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May 01, 2016

ABA president reiterates opposition to new Labor Department persuader rule

ABA President Paulette Brown last month reiterated the ABA’s opposition to the Labor Department’s new final “persuader” rule, maintaining that the new rule – which will apply to arrangements, agreements and payments made on or after July 1− will “seriously undermine both the confidential lawyer-client relationship and employers’ fundamental right to counsel.”

Brown submitted her statement for the record of an April 27 hearing on the new rule convened by the House Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions. Subcommittee Chairman Phil Roe (R-Tenn.), who acknowledged Brown’s statement during the hearing, said the new persuader rule upends over half a century of labor policy by changing the department’s longstanding interpretation of the advice exemption of the rule contained in Section 203(c) of the Labor-Management Reporting and Disclosure Act.

The 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. For more than 50 years, the department interpreted the advice exemption broadly and deemed lawyers to be 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.

In her statement, Brown expressed concerns that the department’s new interpretation of the rule “will essentially nullify the act’s advice exemption, undermine the related attorney-client communications exemption, and hence thwart the will of Congress.” She also warned that the new rule will conflict with lawyer’s existing state ethics rules regarding client confidentiality and seriously undermine both the confidential lawyer-client relationship and the employers’ fundamental right to effective counsel. “To avoid these negative consequences,” Brown explained,” the ABA urges Congress to preserve the previous well-established interpretation of the advice exemption” and urges the department to narrow the scope of Form LM-21 so that only those receipts and disbursements relating directly to the law firm’s persuader activities need be disclosed.

The rule states that the advice exemption will no longer shield employees and their lawyers from reporting agreements in which the lawyer “has no face-to-face contact with employees but nonetheless engages in activities behind the scenes (known as indirect persuader activities) where an object is to persuade employees concerning their rights to organize and bargain collective.”

In addition, unless the department’s Form LM-2 (“Receipts and Disbursements  Report”) is substantially modified in a new rulemaking planned for this fall, the new rule will require lawyers who provide legal advice to employer clients and engage in any persuader activities 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.

ABA Past President Wm. T. (Bill) Robinson III, testifying before the subcommittee in his individual capacity, explained that the final rule is similar to an earlier version proposed in 2011 that caused great concern to the legal profession when he was ABA president. At the time, Robinson sent a letter expressing the association’s serious concerns about the proposal, and 18 states, local and specialty bar associations submitted also separate written comments opposing the proposed rule.

After echoing many of the same concerns expressed by the ABA, Robinson predicted that the new rule “would set a trap for attorneys whose responsibility it is to advise members of an entire class of clients – every person and business creating jobs in America.”

Robinson also urged members to vote for H.J. Res 87, a joint resolution introduced by Rep. Bradley Byrne (R-Ala.) to block the rule from taking effect. The House Education and the Workforce Committee approved the measure May 18.

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 fiscal year 2017 appropriations legislation to prohibit DOL from spending money to implement the new rule.

Others opposed to the final rule include the U.S. Chamber of Commerce, the National Federation of Independent Businesses, the Associated Builders and Contractors, other business groups, and various large management-side law firms. Lawsuits seeking to block implementation of the rule have been filed by these and other opponents in U.S. district courts in Arkansas, Minnesota, and Texas.     

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