August 30, 2018

DOL final rule rescinds previous “Persuader Rule” changes

In a victory for the ABA, the Department of Labor published a final rule on July 18 rescinding previous changes to the “Persuader Rule” adopted in 2016 that would have required management-side labor lawyers to report confidential client information to the government.

The department cited the ABA’s previous comments extensively, especially those warning that the Persuader Rule changes would have seriously undermined the confidential attorney-client relationship.

The 2016 changes to the Persuader Rule, which were blocked by a permanent nationwide injunction issued by a U.S. district court in Texas in November 2016 before they could go into effect, were intended to narrow the department’s longstanding interpretation of the “advice” exemption under Section 203 of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA).

Section 203 requires employers and their labor consultants, including lawyers, to file extensive periodic disclosures with the department when they engage in certain activities or enter into agreements or arrangements to persuade employees on union formation or membership issues. However, Section 203(c) of the act has long been interpreted to exempt lawyers 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 2016 rule would have required lawyers who provide both legal advice to employer clients and engage in any persuader activities to file periodic disclosure reports even if they have no direct contact with the employees. These reports would have included disclosure of a substantial amount of confidential information, including the existence of the lawyer-client relationship and the identity of the client, the general nature of the legal representation, and a description of the legal tasks performed. The reports also could have compelled disclosure of a great deal of confidential financial information about clients that is unrelated to persuader activities that the LMRDA is intended to monitor.

In a letter sent to the department in August 2017, ABA Governmental Affairs Director Thomas M. Susman reiterated the association’s opposition to the 2016 rule and referenced both the ABA’s 2011 comment letter to the department and its statement to the House Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions.

Susman emphasized that the ABA was not taking sides on a union-versus-management dispute, but had the sole objective of “defending the confidential client-lawyer relationship by reversing a rule that imposes unjustified and intrusive burdens on lawyers, law firms and their clients.”