)], the court ruled that union organizers had the right to promise workers various benefits if they unionized, yet barred from employers from offering things of value if workers agreed to remain union-free. And in NLRB v. Gissel Packing Co. [395 U.S. 575 (1969)], the court ruled that unions can warn fellow workers about unfair labor practices likely to happen in lieu of unionization, yet prevented employers in most cases from speaking out about negative consequences of unionization.

In this context, "union busting" isn't nearly as ignoble as opponents make it out to be. Labor officials, by nature, seek to expand their legal basis for organizing and bargaining, especially through grants of monopoly power from any of the three branches of government. And with unions remaining an indispensable base of financial and voter support for the Democratic Party, and in particular for President Obama's 2012 re-election bid, this administration can't afford to spare friendly gestures.


Obama Administration Set to Block DOL Transparency Rules

New DOL Rule Would Promote Transparency in Trust Funds