Defending Employers’ Access to Legal Advice: Comments Filed Supporting DOL’s Rescission of Controversial Persuader Rule

August 11, 2017, was the deadline for interested parties to submit comments regarding the U.S. Department of Labor’s (DOL) proposal to formally rescind its controversial persuader rule, which was issued in 2016 under the Obama administration. At last count, well over 1,000 comments were submitted and are now available on the DOL’s website, including comments from employers, trade associations, lawyers, legal ethics experts, and others supporting rescission. Unsurprisingly, unions and union organizers also have commented and urged the DOL to leave the rule in place—no doubt because they believe it will help them in union elections.

Background

The Labor Management Reporting and Disclosure Act of 1959 (LMRDA) requires, among other things, that employers that hire attorneys or other labor consultants to persuade employees during a union campaign must file certain publicly accessible disclosure reports. Those reports inform the world at large of the existence of the agreement, the amount the employer pays the attorney or labor consultant, and the terms of the agreement, among other things. The attorney or labor consultant is also required to file a publicly accessible disclosure report within 30 days after entering an agreement with an employer reporting much of the same information. The attorney or consultant must also file an annual disclosure report revealing the names of and the amounts paid by all of his or her clients for “Labor Relations Advice or Services,” which includes all labor and employment matters, not only persuader activities.

As an exception to the LMRDA’s disclosure requirements, the statute provides an exemption for providing and receiving “advice.” For over 50 years, the DOL made clear that under the “advice” exemption, employers that retained lawyers and other consultants to advise them in responding to a union campaign were not required to file anything under the LMRDA, so long as the attorney did not have direct contact with employees and the employer was always free to accept or reject whatever suggestions and drafts the attorney might provide the employer.

However, in March of 2016, the Obama administration’s DOL issued a new rule dramatically revising the department’s interpretation of the LMRDA’s advice exemption. This new persuader rule narrowed the exemption to such a degree that it essentially eliminated it. Under the persuader rule, employers (and their lawyers) would have to publicly disclose any and all arrangements under which a lawyer provided advice to an employer on employment practices, policies, and other matters that could affect employees’ desire to unionize. Employers pointed out such expansive persuader reporting would be triggered under this new rule by ordinary day-to-day employment law work, such as revising a handbook policy or reviewing benefits practices, if the employer was motivated to any degree by a desire to remain union-free. In addition, lawyers and law firms that provided such advice would also be required under the LMRDA to file publicly accessible disclosure reports listing all of their labor and employment clients and how much they were paid by each client during the prior year.

Almost immediately after the DOL issued its new rule in 2016, multiple lawsuits were filed challenging it. In one of those cases (handled by Ogletree Deakins), the Northern District of Texas, in National Federation of Independent Business v. Perez, entered a nationwide injunction blocking the DOL from implementing the new rule. Deeming the new rule “defective to its core,” the court found that the rule overstepped the DOL’s authority and violated employers’ free speech rights. The court also found that the rule would likely reduce employers’ access to legal counsel by deterring employers from seeking such counsel, and attorneys from providing it, to avoid losing the confidentiality that has been traditionally accorded to the attorney-client relationship.

In response the federal court’s injunction, the new administration’s DOL published a notice of proposed rulemaking in June of 2017, proposing to rescind the 2016 rule and seeking public comment.

Over 1,000 Comments Filed

A federal agency seeking to undo an action is required to provide “a reasoned analysis for the change.” Demonstrating the substantial concern that many employers, lawyers, trade associations, legal ethics experts, businesses, and other stakeholders have about the 2016 rule, over 1,000 comments were filed in response to the DOL’s notice of proposed rulemaking by the August 11, 2017 deadline, providing the DOL with extensive reasons for rescinding the new persuader rule. These include comments from many of the leading employer, business, human resource professional, and attorney organizations in the country that support rescinding the 2016 rule. Filing organizations include the following entities:

• The United States Chamber of Commerce
• The Society for Human Resource Management
• The National Federation of Independent Business
• The National Association of Home Builders
• The American Bar Association
• The Association of Corporate Counsel
• The Council on Labor Law Equality
• The Coalition for a Democratic Workplace
• A number of prominent labor and employment law firms (including Ogletree Deakins)
• The Food Marketing Institute
• 17 states’ attorneys general

 

What Happens Next?

The DOL will now review and consider all of the comments filed to determine whether it should finalize its proposal to rescind the 2016 rule. That could take months. In the meantime, the DOL has formally appealed from the federal court’s injunction prohibiting it from enforcing the 2016 rule, but that appeal is stayed while the department undertakes this rulemaking.

Although employers can breathe a little more easily in light of the injunction and proposed rescission of the 2016 revised persuader rule, they should not let up; unions, union organizers, and their allies surely won’t. Employers will want to continue to monitor this issue closely.