LUBBOCK, Texas (CN) - Business groups say a new Department of Labor rule that requires employers to reveal the names of consultants they hire to dissuade union organizing violates attorney-client privilege and the Constitution.
The National Federation of Independent Business and four other business groups sued the Secretary of Labor in Federal Court on March 31, challenging the "persuader advice exemption," which is set to take effect on April 25.
The rule under the Labor-Management Reporting and Disclosure Act will require employers to disclose the names of consultants they hire to discourage workers from unionizing.
"DOL's new rule illegally interferes with the right of plaintiffs' employer members to obtain confidential legal advice and impedes their right to communicate with employees about unions and workplace issues," the complaint states. "DOL's new and expanded Advice Exemption Interpretation adversely impacts plaintiffs, plaintiffs' members, employers, and employees. Small employers are particularly adversely impacted by DOL's new rule."
Plaintiffs include the Texas Association of Business, the Lubbock Chamber of Commerce, the National Association of Home Builders, and the Texas Association of Builders.
They say the law for decades has exempted consultants from being reported, so long as they have no direct contact with employees and the employer is free to take or reject their recommendations.
"Among the many activities for decades considered to fall within the Advice Exemption are a lawyer's legal review of actions contemplated by an employer in response to union organizing, including the preparation of documents, speeches and even responses by an employer to questions raised by employees, for an employer's use during union organizing, the training of managers and supervisors through conferences and seminars and otherwise, and the development of personnel policies and practices," the complaint states.
"Ordinary" tasks performed by employers' attorneys now are to be regarded as "persuader" activity that triggers reporting obligations, the business groups say.
"DOL's new and expanded Advice Exemption Interpretation is contrary to the express language of the LMRDA's Advice Exemption," the complaint states. "It also is inconsistent with the ordinary usage and practice of interpreting such language. Courts have long recognized that an attorney's preparation of materials and documents for a client is a component of providing legal advice protected by the attorney-client privilege."
The plaintiffs say the DOL exceeded its authority because it "illegally attempts to usurp state laws" by regulating the attorney-client relationship. And, they say, the new rule will "substantially burden" employers' speech rights.
"The issue of unionization is one of substantial public importance," the complaint states. "Speech by employers on the issue of unionization is non-commercial speech that is entitled to the highest form of protection. Any restraint on this speech must pass strict scrutiny. DOL's new and expanded Advice Exemption Interpretation cannot pass strict scrutiny."
Plaintiffs' attorney Fernando M. Bustos said the rule will make it impossible for most attorneys to give advice and will burden small and mid-size businesses, which often seek outside counsel for labor management advice.
"It's going to completely destroy their ability to be able to hire a lawyer to get legal advice," Bustos told the Lubbock Avalanche-Journal.
But the Department of Labor said that if workers know their employers are spending money on outside consultants, it "could help workers assess the employers' claims about their financial situation."
"With more transparency, workers will be able to better assess the merits of the arguments directed at them and make more informed choices when they understand that the information they are receiving about the union originates with paid outsiders, not their employers or supervisors," the Labor Department said in a March statement about the " Persuader Rule ."
"Workers who understand that an outsider has been hired to persuade them can better weigh the common claim that bringing an 'outside' or 'third party' union into the workplace will disrupt the worker-employer relationship, or otherwise be counterproductive to the workers' interests," according to the statement.
The plaintiffs seek declaratory judgment that the rule violates the Administrative Procedure Act, the Regulatory Flexibility Act, and the First and Fifth Amendments, and an injunction against its enforcement.
The business groups' lead attorney is Jeffrey Londa, with Ogletree, Deakins, Nash, Smoak & Stewart. Co-counsel Bustos' office is in Lubbock.Follow @davejourno
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.