The US Department of Labor (DOL) recently finalized regulations affecting employers and trade associations across the US. Those regulations would require reporting of engagement with legal counsel involved in direct or indirect persuasion of employees on matters of union representation. The stated goal of the regulations was to bring into public view the point that attorneys and consultants are often engaged to help employers in communicating with employees. With this goal in mind, the regulations sought to force employers and their counsel, effective July 1, 2016, to report engagements, terms of engagement, certain tasks, and expenditures linked to employer communication with employees. Thus, if an employer hired counsel to draft or review communication plans, to prepare communication pieces, to train supervisors on things they can and cannot say under the law, or in taking action against an employee who engaged in misconduct during the time of a union organizing campaign, such information would be required for disclosure on forms developed by the DOL. Not only must the attorney/consultant file the report, but the employer must as well, even if the attorney/consultant had no communication directly with employees other than supervisors and management.
These DOL “persuader rules” required reporting within 30 days of engagement and again based upon the timing of fiscal years. DOL estimated minimal time and cost impact from reporting to comply with the rules. Outside parties who reviewed the reporting and requirements have generally viewed the time and cost to be much higher than DOL did. A failure to provide timely and complete reporting carried significant repercussions, including potential criminal prosecution.
Although the persuader rules required disclosure of clients, terms of engagement, tasks performed, and billing information, the DOL steadfastly maintained that the rules did not infringe upon attorney-client privilege. Many attorneys disagreed and the American Bar Association spoke out against the rules. In the time after DOL announced the rules were final, lawsuits were filed to enjoin enforcement. Litigation began in Arkansas, Minnesota, and Texas.
A Minnesota court ruled that the DOL’s persuader rules likely violated the law. However, that court found no irreparable injury to warrant an injunction, leaving the rules in effect.
The Texas court found that all factors supporting injunctive relief were met. With a thorough explanation of how labor issues arise and how management attorneys work within a difficult and short timeframe to educate employers on do’s and don’ts as well as the subtleties of the NLRB’s election process and communication rules, the court assessed the impact on counsel, employers, and the ethical obligations of counsel to maintain confidentiality. Noting the importance of confidentiality in the attorney-client relationship, the court determined an injunction to be appropriate. With the persuader rules designed for national impact and an imminent July 1 effective date for reporting, the Texas court determined that a national injunction was appropriate.
The Arkansas court has not yet spoken on its lawsuit. Further litigation should be expected. The persuader rules have had significance with the current Administration and labor-side supporters of the Administration, who see reporting and disclosure as important to their ability to organize and increase union density. How strenuously the DOL continues to litigate and push for such reporting requirements may depend on the outcome of November elections.
Employers and trade associations are advised to stay tuned for further developments.
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