Economy & Business

The Obama Administration’s Pro-Union Heavy Hand in Labor Negotiations

A new Labor Department rule threatens the free exchange of legal advice in union negotiations.

Three federal courts are currently considering whether the Obama administration’s most recent attempt to regulate workplace speech exceeds the president’s authority under the U.S. Constitution and federal labor law. These cases involve challenges to the Department of Labor’s recently amended “Persuader Rule,” which would compel attorneys to disclose details about the advice they provide to companies in labor disputes that have long been considered confidential communications. One court in Texas has already ordered that the rule, which was scheduled to take effect July 1, be enjoined nationwide until the court can reach a final decision on its legality.

Since 1959, federal law has required that consultants and contractors periodically and publicly disclose “persuader” activities — that is, work done for a company to influence its employees’ decision on whether or not to join a union. But Congress was also careful to craft explicit exemptions to these disclosure rules for any person who merely “give[s] advice to such employer” and for “any information . . . lawfully communicated to [an] attorney by any of his clients in the course of a legitimate attorney-client relationship.”

Consistent with these legislative commands, President Kennedy’s solicitor of labor interpreted this advice exemption as protecting attorneys from disclosure as long as they did not directly interact with employees and the employer remained free to accept or reject the attorney’s advice. Employers relied on this sensible interpretation for over 50 years. The new rule, however, dispenses with the direct-contact requirement and effectively requires attorneys to make disclosures whenever they advise clients on activities relating to union elections.

Under the new rule, covered attorneys would have to disclose the existence of the attorney-client relationship, the client’s identity, the nature of the representation, a description of the tasks performed, and the fees paid by all of the attorneys’ employer clients who receive labor-relations advice or services. The new rule could also subject a host of previously exempt activities to the disclosure requirements, including the preparation of documents, speeches, and audiovisual presentations, the development of personnel policies or practices, and any participation in training sessions for managers or HR professionals.

The rule is a trifecta of executive overreach.

The new rule has drawn criticism from across the legal and political spectrum, from the U.S. Chamber of Commerce to the attorneys general of ten states (who intervened in the Texas case) to the American Bar Association (ABA). And with good reason: The rule is a trifecta of executive overreach, simultaneously violating separation of powers, disrupting the federal–state balance, and abridging free-speech and due-process rights under the First and Fifth Amendments.

On separation of powers, the rule would lay waste to explicit exemptions in federal law crafted by Congress to protect confidential communications between employers and attorneys and other advisors. While courts sometimes accord deference to administrative interpretations of federal statutes, no such deference is owed where, as here, clear statutory text prohibits the agency from acting.

On federalism, the rule would require attorneys to violate ethical duties under state rules of professional conduct. Besides compromising attorneys’ obligations to keep communications with clients confidential, the rule also has the potential to create conflicts between attorneys and clients. Lawyers owe clients a duty of candor and zealous representation, which could require them to fully advise employers about the consequences of union activity on their premises. But because violations of the Persuader Rule carry criminal penalties, lawyers may be loath to provide any advice that could subject them to the new, onerous disclosure requirements. For these reasons, the ABA concluded that the rule “will seriously undermine both the confidential lawyer-client relationship and the employers’ fundamental right to effective counsel.”

The rule tramples on multiple constitutional liberties.

Finally, the rule tramples on multiple constitutional liberties. It restricts free-speech and association rights by compelling disclosure of confidential information and chilling communications between lawyers and their clients. The rule also fails to provide sufficient notice of what conduct would constitute covered “persuader” activities and what conduct would be exempt “advice.” Due process requires more concrete guidance before companies can be exposed to criminal sanctions.

Regrettably, the Persuader Rule is not an aberration in the president’s labor policy. As we explain further in our contribution to Liberty’s Nemesis — Dean Reuter’s and John Yoo’s recent collection of essays on the president’s overzealous regulatory agenda — the Obama administration has made a concerted effort to expand executive authority and curtail employer speech rights to advance its preferred pro-union agenda.

Consider, for example, the interplay between the Persuader Rule and the National Labor Relations Board’s recent “ambush election” rule. The “ambush” rule considerably reduces the amount of time that employers have to communicate with employees prior to a union-representation election. If the new Persuader Rule took effect, it would deter companies from consulting attorneys to help in the course of these newly abbreviated union campaigns.

The cumulative effect of these rules will be to make employees less informed about their options than they would be if armed with information from a fully engaged employer. This is by design, as the current administration’s labor policy is based on a philosophy that sees any employer role in the deliberative process of choosing whether or not to have a collective-bargaining representative as inherently coercive.

But this paternalistic view will not protect employees’ interests. To the contrary, companies bereft of legal counsel will be more likely to engage in activities prohibited by the complex federal labor laws in the course of a union campaign. And the increased legal and regulatory costs associated with this new regime will fall especially hard on small businesses and their employees.

The next administration will inherit this legacy and have to confront a fundamental choice about whether to continue down this ill-advised path. The next president should pursue policies and appoint judges who will enforce both the Constitution’s structural limitations and Bill of Rights to curb federal regulatory overreach. And that president should also pursue labor policies that ensure that everyone has a fair and equal opportunity to persuade employees on issues of fundamental importance to the workplace.


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