Government Tightens Squeeze On Contractors, Publishes Final Persuader Rule For DoD, NASA and GSA Contracts

Posted by Mark Theodore on November 02, 2011

Contracting with the Department of Defense ("DoD"), National Aeronautics and Space Administration ("NASA") and General Services Administration ("GSA") will become more burdensome after December 2, 2011, according to final regulations published today.  The regulations, which were proposed on April 14, 2010, and were adopted without any changes (no surprise there), deem certain labor relations costs unreimbursable by the federal government.  The new regulations, set forth in bold, adds to the existing regulation:

(a) Costs incurred in maintaining satisfactory relations between the contractor and its employees (other than those made unallowable in paragraph (b) of this section), including costs of shop stewards, labor management committees, employee publications, and other related activities, are allowable.

(b) As required by Executive Order 13494, Economy in Government Contracting, costs of any activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees' own choosing are unallowable.  Examples of unallowable costs under this paragraph include, but are not limited to, the costs of-

(1) Preparing and distributing materials;

(2) Hiring or consulting legal counsel or consultants;

(3) Meetings (including paying the salaries of the attendees at meetings held for this purpose); and

(4) Planning or conducting activities by managers, supervisors, or union representatives during work hours.

In theory, the rule purports to simply say the contractor cannot charge the government for certain expenses, which sounds good, especially in these trying economic times.  Practically speaking, however, this rule will do nothing but cause problems for non-union employers while rewarding unionized contractors.  Here are a few examples:

  • The rule says it is neutral and applies to statements for or against a union, but let's be honest:  how many unions are federal contractors that would fall under this rule? 
  • The rule on its face allows charges for "union stewards" to work on government paid time, but disallows a supervisor expressing his or her view about unionization.  And union stewards always act in a manner that is efficient for the business, right?  What if the supervisor's view is personally held and not one of employer policy, would the employer have to deduct the estimated amount of the conversation from any billing to the government? If so, how would it estimate the time? 
  • If an employee asks a question of his or her supervisor about unions, must the supervisor account for the time spent answering the question?
  • If an employee asserts that he or she had a conversation with a supervisor about the union, what is considered persuader activity?  What if the supervisor's answer is completely factual?  Who decides what is persuader activity and what is not? Will the government put the contract in jeopardy based on the allegation?
  • A union can use whatever resources it gets, often indirectly from the government through public sector dues payments, to use lawyers and hire organizers, but these expenditures are not affected by the rule.  The private sector employer, however, must segregate such costs.

In sum, this change while facially neutral does not even withstand the slightest scrutiny.   Like many other regulations popping out of the government like so many gumballs from a machine, this one too may be challenged in the courts.

The changes the administration forces onto federal contractors foreshadow what it intends for all private sector employers.  For example, the federal government required contractors to post the NLRB rights poster months before the NLRB issued the broader rule covering all employers under its jurisdiction.  Likewise, this final rule is similar to the Department of Labor's attempt to narrow the LMRDA's advice exemption, about which we reported here.

 

Comments Filed With Department Of Labor Over Proposed Persuader Rules

Posted by Mark Theodore on September 23, 2011

Another milestone in the government's quest to upend labor relations in the United States passed last week.  The deadline for filing comments with the Department of Labor ("DoL") about its proposal to narrow the "advice" exemption under the Labor Management Reporting and Disclosure Act ("LMRDA") expired September 21, 2011.  Several interested parties filed comments both for, but mostly against, the proposed changes.

The issues can be summarized as follows:

  • The LMRDA, passed in 1959, requires the unions, employers and labor relations consultants to file a publicly available report detailing certain financial transactions. 
  • Labor relations consultants (any third party hired by an employer) are required to report the fees they receive for assisting labor relations matters in organizing and collective bargaining where the object is to "persuade" employees.
  • The LMRDA exempts from reporting any assistance given that is "advice."
  • For the entire 52 years since the passage of the LMRDA, "advice" has been interpreted by the Department of Labor and the courts as a bright-line rule:  if the labor relations consultant has no direct contact with employees, then there is no duty to report.  Orchestrating or advising on an organizing campaign, and assisting an employer with organizing campaign materials that are distributed by supervisors or managers are not reportable activities.
  • This year, however, the Department of Labor suddenly discovered that the interpretation of "advice" has been wrong for the entire existence of the LMRDA.
  • In June, the Department of Labor proposed narrowing the "advice" exemption.  It now seeks to have labor relations consultants, which it asserts includes attorneys as well, report any monies received for assisting an employer persuade employees about union organizing or collective bargaining.
  • If the proposed interpretation is adopted, virtually any aspect of an employer's response to union organizing would be reportable, if a labor relations consultant was involved.
  • The new interpretation would require financial reports be filed in any situation where an outside party assists an employer with communication with its own employees, no matter how indirect the assistance.  This would include: attorney-client conversations about a union campaign where ultimately a message to employees is crafted or "enhanced"; money spent to send managers and human resources personnel to seminars where union avoidance might be discussed; money spent to train supervisors on lawfully responding to organizing; the creation of websites to assist getting employees information about a union organizing campaign.

This initiative represents a naked attempt to inhibit employer communication and response.  It is a complicated issue, but note that unions engage in corporate campaigns where all manner of inappropriate tactics are used, are not required to report the details about how such activities are funded.  The LMRDA was enacted to deal with certain inappropriate conduct; not lawful, appropriate employer conduct.  Yet, the DoL would have all employers and labor relations consultants report the monies spent on such lawful activities.

We assisted the Society for Human Resources Management ("SHRM") in responding to the DoL's proposed changes.  The rationale cited by the Department of Labor for the "real" interpretation of advice is just wrong.  For example, the DoL asserts the newly discovered interpretation is supported by the legislative history.  As addressed in SHRM's comments.pdf, the DoL cherry-picked only the tiniest of fragments of the legislative history, while ignoring the rest, to justify its results-oriented interpretation:

The legislative history of the LMRDA runs a total of 1927 pages.  The [DoL's proposed rulemaking] cites to only five of the pages, all from the same Senate Committee on Labor and Public Welfare ("Labor Committtee").....No other parts of the legislative history are referenced. . .

A detailed and thorough review of the legislative history is set forth in the SHRM comments.  This review shows there is no support for the DoL's position.

Several other influential parties opposed the changes as well.  Notably, U.S. Chamber's comments.pdf illustrate how the proposed interpretation is so vague that it raises more questions than it answers.  Also, just as it did in 1959, the American Bar Association filed its own strong opposition.pdf to the proposed change, noting that the DoL's interpretation, if adopted, would erode the attorney-client privilege.

The DoL will now evaluate the input it received and make its decision.