[Federal Register Volume 66, Number 8 (Thursday, January 11, 2001)]
[Notices]
[Pages 2782-2788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-969]



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Part VIII





Department of Labor





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Office of Labor-Management Standards



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Interpretation of the ``Advice'' Exemption in Section 203(c) of the 
Labor-Management Reporting and Disclosure Act; Notice

  Federal Register / Vol. 66, No. 8 / Thursday, January 11, 2001 / 
Notices  

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DEPARTMENT OF LABOR

Office of Labor-Management Standards


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

AGENCY: Office of Labor-Management Standards, Employment Standards 
Administration, Labor.

ACTION: Notice of revised statutory interpretation.

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SUMMARY: The Department of Labor's Office of Labor-Management Standards 
(OLMS) intends to implement a revised interpretation, by the Secretary 
of Labor, of Section 203(c) of the Labor-Management Reporting and 
Disclosure Act (LMRDA). That statutory provision creates an ``advice'' 
exemption from reporting requirements that apply to employers and other 
persons in connection with persuading employees about the right to 
organize and bargain collectively. This notice announces a revised 
interpretation of LMRDA Section 203(c), as it applies to persuasive 
communications made to employees. The Department of Labor will, as a 
matter of enforcement policy, apply this revised interpretation 
prospectively, to conduct occurring 30 days or more after the date of 
this Notice.

FOR FURTHER INFORMATION CONTACT: Kay H. Oshel, Chief, Division of 
Interpretations and Standards, Office of Labor-Management Standards, 
Employment Standards Administration, U.S. Department of Labor, 200 
Constitution Avenue, NW., Room N-5605, Washington, DC 20210. (202) 693-
1233 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION: The Secretary of Labor administers 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. Section 203 of the LMRDA, 29 U.S.C. 433, requires employers 
and other persons to file certain reports with the Department of Labor 
in connection with persuading employees about the right to organize and 
bargain collectively. The statute also creates an exemption from these 
reporting requirements if the activity involved is ``giving or agreeing 
to give advice'' to an employer. This notice: (1) Describes the 
relevant reporting requirements of LMRDA Section 203(a) and section 
203(b), as well as the ``advice'' exemption of section 203(c); (2) 
discusses the history of the Department of Labor's interpretation of 
the section 203(c) ``advice'' exemption, as it applies to persuasive 
communications made to employees; (3) explains why the Department has 
reviewed its prior interpretation; and (4) announces a revised 
interpretation of the ``advice'' exemption, which will be applied 
prospectively by the Department as a matter of enforcement policy.
    Under the Administrative Procedure Act (APA), 5 U.S.C. 553, the 
Department is not required to engage in notice-and-comment rulemaking 
in order to adopt or modify a statutory interpretation. The Department 
does not intend to publish a new regulation interpreting or 
implementing LMRDA section 203(c) in the Code of Federal Regulations.

A. The Reporting Requirements of LMRDA Section 203(a) and Section 
203(b); the ``Advice'' Exemption of Section 203(c)

    Among the abuses that prompted Congress to enact the Labor-
Management Reporting and Disclosure Act in 1959 was questionable 
conduct by some employers and their labor relations consultants, which 
interfered with the right of employees to organize labor unions and to 
bargain collectively under the National Labor Relations Act. See, e.g., 
Senate Report No. 86-187 at 7-8 (1959), reprinted in 1959 United States 
Code Congressional and Administrative News 2326-2328. Congress believed 
that certain consultant activities ``should be exposed to public 
view,'' since they are ``disruptive of harmonious labor relations and 
fall into a gray area,'' even if they are not illegal or unfair labor 
practices. Id.
    As a result, Congress imposed reporting requirements on employers 
and other persons, in LMRDA section 203. 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 is also 
authorized (section 210) to bring civil actions to enforce the LMRDA's 
reporting requirements. 29 U.S.C. 440. Willful violations of the 
reporting requirements, knowingly false statements made in a report, 
and knowing failures to disclose a material fact in a report are 
subject to criminal penalties. LMRDA section 209, 29 U.S.C. 439.
    LMRDA section 203(a) requires employers annually to report to the 
Department of Labor:

    any agreement or arrangement with a labor relations consultant 
or other independent contractor or organization pursuant to which 
such person undertakes activities where an object thereof, directly 
or indirectly, is to persuade employees to exercise or not to 
exercise, or persuade employees as to the manner of exercising, the 
right to organize and bargain collectively through representatives 
of their own choosing * * *.
29 U.S.C. 433(a)(4).\1\ ``[A]ny payment (including reimbursed expenses) 
pursuant to an agreement or arrangement described in'' this provision 
must also be reported. 29 U.S.C. 433(a)(5).
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    \1\ 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 activites, or collective bargaining 
activities.'' 29 U.S.C. 402(m).
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    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. 29 CFR 
part 405.
    LMRDA section 203(b), in turn, imposes a similar reporting 
requirement on labor relations consultants and other persons. It 
provides, in part, that:

    Every person who pursuant to any agreement or arrangement with 
an employer undertakes activities where an object thereof is, 
directly or indirectly--(1) to persuade employees to exercise or not 
to exercise, or persuade employees as to the manner of exercising, 
the right to organize and bargain collectively through 
representatives of their own choosing * * * 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 their relevant receipts and disbursements. The 
Department of Labor's implementing regulations require labor relations 
consultants and other persons to file a Form LM-20 ``Agreement and 
Activities Report'' and a Form LM-21 ``Receipts and Disbursements 
Report'' that contain the required information in a prescribed form. 29 
CFR part 406. Consistent with the Department's traditional

[[Page 2783]]

interpretation of LMRDA Section 203(b), Form LM-21 requires a 
consultant or other person who undertakes persuader activity for, or 
who supplies information to, one employer to report information related 
to ``labor relations advice or services'' that were provided to other 
employers. ``Labor relations advice or services'' refers to advice or 
services concerning employee organizing, representation, or concerted 
activities; collective bargaining activities; or labor disputes.
    In addition to requiring reports from employers and other persons 
involved in ``persuasive activities,'' LMRDA section 203 also creates 
an exemption from these requirements for ``advisory or representative 
services.'' Section 203(c) provides in 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) (italics added).
    Finally, LMRDA section 204 creates an exemption from reporting for 
``attorney-client communications,'' that is, ``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.
    This Notice addresses the applicability of the LMRDA's reporting 
requirements when an employer enters into an agreement or arrangement 
with another person to produce persuasive communications: material such 
as speeches, scripts, documents, or videotapes that, in the words of 
LMRDA section 203(a) and section 203(b), are designed ``to persuade 
employees to exercise, or not to exercise, or persuade employees as to 
the manner of exercising, the right to organize and bargain 
collectively through representatives of their own choosing.'' The issue 
is whether, and under what circumstances, the activities of these 
persons constitute ``advice'' within the meaning of section 203(c) and 
thus need not be reported. Examples of persuasive communications would 
include (but would not be limited to) materials explicitly or 
implicitly urging employees to vote against union representation, to 
take a certain position with respect to collective bargaining 
proposals, or to refrain from concerted activity, such as a strike, in 
the workplace.

B. History of the Department of Labor's Interpretation of the 
``Advice'' Exemption in LMRDA Section 203(c); the Most Recent 
Interpretation

    The ``advice'' exemption of LMRDA section 203(c) is reflected in 
the Department's implementing regulations, but the regulations simply 
track the language of the statute. 29 CFR 405.6(b), 406.5(b). The 
Department has, however, interpreted the ``advice'' exemption in the 
course of administering the LMRDA. As explained below, this 
interpretation has varied in the years since the LMRDA was enacted.\2\ 
Apparently, the Department has never provided public notice and 
opportunity for comment in connection with adopting or revising its 
interpretation of section 203(c). The Department's interpretation has 
been communicated primarily in documents intended to guide Department 
staff in administering the LMRDA and in documents distributed to the 
public to assist employers, labor relations consultants, and others in 
complying with the LMRDA.
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    \2\ 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'').
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1. The Department's Initial Interpretation of the ``Advice'' Exemption

    In its earliest approach to the ``advice'' exemption, reflected in 
a 1960 publication to guide employers, 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 p. 18 (1960).
    The Department also took the position, in at least some opinion-
letters to members of the public, that a lawyer or consultant's 
revision of a document prepared by an employer was reportable activity. 
In a 1961 article, a Department of Labor official, after noting that 
the drafting of speeches or written material by a consultant or lawyer 
was reportable, addressed the issue of revisions to material prepared 
by the employer:

    [A]dvice to a client with respect to a speech or letter, drafted 
by the client, is not reportable. However, if the individual 
undertakes to revise that speech, this constitutes an affirmative 
act; it is the undertaking of activities to persuade employees in 
the exercise of their rights and, comparable to the giving of a 
speech, requires reporting. The Bureau [Bureau of Labor-Management 
Reports] takes the position that reporting is required in any 
situation where it is impossible to separate advice from activity 
which goes beyond advice. In any situation where an attorney 
undertakes activities which are more than mere advice for the same 
employer, the exclusion of [LMRDA] section 203(c) does not apply 
since the causal relationship is clear.

Benjamin Naumoff, Reporting Requirements under the Labor-Management 
Reporting and Disclosure Act, in Fourteenth Annual Proceedings of the 
New York University Conference on Labor 129, 140-141 (1961) (italics 
added).

2. The Department's Most Recent Interpretation of the ``Advice'' 
Exemption

    In 1962, the Department changed its original view of the ``advice'' 
exemption, adopting what remained the Department's interpretation until 
now.
    The change is reflected in a February 19, 1962 memorandum from then 
Solicitor of Labor Charles Donahue to John L. Holcombe, then 
Commissioner of the Bureau of Labor-Management Reports, in response to 
a November 17, 1961 memorandum from Commissioner Holcombe. Commissioner 
Holcombe's memorandum sought guidance from Solicitor Donahue on 
``exactly what the Department's position is with respect to the 
drafting and editing of communications to employees which are intended 
to persuade employees.'' Holcombe endorsed the view that the initial 
preparation of a persuasive document by a lawyer or consultant for use 
by an employer was reportable, but that revising a draft constituted 
``advice'' for purposes of Section 203(c).
    In response, the Donahue memorandum addressed three situations: (1) 
Where persuasive material is prepared and delivered by the lawyer or 
consultant; (2) where an employer drafts the material and intends to 
deliver it to his employees, and a lawyer or other person provides oral 
or written advice on its legality; and (3) where a lawyer or consultant 
prepares an entire speech or document for the employer.
    The Donahue memorandum concluded that the first activity 
(preparation and delivery of material) was reportable; that the second 
activity (legal review of a draft) constituted

[[Page 2784]]

``advice;'' and that the third activity (preparation of an entire 
document) ``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.'' In discussing 
the preparation of an entire document, the Donahue memorandum observed:

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

The Donahue memorandum did not explicitly analyze the language of LMRDA 
section 203 or the statute's legislative history, but asserted that 
both had been examined.
    In a 1962 presentation to the American Bar Association's Section of 
Labor Relations Law, Solicitor Donahue described the Department's 
original interpretation of the ``advice'' exemption this way:

    [T]he Department of Labor originally took the position that [the 
exemptions in LMRDA section 203(b) and section 204] did not extend 
to drafting or revising speeches, statements, notices, letters, or 
other materials by attorneys or consultants for the use of 
dissemination by employers to employees for the purpose of 
persuading them with respect to their organizing or bargaining 
rights. This kind of help was not viewed as advice but, instead, was 
regarded as an affirmative act with the direct or indirect objective 
of persuading employees in the exercise of their rights.

Charles Donahue, Some Problems under Landrum Griffin in American Bar 
Association, Section of Labor Relations Law, Proceedings 48-49 (1962). 
Donahue observed that this position had been ``reviewed in the light of 
Congressional intent,'' which revealed ``no apparent attempt to curb 
labor relations advice in whatever setting it might be couched.'' Id. 
at 49. Expert legal advice was often necessary, Donahue suggested, and 
thus:

    Even where this advice is embedded in a speech or statement 
prepared by the advisor to persuade, it is nevertheless advice and 
must be fairly treated as advice. The employer and not the advisor 
is the persuader.

Id.
    The conclusions and language of the 1962 Donahue memorandum appear 
in section 265.005 (``Scope of the Advice Exemption'') of the LMRDA 
Interpretative Manual. The Manual reflects the Department's official 
interpretations of the LMRDA and is designed to guide the work of the 
staff of the Office of Labor-Management Standards in the administration 
and enforcement of the statute. Section 265.005 of the Manual states:

    Section 203(b) provides for reports from every person who 
pursuant to an agreement or arrangement with an employer undertakes 
the type of activities described therein. Section 203(c) provides 
that nothing in section 203 shall be construed to require any person 
to file a report * * * by reason of his giving or agreeing to give 
advice to such employer * * *.''
    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.
    As to specific kinds of activity, it 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. Moreover, the 
fact that such material may be delivered or disseminated through an 
agent would not alter the result. Such undertakings obviously do not 
call for the giving of advice to an employer.
    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.

    In later years, the Department reiterated the 1962 position, 
sometime expressing doubts about its soundness. See Oversight Hearings 
on Landrum-Griffin Act before the Subcommittee on Labor-Management 
Relations of the House of Representatives Committee on Education and 
Labor 98th Cong. 342 (1984) (statement of Richard Hunsucker, Director, 
Office of Labor-Management Standards Enforcement, Labor-Management 
Standards Administration, U.S. Department of Labor); 4 Pressures in 
Today's Workplace: Oversight Hearing before the Subcommittee on Labor-
Management Relations of the House of Representatives Committee on 
Education and Labor, 96th Cong. 5 (1980) (statement of William Hobgood, 
Assistant Secretary of Labor for Labor-Management Relations) (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'').

3. The Kawasaki Motor Corporation Litigation: International Union, 
United Automobile Workers v. Dole

    The Department of Labor's most recent public statements involving 
the ``advice'' exemption were made in the context of litigation. The 
Department's position in the litigation was consistent with, and 
derived from, the interpretation of LMRDA section 203(c) reflected in 
the Donahue memorandum and the LMRDA Interpretative Manual.
    In 1982, the United Automobile Workers sued the Department, seeking 
to compel the Department to proceed against the Kawasaki Motor 
Corporation for failing to report conduct that allegedly was reportable 
under LMRDA section 203(a) and 203(b). One focus of the litigation was 
Kawasaki's payments to a consultant to devise personnel policies to 
discourage unionization. The Department took the position that the 
payments were not reportable, since the consultant's activity 
constituted ``advice'' under section 203(c). In a statement of its 
reasons for not proceeding against Kawasaki, the Department cited 
section 265.005 of the LMRDA Interpretative Manual and stated: ``An 
activity is characterized as advice if it is submitted orally or in 
written form to the employer for his use, and the employer is free to 
accept or reject the oral or written material submitted to him.''
    A federal district court ruled against the Department. 
International Union v.

[[Page 2785]]

Secretary of Labor, 678 F. Supp. 4 (D.D.C. 1988). However, the U.S. 
Court of Appeals for the District of Columbia Circuit reversed this 
ruling and deferred to the Department's interpretation of LMRDA section 
203 as reasonable in the context of the case, since the statute itself 
was ``silent or ambiguous with respect to the issues before'' the 
court. International Union, United Automobile Workers v. Dole, 869 F.2d 
616, 617 (D.C. Cir. 1989).
    Following the decision of the Court of Appeals, OLMS staff has been 
guided by a March 24, 1989 memorandum from then Acting Deputy Assistant 
Secretary for Labor-Management Standards Mario A. Lauro, Jr. The Lauro 
Memorandum cited LMRDA Interpretative Manual Section 265.005 and 
stated:

    [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.

C. Reasons for Revising the Department's Interpretation of the 
``Advice'' Exemption in LMRDA Section 203(c)

    The Department has decided to revise its most recent interpretation 
of the ``advice'' exemption (as adopted in 1962 and reflected in the 
LMRDA Interpretative Manual and later statements derived from the 
Manual), in favor of an interpretation that best captures the intent of 
Congress in enacting the LMRDA and that today best achieves the aims of 
the statute. There is persuasive evidence that the most recent 
interpretation has led to the under-reporting of activities that 
Congress believed should be disclosed to employees and to the public, 
particularly given the apparent growth in the use of labor relations 
consultants beginning in the 1970's. The revised interpretation, 
discussed below, is superior to the prior interpretation in these 
respects. The LMRDA is silent or ambiguous on the issues addressed 
here. See International Union, United Automobile Workers v. Dole, 869 
F.2d 616 (D.C. Cir. 1989) (discussed above). As a result, the 
Department is free to reconsider its prior interpretation and to adopt 
a different interpretation, so long as it, too, is reasonable. See, 
e.g., Rust v. Sullivan, 500 U.S. 173 (1991); Chevron, U.S.A., Inc. v. 
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

1. The Textual Basis for the Prior Interpretation Is Dubious

    As explained, under the Department's most recent interpretation of 
LMRDA Section 203(c), the preparation of an entire speech or document 
for an employer is considered ``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.'' LMRDA Interpretative Manual, 
section 265.005. This interpretation is in tension with the ordinary 
meaning of the term ``advice,'' used in Section 203(c).
    ``Advice'' is ordinarily understood to mean a recommendation 
regarding a decision or a course of conduct. See, e.g. Webster's Third 
New International Dictionary of the English Language Unabridged 32 
(1968) (defining ``advice'' as ``recommendation regarding a decision or 
course of conduct: counsel''); Black's Law Dictionary 55 (defining 
``advice'' as ``guidance offered by one person, esp. a lawyer, to 
another'') (7th ed. 1999); 1 The Oxford English Dictionary 191 
(defining ``advice'' as ``opinion given or offered as to action; 
counsel. spec. medical or legal counsel'') (2d ed. 1989). This 
understanding of ``advice'' seems easily to cover situations where an 
employer has drafted persuasive material, which a lawyer or consultant 
reviews at the employer's request to determine whether the statements 
in the material are allowed by the National Labor Relations Act. But a 
consultant or lawyer's own preparation of material that will be 
distributed or disseminated to employees is an activity that seems 
different in kind from reviewing or editing the employer's work-
product. The most recent interpretation, however, treats these two 
activities the same way: neither must be reported.
    While a consultant or lawyer may recommend that the employer use 
the persuasive material that he has prepared, the preparation of the 
material is not itself a recommendation and thus not ``advice'' in the 
ordinary sense. For example, to the extent that the persuasive material 
is disseminated to employees, it is clearly not the sort of 
communication that would be protected from disclosure by the attorney-
client privilege: the material itself has been deliberately disclosed 
to third parties and any privilege has thus been waived. The 
Department's most recent view-that preparation of material is advice, 
so long as the employer is free to accept or reject the material--is 
open to question. Because an employer generally has the authority to 
accept or reject the work done for him (and can exercise that authority 
whenever he is aware of the work), the scope of the ``advice'' 
exemption as most recently applied is very broad.
    For purposes of the LMRDA, the distinction between direct 
communication by a consultant or a lawyer, and situations where an 
employer essentially serves as the channel for a communication by a 
consultant or a lawyer, is not clear. The important role of a person 
other than the employer in persuading employees would seem to be what 
Congress intended to be disclosed to employees and to the public, since 
Congress believed that there is a potential for abuse when employers 
rely heavily on third parties in the context of union organizing drives 
and collective bargaining. See, e.g., Senate Report No. 86-187 at 7-8 
(1959), reprinted in 1959 United States Code Congressional and 
Administrative News 2327 (citing evidence ``showing that large sums of 
money are spent in organized campaigns on behalf of some employers' and 
stating that such activities ``should be exposed to public view'').
    The Department's most recent approach seems inconsistent with LMRDA 
section 203(a)(4), which refers to ``activities where an object 
thereof, directly or indirectly, is to persuade employees,'' and with 
LMRDA section 203(b), which uses a nearly identical formulation 
(``activities where an object thereof is, directly or indirectly--to 
persuade employees''). The direct object, or at least the indirect 
object, of preparing persuasive material that is intended to be 
transmitted to employees is to persuade employees. It seems reasonable 
to believe that Congress envisioned that this type of activity, which 
goes beyond just giving advice in the ordinary sense, would be 
reported. In discussing the provision that became Section 203(c), for 
example, a Senate committee report observed that, ``An attorney or 
consultant who confines himself to giving legal advice * * * would not 
be included among those required to file reports. * * *'' Senate Report 
No. 86-187 at 7-8 (1959), reprinted in 1959 United States Code 
Congressional and Administrative News 2328. It seems fair to infer that 
reporting is required when a person engages in activities that involve 
persuasion in addition to giving advice. In such instances, the lawyer 
or consultant functions less as an advisor to the employer than as a 
persuader of employees.

[[Page 2786]]

2. The Most Recent Interpretation Has Harmed the Effectiveness of the 
LMRDA in Requiring Disclosure of Persuader Activities

    The objections to the Department's most recent interpretation of 
LMRDA section 203(c) as a matter of statutory construction are not the 
only basis for reviewing that interpretation. The apparent practical 
consequences of the interpretation also suggest the need for revision.
    Over the years, the Department's most recent interpretation of the 
``advice'' exemption has been criticized by a Congressional 
subcommittee and by commentators, who have suggested that the 
interpretation has seriously harmed the effectiveness of the LMRDA in 
requiring the disclosure of persuader activities.\3\
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    \3\ See Subcommittee on Labor-Management Relations, Committee on 
Education and Labor, U.S. House of Representatives, 98th Cong., The 
Forgotten Law--Disclosure of Consultant and Employer Activity under 
the LMRDA 13-14 (Comm. Print 1984); Subcommittee on Labor-Management 
Relations, Committee on Education and Labor, U.S. House of 
Representatives, 96th Cong., Pressures in Today's Workplace 43-44 
(Comm. Print 1980); Jules Bernstein, Union-Busting: From Benign 
Neglect to Malignant Growth, 14 U.C. Davis L. Rev. 1, 23-27 (1980).
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    More recently, a former labor relations consultant, Martin Jay 
Levitt, has published a book that seems to confirm this criticism. 
Discussing the LMRDA (also known as the Landrum-Griffin Act, after its 
Congressional sponsors), Mr. Levitt has written:

    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 Landrum-Griffin in my life, and 
few union busters do. Here's why not: According to the law, in order 
to be engaged in ``persuader'' activities, the consultant must speak 
directly to the employees in the voting unit. As long as he deals 
directly only with supervisors and management, he can easily slide 
out from under the scrutiny of the Department of Labor, which 
collects the Landrum-Griffin reports.

Martin Jay Levitt (with Terry Conrow), Confessions of a Union Buster 
41-42 (New York: Crown Publishers, Inc. 1993) (italics added). Mr. 
Levitt's description of the actual practice of labor relations 
consultants is consistent with prior statements by other consultants. 
See Subcommittee on Labor-Management Relations, Committee on Education 
and Labor, U.S. House of Representatives, 96th Cong., Pressures in 
Today's Workplace 44 (Comm. Print 1980) (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'').
    Considering Mr. Levitt's apparent personal experience in the field, 
his statement raises concerns about the effectiveness of the LMRDA's 
reporting provisions, in light of the Department's most recent 
interpretation of the ``advice'' exemption. Mr. Levitt's statement is 
incorrect in suggesting that the LMRDA, by its terms, requires direct 
contact between a consultant and employees before the statutory duty to 
report persuader activities is triggered. But the Department's most 
recent interpretation of LMRDA section 203(c) lends itself to the 
understanding described by Mr. Levitt, since it views most activity 
other than direct contact between a consultant and employees as falling 
within the ``advice'' exemption. If Mr. Levitt's statement is accurate, 
then the Department's most recent interpretation may be contributing to 
the substantial under-reporting of persuader activities that Congress 
wanted disclosed.
    Since 1962, when the Department's most recent interpretation of the 
``advice'' exemption was adopted, the means and methods used by labor 
relations consultants to market themselves to employers and to persuade 
workers have become more sophisticated, reflecting new technologies.
    For example, one prominent labor relations consulting firm--which 
recently merged with another, long-established firm--advertises its 
services on the Internet. Its Website announced that the ``new firm 
will have combined billings of $5.5 million,'' that it ``represents the 
merger of the field's top intellectual assets in response to the 
explosive growth of union organizing across the country,'' and that the 
two merging firms ``have worked with thousands of companies over the 
years.'' Among the services offered by the firm on its Website are 
``full scale counter-union campaigns.'' The firm states, ``We know how 
unions organize employees, why employees turn to unions, and how to 
keep unions out. * * *'' Among the products offered by the firm is a 
videotape called ``Inside the Union.'' The firm describes it this way:

    [The firm] can produce a customized video for your organization 
that goes inside the union that is attempting to organize your 
employees * * * This tape provides your employees with everything 
they need to make an informed decision at the voting booth.

The firm invites employers to ``discuss how Inside the Union can fit 
into your counter-union campaign.''
    The use of consultant-prepared, customized video presentations 
appears to be a common persuasive technique. One consultant firm, on 
its Website, describes its ``custom video presentations for 
management,'' begun in 1984, which evolved into an ``NLRB 
Representation Election Campaign Program,'' ``used in more than 3,000 
elections.'' According to the firm, ``[t]his revolutionary approach 
utilized a series of captive audience videos that enabled employers to 
effectively conduct their own campaigns without expensive consulting 
services.'' The firm describes its videos as ``credible communications 
that inform and persuade employees,'' noting that its ``standards * * * 
mean that [the employer's] union-free message commands attention and 
respect.''
    Other firms offer services that depend less on high technology. The 
Website of one firm offers services that include ``developing flyers 
aimed [at] company specific issues.'' According to the firm ``flyers 
mailed to worker's homes let family members realize what is at stake.'' 
In the words of another firm's Website, addressed to employers, it can 
help ``get your anti-union message indelibly engraved upon your 
employee's minds.''
    The sophistication of today's labor relations consultants is 
apparent from their Internet sites, like those just described. Many 
consultants have such sites, which they use to market their services in 
a way that was not possible in 1962. The Internet sites seemingly 
illustrate the important role consultants play in employers' responses 
to union organizing campaigns. One firm describes itself as ``providing 
professional on-site campaign management expertise'' and says it has 
been involved in 930 campaigns. Its services include ``persuader, 
bilingual, and custom video campaigns,'' billed as ``highly credible, 
direct employee communications that build lasting positive 
impressions.'' The firm refers to its staff members as ``professional 
campaign managers,'' who are ``thoroughly experienced in developing and 
using video, internet, and multi-media based communications programs.'' 
Staff members ``design a winning strategy and deliberate tactics fine-
tuned to the particular issues and requirements of your [the 
employer's] campaign.''
    Like the firms already described, other labor relations consultants 
who

[[Page 2787]]

advertise on the Internet make clear that they provide comprehensive 
services to employers. One firm, which has claimed involvement in 950 
union representation and decertification elections over 25 years, 
offers ``campaigns to defeat Union attempts to organize employees.'' 
Another firm's Website offers ``counter-union organizing strategies'' 
and ``union avoidance'' efforts, among services ``custom designed to 
meet the needs of the individual client.'' The firm observes, ``When 
organizing occurs, [the firm] works closely with the employer's 
management team to ensure that employees receive full and accurate 
information regarding what a union can and cannot do for them.'' A 
different firm offers ``union avoidance campaigns'' among its services, 
describes itself as ``nationally recognized as a leader in conducting 
successful campaigns for companies,'' and points out that it can 
``strategically utilize the expertise and skills of company supervisors 
to influence a positive outcome to elections.''
    In addition to consulting firms, law firms also appear to be 
engaged in developing persuasive communications, as well as more 
traditional legal work. One law firm Website, in describing its ``legal 
services to management,'' includes (in addition to ``advice and 
counsel'') ``union avoidance,'' noting that its ``lawyers are prepared 
to counter the union's efforts with election campaign tactics,'' 
``focusing on not only why employees should vote against the union, but 
why they should vote for the kind of relationship they really want to 
have with their employer.'' Similarly, another law firm says that it 
``frequently advises clients in union avoidance, organizing campaigns, 
and representation elections' and ``frequently assist[s] * * * clients 
in employee communication strategies, including the development of 
speeches, multimedia, and written employee communications.''
    Evidence suggests since the 1960's, the use of labor relations 
consultants by employers has increased significantly, that such 
consultants play an important role in connection with the process of 
union organizing efforts, and that this role may contribute to harmful 
conflicts in American workplaces. Reporting by labor relations 
consultants under the Department's most recent interpretation of LMRDA 
section 203(c) does not appear fully to reflect the scale and scope of 
consultant activity.
    Observers of American labor relations have noted an increased use 
of labor relations consultants in the years since the Department's most 
recent interpretation of the ``advice'' exemption was adopted. See, 
e.g., Unions and Management Representatives Disagree on Extent of 
Consultants' Influence in 75 Daily Labor Report (Bureau of National 
Affairs) at C-1 (April 19, 1988) (``The number of labor relations 
consultants * * * has proliferated in recent years''). A 1984 
Congressional subcommittee report observed:

    In the 25 years since the enactment of the LMRDA there has been 
a dramatic increase in management's use of consultants to counter 
the unionization efforts of employees or to decertify existing 
unions. This well-documented increase has been most pronounced in 
the past 10 years.

    Subcommittee on Labor-Management Relations, Committee on Education 
and Labor, U.S. House of Representatives, 98th Cong., The Forgotten 
Law--Disclosure of Consultant and Employer Activity under the LMRDA 2 
(Comm. Print 1984).\4\ See also Subcommittee on Labor-Management 
Relations, Committee on Education and Labor, U.S. House of 
Representatives, 96th Cong., Pressures in Today's Workplace 28 (Comm. 
Print 1980) (``[T]he labor consultant industry has undergone very 
substantial growth since the Landrum-Griffin Act [LMRDA], particularly 
during the past decade.''). A scholar has described the apparent trend 
this way:
---------------------------------------------------------------------------

    \4\ Witnesses at Congressional subcommittee hearings in 1979 and 
1980, including both labor union officials and labor relations 
consultants, testified to a ``staggering increase in the number of 
practicing labor relations consultants.'' Subcommittee on Labor-
Management Relations, Committee on Education and Labor, U.S. House 
of Representatives, 96th Cong., Pressures in Today's Workplace 27 
(Comm. Print 1980). One prominent consultant estimated ``tenfold 
growth in the past 10 years,'' i.e., during the 1970's. Id. See 3 
Pressures in Today's Workplace: Oversight Hearing before the 
Subcommittee on Labor-Management Relations of the House of 
Representatives Committee on Education and Labor, 96th Cong. 12 
(1980) (testimony of Herbert G. Melnick, Modern Management, Inc.).

    Anti-union labor relations consultants became fairly active in 
the 1950s; they were important enough to be the subject of 
congressional investigations in 1958 and 1959. By the 1970s, 
however, they came to represent a quantitatively and qualitatively 
different phenomenon. From being atypical in the late 1950s, they 
became the usual occurrence in the 1970s; their activities continue 
---------------------------------------------------------------------------
unabated today.

Michael Goldfield, The Decline of Organized Labor in the United States 
193 (Chicago: University of Chicago Press, 1987). For a similar 
description of this trend, see Michael H. LeRoy, Severance of 
Bargaining Relationships During Permanent Replacement Strikes and Union 
Decertifications: An Empirical Analysis and Proposal to Amend Section 
9(c) of the NLRA, 29 U.C. Davis L. Rev. 1019, 1072-1077 (1996).
    In its 1994 fact-finding report, an advisory committee appointed by 
the Secretary of Labor and the Secretary of Commerce and chaired by 
Professor John T. Dunlop of Harvard University, found that ``[f]irms 
spend considerable internal resources and often hire management 
consulting firms to defeat unions in organizing campaigns at a sizable 
cost.'' Commission on the Future of Worker-Management Relations (Dunlop 
Commission), Fact Finding Report at p. 74 (May 1994). The same report 
observed that ``[s]tudies show that consultants are involved in 
approximately 70 percent of organizing campaigns,'' but also stated 
that ``[t]here are no accurate statistics on consultant activity.'' Id. 
at p. 68.\5\
---------------------------------------------------------------------------

    \5\ In the past, a Congressional subcommittee has suggested that 
a ``careful study by the Department of Labor of the dimension and 
impact of this phenomenon [the growth in the number of labor 
relations consultants] is overdue.'' Subcommittee on Labor-
Management Relations, Committee on Education and Labor, U.S. House 
of Representatives, 96th Cong., Pressures in Today's Workplace 28 
(Comm. Print 1980). For a detailed analysis of the business of labor 
relations consultants in the mid-1980's, see Bureau of National 
Affairs, Labor Relations Consultants: Issues, Trends, and 
Controversies (1985). That report observed that ``[m]anagement 
consulting is a large industry'' and that ``[m]any observers see the 
industry growing.'' Id. at 3. But the report also pointed out that 
``[b]ecause much of the management consultants'' work is done behind 
the scenes, keeping tabs on the activities of consultants--and thus 
getting an estimate of the size of the industry--is difficult.'' Id. 
at 5.
---------------------------------------------------------------------------

    Some studies of employers' use of labor relations consultants have 
been done. They suggest that employers frequently use consultants. A 
study based on a random sample of 261 National Labor Relations Board 
elections between July 1986 and July 1987, found that 71 per cent of 
employers used an outside consultant during the election campaign. 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., 1994) (Ithaca, N.Y.: ILR Press). The use of consultants, 
according to the study, appears to have an effect on the outcome of 
union representation elections: unions won 40 per cent of the elections 
in which employers used a consultant, as opposed to 50 per cent when no 
consultant was used. Regardless of the effect, the common use of 
consultants in the course of union election campaigns suggests 
widespread persuader activity that may be subject to the LMRDA's 
reporting requirements.

[[Page 2788]]

    The reports of the Dunlop Commission, meanwhile, suggest that the 
use of labor relations consultants may be harmful to good labor-
management relations.\6\ In its fact-finding report, the Dunlop 
Commission observed that:
---------------------------------------------------------------------------

    \6\ 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. 
v. 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).

The NLRA [National Labor Relations Act] process of representation 
elections is often highly confrontational with conflictual activity 
for workers, unions, and firms that thereby colors labor-management 
---------------------------------------------------------------------------
relations.

Commission on the Future of Worker-Management Relations, Fact Finding 
Report at p. 68 (May 1994). In its final report, the Commission noted 
the harm to good labor-management relations caused by the ``import of 
the worst features of political campaigns into the workplaces by 
managers and unions.'' Commission on the Future of Worker-Management 
Relations, Report and Recommendations at p. 15 (December 1994).
    The apparent rise in the use of labor relations consultants since 
1962, the reasonable possibility that some labor relations consultants 
contribute to harmful conflicts in labor-management relations (an 
object of Congressional concern in passing the LMRDA), and evidence 
that the Department's most recent interpretation of the ``advice'' 
exemption has led to the under-reporting of the activities of these 
consultants, all support revision of the interpretation.

D. Revised Interpretation of the ``Advice'' Exemption

    For the reasons just described, the Department has revised its 
interpretation of LMRDA section 203(c) with respect to the preparation 
of persuasive materials by labor relations consultants and other 
persons. The Department's new interpretation, as it will appear in the 
LMRDA Interpretative Manual distributed to the staff of the Office of 
Labor-Management Standards (superseding section 265.005 of the most 
recent version of the Manual, described above), is as follows:

    LMRDA Section 203(b) requires reports from: ``every person who 
pursuant to any agreement or arrangement with an employer undertakes 
activities where an object thereof is, directly or indirectly--to 
persuade employees to exercise or not to exercise, or persuade 
employees as to the manner of exercising, the right to organize and 
bargain collectively through representatives of their own choosing* 
* * .'' Section 203(c) provides that a person need not file a report 
``by reason of giving or agreeing to give advice to * * * an 
employer.''
    The application of the ``advice'' exemption depends on whether 
an activity can fairly be considered giving ``advice,'' as opposed 
to engaging in direct or indirect persuasion of employees. 
``Advice'' means an oral or written recommendation regarding a 
decision or a course of conduct.
    For example, a lawyer or consultant who counsels an employer on 
what he may lawfully say to employees or on how to exercise his 
legal rights most effectively is providing ``advice,'' even if the 
employer's communication is intended to persuade employees within 
the meaning of the LMRDA. This activity is not reportable.
    However, persons who give advice to employers may also engage in 
activities that must be reported. When a consultant or lawyer or 
their agent communicates directly with employees in an effort to 
persuade them, the ``advice'' exemption does not apply. The duty to 
report can be triggered even without direct contact between a 
consultant or lawyer and employees, if persuading employees is an 
object (direct or indirect) of the person's activity pursuant to an 
agreement or arrangement with an employer.
    For example, when such a person prepares or provides a 
persuasive script, letter, videotape, or other material for use by 
an employer in communicating with employees, no exemption applies 
and the duty to report is triggered.
    Material is persuasive if, for example, it explicitly or 
implicitly urges employees to vote against union representation, to 
take a certain position with respect to collective bargaining 
proposals, or to refrain from concerted activity (such as a strike) 
in the workplace.
    A lawyer or consultant who, as a means of providing legal or 
other advice, simply reviews and revises persuasive material 
prepared by the employer is not required to report that activity.

The Department will, as a matter of enforcement policy, apply this 
interpretation prospectively, to conduct occurring thirty days or more 
after the date of this Notice.

    Signed at Washington, D.C., this 8th day of January, 2001.
Bernard E. Anderson,
Assistant Secretary for Employment Standards.
[FR Doc. 01-969 Filed 1-10-01; 8:45 am]
BILLING CODE 4510-86-P