The Department of Labor Announces Rules That Could Erode the Attorney Client Privilege

In The Midst of Dramatic Changes in the Law

Submitted by the Labor & Employment PAC

By Clifford Hammond, Partner, Nemeth Law, P.C., Detroit, Michigan

Recently the National Labor Relations Board (“NLRB”) dramatically overhauled union election procedures, reversed decades of established policy that could require a non-union employer to sit down at the bargaining table with a sub-contractor’s union to discuss the contractor’s employees’ terms and conditions of employment, and made several high profile rulings about the legality of non-union employer’s handbooks and work rules.

For employers who have never had a union or have little experience with the nuances of labor law, it is time to seek counsel on how to navigate these rapidly changing waters. Unfortunately, just when it seems employers need advice the most, new reporting measures announced by the Department of Labor (“DOL”) represent an unprecedented obstacle to employers actually seeking counsel in some labor law matters. Employers and their attorneys will soon find their contracts and payments for advice may need to be publicly disclosed. If they do not do so, they could face potential jail time and significant fines.

In July of 2016, the Department of Labor (“DOL”) will turn its back on 40 years of consistent application of a rule that required certain types of labor activities be publicly reported, but which also expressly protected advice and guidance that attorneys provided. For forty years, employers could feel free to contact and ask their attorneys for help drafting lawful communications to their employees about unions, training managers on how to lawfully address a current or potential union campaign, and creating policies to educate employees about unions. Under the new rule set to become effective in July 2016, consultants and employers must report all direct and indirect communications with employees about unions. This is a significant departure from how education and training has been done in the past and is the subject of heated debate relating to the attorney client privilege.

The DOL has determined that it will require any employer and any attorney who enters into an agreement to directly or indirectly discuss how to have lawful discussions with employees about unions, to file comprehensive reporting of the attorney client arrangement. The DOL says it wants to “pull back the curtain” and let employees see who is really talking to them. They say requiring employers to report who the attorney and consultants are that provide advice, not just directly to employees, but to management, is needed so employees can make educated decisions on whether to choose a union. The DOL has outlined some types of advice that will be protected from filing requirements, but expressly requires the remaining attorney-client counseling and advice to be subject to reporting and potentially serious penalties for non-compliance.

Many employers would assume they can call an attorney and ask a very simple question, “what can I say to my employees who may be interested in a union.” Under the new rule, the company and its managers can still discuss the law, what the company wants to say, and have the attorney help the company and managers shape a lawful and appropriate statement or response. However, the attorney and company would have to publish the nature of the relationship between the attorney and the company as well as any payments made pursuant to that relationship and the advice given. This means that the attorney and company will now have to evaluate whether or not obtaining the advice is worth the required disclosure and publication that would be required under the rule.

This is clearly different than other areas of the law. If an employer wants to have an attorney meet with its management team to discuss how to ensure compliance with civil rights laws, how to handle a disability accommodation, communicate with its employees about legal issues, or otherwise deal with a difficult situation or employee—employers can call their attorney without having to let the government know they sought legal advice on how to comply with the law. Such a requirement would offend most reasonable minds who appreciate the need and right to consult with an expert to ensure compliance with the law. Very few would argue there is any right for federal agencies to intrude and publish how much or little employers invest in complying with the law.

The DOL’s rule change will undoubtedly leave many attorneys who have provided frank and honest advice on the limits of labor law with a difficult choice. Do they want to enter into agreements and payment structures that will be posted by the federal government for the world to see? If attorneys choose not to engage in this service, there are “consultants” or “persuader” companies, many of them very skilled, but who may or may not be attorneys. It would appear this group of mostly non-attorneys will fill the void of training and advising employers. The ranks of these groups are filled with very competent ex-union officials, who are very persuasive, but again, mostly non-attorneys.

Several prominent organizations and law firms have announced they intend to fight this rule’s invasion of the attorney client privilege. The lawsuits attack rule’s infringement on the right to counsel and are supported by the longstanding understanding that the need for counsel is not just a fundamental constitutional, administrative and legal right, it is common sense. The DOL made an important clarification during the litigation, stating they will effectively grandfather the existing interpretation and reporting obligations for persuader activity for all agreements in place before July 1, 2016 – even if the services or payments are rendered or paid after July 1, 2016. Then, on June 27th, a nationwide injunction was issued in the Northern District of Texas, enjoining the DOL from implementing the new rule for the time being, pending a trial on the merits.

Employers need to know what the law is and have the ability to craft messages and determine how they respond to very complicated legal matters dealing with their employees on their work floor. Importantly, the DOL’s changes do not require disclosure and reporting of traditional legal advice which attorneys provide unrelated to persuading employees directly or indirectly. As a result, employers should still consult with a labor attorney to discuss how labor law applies to them and then decide whether the DOL’s reporting requirements are or are not a significant deterrent for them to pursue management training or employee education.

Clifford Hammond is a partner at Nemeth Law, P.C. in Detroit, Michigan. He represents public and private sector employers in traditional labor and employment law, with a focus on union avoidance, elections and negotiations.