DOL Responds to Lawyers' Persuader Rule Challenge

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By Lawrence E. Dubé

May 9 — The Labor Department has responded to arguments by law firms that the agency's interpretation of an advice exemption from Labor-Management Reporting and Disclosure Act rules for “persuader” activities infringes on their duty to protect privileged or confidential information of business clients.

The LMRDA, 29 U.S.C. § 433(a), requires employers to report certain efforts to “persuade” employees concerning their exercise of organizing and bargaining rights. The act exempts arrangements for “giving or agreeing to give advice” to an employer, but law firms are among the challengers arguing DOL's recent rulemaking on the advice exemption is unlawful or unconstitutional.

The government filed a May 6 response to the lawyers'motion for injunctive relief from the final rule (RIN:1215-AB79; 1245-AA03). The government argued in part that lawyers can comply with DOL's persuader reporting rules without violating their obligations under state laws or professional ethics codes.

Challenge by Law Firms

The DOL's Office of Labor-Management Standards adopted March 24 a final rule (RIN 1215-AB79; 1245-AA03) that interprets the statutory exemption for advice more narrowly. The revised rule requires employers and consultants to report agreements for “indirect persuader activities” (56 DLR AA-1, 3/23/16).

The lawsuit, filed by legal network Labnet and a number of U.S. law firms, is one of several challenges pending in federal district courts (83 DLR AA-1, 4/29/16).

The lawsuit alleges in part that DOL's interpretation of the persuader exemption “impermissibly infringes upon the attorney-client relationship by requiring the reporting of confidential and privileged information and driving a wedge between lawyers and their clients concerning reporting requirements.”

Government Denies Threat to Lawyer Duties

DOL's lengthy memorandum included some of the same defenses of its LMRDA interpretation offered in response to the other court challenges, but also focused on the argument that the government's position would interfere with lawyers' fulfillment of professional obligations.

The rule requires reporting the nature and terms of persuader services covered by the LMRDA, as well as disclosure of agreements for covered services, but DOL said some courts have held that client identities and information about payment for legal services is not privileged.

Complying with the federal regulation should not require attorneys to violate any attorney-client privilege, the government said. For example, while the rule requires information about employer payments for persuader services, the LMRDA, 29 U.S.C. § 434, provides a licensed attorney is not required to include “any information which was lawfully communicated to such attorney by any of his clients in the course of a legitimate attorney-client relationship.”

The government also argued that “even if the Rule were deemed to conflict with a state-law attorney ethics requirement, the state requirement would be preempted” by federal law.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

Text of the government's memorandum is available at http://src.bna.com/eN1.