On March 24, 2016, the Department of Labor issued its long-anticipated final rule regarding the advice exemption to the persuader rule in the Labor-Management Reporting and Disclosure Act (“LMRDA”). The new rule changes the test that has been in place for more than 50 years and significantly expands the types of activities and information that must be disclosed under the LMRDA. More information about the new rule and its disclosure requirements can be found in our prior post.
Challenges to the Rule
In a swift response, industry associations and law firms filed three separate lawsuits in Arkansas, Minnesota, and Texas federal courts challenging the legality of the rule. The suits include parties such as the National Association of Manufacturers and National Federation of Independent Business, as well as law firms and law firm associations.
The three lawsuits assert similar claims, including violations of:
- The Administrative Procedure Act;
- The First and Fifth Amendments of the United States Constitution;
- The National Labor Relations Act; and
- The Regulatory Flexibility Act
A central argument to each complaint is that the new rule infringes on the confidentiality of the attorney-client communications between employers and their legal counsel. Each suit seeks to declare the rule invalid and enjoin DOL from implementing it.
The new rule faces political opposition, as well. On April 13, 2016, Representative Bradley Byrne (R-Alabama) introduced a Joint Resolution stating “[t]hat Congress disapproves the rule…and such rule shall have no force or effect.” In light of the current political climate, however, labor professionals should not expect this legislative action to produce any actual reprieve from the DOL’s rule.
So, unless the court challenges are successful, the disclosure requirements will apply to employer-consultant agreements and arrangements entered into on or after July 1, 2016.
DOL Will Not Enforce Certain Disclosure Requirements
Perhaps recognizing the implications of the challenge to the persuader rule based on the attorney/client privilege, the DOL announced last week a “special enforcement policy” that becomes effective immediately. This policy applies to a different form, the LM-21 Receipts and Disbursements Report, which requires reporting of any payments the persuader made or received during the fiscal year as a result of arrangements of the kind requiring a Form LM-20 disclosure.
The LM-21 form is the subject of a separate DOL rulemaking process. In its response to comments on the persuader rule, the DOL refused to delay the persuader rulemaking until the LM-21 rulemaking “caught up” to it.
Under the new special enforcement policy, those required to file a Form LM-20 (including attorneys) who must also file a Form LM-21 will not be required to complete two parts of the LM-21. Specifically, the DOL will not take enforcement action based upon a failure to complete the following Parts of Form LM-21:
- Part B (Statement of Receipts), which ordinarily requires the filer to report all receipts from employers in connection with labor relations advice or services regardless of the purposes of the advice or services, and/or
- Part C (Statement of Disbursements), which ordinarily requires the filer to report all disbursements made by the reporting organization in connection with labor relations advice or services rendered to the employers listed in Part B.
Additionally, consultants/attorneys are not required to maintain records solely relating to Part B and Part C. It appears that the persuader will still be required to complete Part D, which is a “Schedule of Disbursements for Reportable Activity.”
Importantly, this special enforcement policy is not permanent and may be changed/revoked upon 90 days notice. Therefore, there is no guarantee that the DOL will not require disclosure of such information in the future.
Stay tuned to this blog for additional developments on this and other topics.