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New Labor Law Could Cast Harsh Light on Companies

Thousands of businesses are criticizing a proposed labor law that would require many lawyers to report confidential information on corporate clients to the Department of Labor.
Marielle Segarra, CFO.com | US
October 21, 2011

Union organizing is always a contentious topic, and proposed changes to corporate labor law have heated up the debate. The proposal, issued by the Department of Labor, would require attorneys to publicly disclose more information about the union-related advice they have given corporate clients - information that companies say could cast them in a negative light.  

The DoL says the new rule, a proposed change to the Labor-Management Reporting and Disclosure Act (LMRDA), would help employees decide whether or not to unionize. In its proposed rule, the DoL wrote that its current interpretation has caused significant underreporting of instances in which lawyers indirectly influenced employees on union issues. In a statement, the DoL stressed that "better disclosure is critical to helping workers make informed decisions about their right to organize and bargain collectively." 

But thousands of business owners, lawyers, and professional groups have flooded the DoL with letters saying the proposed rule would violate attorney-client confidentiality, make companies hesitate to consult lawyers, and heap compliance risk on businesses that need legal help to avoid violations. 

Some say that small businesses, which often cannot afford in-house counsel (which would likely be exempt from reporting), could be hit hardest if the proposal becomes law. "As a small business, we do not have the people on staff [to] properly research and report or interact with employees in a situation that would involve labor representation," wrote Marvin Miller, owner of North Dakota company Twin City Roofing. "The labor side has all kinds of high-powered attorneys to back them up . . . it is only fair that business be able to counteract the other side."  

The new rule would consider more labor lawyers and consultants to be "persuaders," people who influence workers on union issues. As persuaders, these lawyers would be required to publicly disclose confidential information on all of their clients, including company names and addresses, descriptions of tasks performed, and billing details. Companies would also have to report this information.

Currently, labor lawyers can generally avoid the persuader title by speaking exclusively to their clients, typically executives, rather than employees, says Linda M. Doyle, partner at McDermott Will & Emery. But the DoL says this quasi-loophole is out of keeping with the intent of the rule. Under the new rule, any labor lawyers who help persuade employees, even if they speak only to their clients, would have to report.

If, for example, a lawyer edits a speech that a company gives to workers to stop them from unionizing, current rules would exempt that advice from an attorney's reporting. Under the proposed rule, if the revisions "enhance the persuasive message" of the speech, the lawyer would have to report this activity.  Lawyers would also earn the persuader title if they give an employer pamphlets to distribute to workers, devise a plan of action for a company to talk to employees about unions, or provide details about employee or union activities to a client who is in the middle of a labor dispute.

There are some exceptions. Lawyers could still represent employers in arbitration without reporting. They could also answer general questions about labor law or tell employers what they can legally say to workers without triggering the need to report.

On the corporate end, the threat of public exposure could make businesses hesitate to seek counsel. "It's like you're creating a blacklist," says Karen Harned, executive director of the National Federation of Independent Business Small Business Legal Center. "You're setting [companies] up for targeting by the unions." And the limited scope of exceptions provides little consolation, wrote Ray Leonhard, CFO of the Brick Industry Assn., in a comment letter to the DoL that echoed many of the other responses. "If a lawyer . . . is unable to advise about revisions [to drafts] without engaging in persuasion, precious resources will be spent for useless advice," he wrote.

The American Bar Assn. also argued in a comment letter that the rule violates attorney-client confidentiality under both ABA and state rules. Labor rules exempt lawyers from reporting anything that violates attorney-client privilege, such as the content of a conversation with a client. But they do not protect information that falls under attorney-client confidentiality, such as company identity and financial details.

These complexities could leave lawyers reticent to dish out any advice that could trigger the reporting requirement, Doyle says. "Right now I can give my clients pretty detailed [union] campaign strategy advice . . . [including] how to communicate to employees, what to write, what messages to send, and how the CFO or the CEO should speak to the employees," she says. Should the proposal become law, "I'd have to be much more cautious as to how I did that."

Earlier this month, 21 Republican senators sent a letter asking the DoL to rescind the proposal. The agency, which has not publicly responded to the letter, is currently considering comments on the proposal and has not set a date to release a final rule.


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