May 01, 2016

Labor Department issues persuader rule opposed by ABA

The Department of Labor (DOL) issued a final rule March 24 that is opposed by the ABA because it would require many management-side labor lawyers to divulge confidential client information to the federal government.

The final rule − which goes into effect April 25 and will apply to arrangements, agreements and payments made on or after July 1 − substantially narrows the department’s longstanding “advice” exemption to the “persuader activities” reporting rule under Section 203 of the Labor-Management Reporting and Disclosure Act of 1959.

The current persuader rule requires employers and their labor consultants, including lawyers, to file extensive periodic disclosures with the department when they are involved in persuading employees on union formation or membership issues. Lawyers historically have been exempt from the rule’s reporting requirements when they merely provide advice or other legal services directly to their employer clients on these unionization issues but have no direct contact with the employees.

The new rule will require lawyers who provide legal advice to employer clients and engage in any persuader activities to file periodic disclosure reports even if they had no direct contact with the employees. These reports will require disclosure of a substantial amount of confidential information, including the existence of the client-lawyer relationship and the identity of the client, the general nature of the legal representation and a description of the legal tasks performed.  Also required will be disclosure of a great deal of confidential financial information about clients that is unrelated to persuader activities that the act is intended to monitor.

In particular, lawyers deemed to be engaging in any direct or indirect persuader activities will be required to report all receipts from and disbursements on behalf of every employer client for whom the lawyers performed any “labor relations advice or services,” not just those employer clients for whom persuader activities were performed.

Announcing the new rule, Labor Secretary Thomas E. Perez maintained that “full disclosure of persuader agreements gives workers the information they need to make informed decisions about how they pursue their rights to organize and bargain collectively.”

When DOL first proposed the change to the advice exemption in 2011, then ABA President Wm. T. (Bill) Robinson III urged the department not to impose “an unjustified and intrusive burden on lawyers, law firms and their clients.” He emphasized in a comment letter  to the department that the ABA is not taking sides on a union-versus management dispute but is defending the confidential client-lawyer relationship. Eighteen state, local and specialty bar associations joined the ABA in opposition to the proposal.

More than 70 House members also expressed their opposition to the new rule in a March 23 letter to Reps. Tom Cole (R-Okla.) and Rosa DeLauro (D-Ct.), the chair and ranking member of the House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies. The members urged the committee to attach riders to upcoming fiscal year 2017 appropriations legislation that would prohibit the Labor Department from spending money to implement the new rule. “In addition to requiring a tremendous new amount of reporting that is of dubious value, the rule threatens attorney-client privilege and confidences and will likely make it more difficult for employers to find and retain expert advice and assistance,” they wrote.

Others opposed to the final rule include the U.S. Chamber of Commerce, the Associated Builders and Contractors, and various large management-side law firms. Lawsuits seeking to block implementation of the rule have been filed in U.S. district courts in Arkansas, Minnesota, and Texas. 

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