Obama's Latest Lifeline for Unions
A costly new federal rule will hinder firms’ ability to tell workers about the drawbacks of unionizing.
The Labor Department is about to give organized labor a boost by tilting the law against business. It is proposing a new rule, due out in March to take effect before summer, that will require companies to make public the names of the outside attorneys and consultants that give them advice on unionization. These attorneys and consultants, in turn, would have to make public all the other clients they help with union matters, and how much they charged these clients.
The rule would deter many if not most outside attorneys and consultants from offering their services to companies facing a unionization drive. The burden will fall heavily on small businesses that do not have the in-house staff of large corporations. The rule does not apply to consultants offering advice to unions. And the rule overturns more than a half-century of legal interpretation under the Labor-Management Reporting and Disclosure Act of 1959.
The broad goal of the LMRDA was transparency. That goal included a requirement that employers report the names of consultants who directly address their employees, so that these employees know who the consultants actually represent.
But employers never have been required to report the names of consultants who do not interact with employees. Section 203(c) of the LMRDA has an exemption, known informally as the “persuader rule,” which states: “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.”
The Labor Department claims the persuader rule needs changing because “the distinction between activities properly characterized as ‘advice’ and those that go beyond ‘advice’ has not been made clear.” Apparently, if an attorney or consultant writes a speech for a CEO who delivers it to his workers, this is the same as the attorneys or consultants giving the speeches, which somehow pulls the wool over workers’ eyes.
The American Bar Association opposes the new rule, commenting that it “could seriously undermine both the confidential client-lawyer relationship and the employers’ fundamental right to counsel.” The reporting requirements “could very well discourage many employers from seeking the expert legal representation that they need,” which “might have the unintended consequence of increasing the number of employers who, without advice of counsel, would engage in unlawful activities.”
The rule requires three forms to be filled out, one by employers (Form LM-10) and two by lawyers and consultants (LM-20, the agreement with the employer, and a new, modified LM-21, listing their labor-relations clients and all receipts). The Labor Department says the LM-10 and LM-20 would cost about $826,000 annually. This is absurdly low.
The Labor Department estimates that it would receive forms from 3,414 employers and 2,601 advisers. Employers would spend two hours a year completing their LM-10, and advisers would spend one hour completing their LM-20. However, the department’s estimate of employers represents about half of 1% of the 5.73 million U.S. firms, and the new rule applies to any firm that faces a union drive or questions on labor matters. The total number of advising firms estimated by the Labor Department, 2,601, is far below the Census Bureau’s 6,461 human-resource consulting firms and 165,435 law firms.
Law firms and employers might spend one or two hours a year filling in the forms. But an employer would need far more time calculating what information—such as whether a particular company qualifies as a persuader—to add to the form. Suppose a firm puts in a gym at the same time as a rival is unionized. The gym could be construed as an attempt to fend off a union drive and the designer could qualify as an adviser—and be forced to declare its other clients.
Using a more realistic number of firms and hours of compliance, Iestimate that costs would be between $7.5 billion and $10.5 billion in the first year, and between $4.3 billion and $6.5 billion in future years. But my estimate is too low, because it does not include the potential legal costs if there are reporting errors in the forms.
The Office of Management and Budget won’t even begin estimating the cost of the LM-21 until September. But without this estimate the Labor Department cannot calculate—as it is legally required to do—the total costs of the new rule. Before the Labor Department finalizes the new rule, it should wait for OMB to estimate the costs of the new LM-21 form. The stakes are high. The reporting obligations of the new rule are substantial, and failure to comply could lead to criminal sanctions.
The larger context of this proposal, which was first proposed in 2011, is plain. As the Labor Department reported last week, union membership has declined by 1.3 percentage points during President Obama’s tenure. To reverse the decline of this important political constituency, the administration seeks to cripple the ability of firms to present reasons their workers might vote against union representation. This strategy is unfair to employers and the workers the administration purports to represent.
This piece originally appeared in The Wall Street Journal
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Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow him on Twitter here.
This piece originally appeared in The Wall Street Journal