On April 7, 2023, a proposed rule seeking to broaden "persuader" activity reporting requirements on the LM-10 Disclosure Form (the Disclosure Form) was sent to the Office of Management and Budget (OMB) for review, signaling that the regulation may go into effect in coming weeks. Engagement of labor relations consultants is a common tool used by employers to give employees a fuller picture of the reality of unionizing, so that employees can make a more informed decision about whether to join a union during an organizing campaign. These consultants, or "persuaders," can be a helpful educational resource for information that employees often won't get from the union seeking to organize the employees. Employers that work with these consultants are required to file the Disclosure Form annually with the Office of Labor-Management Standards (OLMS), disclosing agreements, payments, and expenditures made to persuaders during organizing and collective bargaining efforts, or to obtain information about employees' and unions' activities in connection to a labor dispute with the employer. Now, under this proposed rule, among other things, companies must affirmatively note whether they are a federal contractor or subcontractor.
What Is the Motivation Behind the Proposed Rule Change?
Early in 2023, the Biden administration's Task Force on Worker Organizing and Empowerment released a 43-page report containing over 60 recommendations meant to promote union organizing and increase union membership nationwide; increased reporting of "persuader activity" is a Task Force recommendation that the proposed rule implements. The Department of Labor (DOL) explains that the purpose of these persuader disclosures is to promote transparency, particularly among federal contractors, which are not permitted to use federal funds to pay for "persuader" costs. However, although transparency is cited as the main objective, the disclosure requirements are one-sided: they do not apply to unions, even if they engage in the types of practices the so-called persuader rule purportedly targets.
The major change contained in the proposed rule is the additional requirement of employers to disclose whether they are a federal contractor or subcontractor. This expansion of the required disclosures targets federal contractors and subcontractors because, according to the DOL, the federal government has an interest in obtaining information on persuader efforts that Congress found to be "disruptive of harmonious labor relations," even when such efforts are lawful, and that this interest is "especially acute" as it relates to federal contractors. Because federal contractors are not permitted to receive reimbursement for the costs of engaging in "persuader" activities under the contract, the proposed disclosure changes will allow federal agencies to better track which contractors are performing work that should not be reimbursed.
What Does the Current Rule Require?
The Disclosure Form currently requires employers to disclose certain financial dealings and arrangements with unions, employees, or consultants. Employers and their consultants must currently disclose both direct and indirect persuasion. When engaging in direct persuasion, a consultant or other individual is in direct contact or communication with any employee with the intent to persuade the employee. When engaging in indirect persuasion, a consultant or other individual has no direct contact with employees, but may assist the employer by, for example, planning or coordinating with employee managers or providing messaging materials or "talking points" about unionization to the employer. Employers must identify the date of each payment or expenditure, as well as the amount of the payment or expenditure. The current Disclosure Form does not require an employer to identify whether it is or is not a federal contractor or subcontractor.
How Might the Proposed Rule Impact My Business?
If the proposed rule is finalized, it will not impact which employers are required to file the Disclosure Form. However, in addition to the existing required disclosures, employers will be required to report on the form whether they are a federal contractor or subcontractor. If the answer to this question is yes, employers will need to provide a short entry indicating the federal contracting agency(ies) and the contractor's Unique Entity Identifier (UEI), if the contractor has one. If providing the name of a particular contracting agency would reveal classified information, the filer should omit the name of the agency.
While the time and effort required in completing the revised form are not likely to be dramatic, and the notion of improving the government's ability to track costs that should not be reimbursed is not concerning, this change is not necessary. There are a myriad of requirements and enforcement statutes, such as the False Claims Act, that ensure that contractors do not seek reimbursement for these unallowed costs. Conversely, the unintended consequences (or underlying intentional motivation of the government) in calling out federal contractors and subcontractors on these forms could serve to chill contractors' and subcontractors' use of labor consultants or, worse yet, create a record that procurement and/or program staff could consult and consider (in any manner) prior to making a contract award. Any such conduct would be inappropriate and illegal, but unfortunately the misuse of information is sometimes the result of the availability of too much unnecessary and irrelevant reporting.
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If you have questions about the proposed rule and steps your business can take to be prepared for compliance with the change, please feel free to contact any of the authors of this article.