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New Union-Friendly Rule from Obama Targets Small Business
Monday, June 1, 2015



Supporters of tougher regulations on businesses usually present them as necessary to curb abuses by large "fat cat" corporations.

However, President Obama's administration is pursuing a new labor rule that would largely ignore big business and instead target small and medium-sized companies.

Under the federal "persuader" rule, businesses currently must disclose whenever they hire somebody to try to convince their employees they shouldn't unionize — hence the rule's name. Now the administration wants to expand the disclosure to include any time managers receive legal advice on the subject.

The persuader rule is part of the Labor Management Reporting and Disclosure Act, which was passed in 1959 to prohibit stealth anti-union campaigns by employers.

The new disclosure rule won't matter much for large corporations, which have in-house lawyers or are used to disclosing when they hire pricey outside "consultants" to fend off union organizing campaigns. Smaller businesses, on the other hand, would find it much harder to get legal advice, critics charge.

"You've got a lot of lawyers who are not going to want to take on labor relations work because they don't want to have to potentially disclose all of their clients," said Elizabeth Milito, senior counsel for the National Federation of Independent Business, which represents small businesses.

There's also the question of whether the new rule would run afoul of attorney-client confidentiality. Shortly after the proposed change was first announced in 2011, the American Bar Association publicly opposed it on those grounds.

Then-association President William Robinson told the Labor Department in a September 2011 letter that it could not reconcile its own professional conduct rules for lawyers with what the administration was requiring them to disclose. The rule would require attorneys to disclose their clients and what specific services they were providing, including matters unrelated to labor-management issues.

"No rational governmental purpose is served by this overly broad requirement," Robinson said. He stressed that he was "not taking sides on a union-versus-management dispute, but rather is defending the confidential client-lawyer relationship." A spokesman for the bar association said its position has not changed.

The administration, which has been pushing for the rule since 2011, quietly announced on May 21, right before Memorial Day weekend, that the new version is set to be completed in December.

The reporting requirements for the persuader rule would be heavy too. Every financial transaction would have to be reported, making public not just who the lawyer's clients are but exactly what the lawyer is doing for them.

The administration has said the rule will be broad, covering all advice that could "directly or indirectly persuade workers" — so basically all communications related to unionizing. The NFIB's Milito says the group expects to have to report every time one of its 350,000 members downloads the labor law legal advice manual from its website.

The persuader rule currently requires disclosure only when consultants talk directly to workers. Congress explicitly wrote in an exception for legal advice. Critics argue that the exception allows employers to circumvent the intent of the rule simply by doing it themselves.

"The 'advice' exception is worded generally enough that it can encompass a large amount of activity that is designed to persuade...requiring the 'persuader' to have actual contact of employees excludes activity that should be included under the statute," said Joshua Parkhurst, a New York employee-side labor lawyer.

In a 2013 letter to the Senate Health, Education, Labor and Pensions Committee, AFL-CIO President Richard Trumka complained that companies could avoid filing reports "even if the employer uses the consultant's materials and follows the consultant's plans."

Since disclosure currently isn't required, it is not clear how often legal advice is provided or what the practical effect of changing the rule would be. The administration has lowballed the legal costs of compliance for businesses and lawyers, putting it at $826,000 annually. The Republican-led House Oversight and Government Reform Committee, by contrast, has put the figure at $200 million a year.

In the initial announcement, the Labor Department was vague about why the change is needed. It said the current rule had resulted in "significant underreporting of employer and consultant persuader agreements." It argued that "better disclosure is critical to helping workers make informed decisions about their right to organize and bargain collectively."

The Labor Department was set to announce a new version of the persuader rule last year, only to announce that March that it had been indefinitely postponed. It made no announcements for more than a year, then quietly made the announcement just before Memorial Day.

The assumption among labor lawyers is that the rule was delayed because administration lawyers are trying to craft a version that can withstand legal challenge. A Labor Department spokesman told Bloomberg last year that they wanted to "get it right rather than meet arbitrary deadlines."

The move closely follows another legal change that would compound the problems that smaller businesses will face in finding a lawyer by giving them much less time to do it.

In April, the National Labor Relations Board, which enforces federal labor laws, formally adopted the so-called "speedy election" rule. The new regulation shortens the time frame for unionizing elections from about two months after they are first authorized to about two weeks.

"The proposed persuader rule is clearly designed to work hand-in-glove with the NLRB's 'ambush' election rule by limiting employers' ability to communicate with their employees," said Randel Johnson, the Chamber of Commerce's senior vice president for labor, immigration and employee benefits.

The board also gave employers only one week after an election to raise any concerns, such as whether certain employees should be eligible to vote. If the employers miss the deadline, they forfeit any ability to raise objections.

"Business owners will be under the gun and have to respond quickly. It is not like finding a criminal attorney or a family law attorney. Labor law is a specialized area," Milito said.

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