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Revamping the 'Advice Exemption'

Law firms and employers are bracing for a new rule that has the potential of altering the attorney-client relationship by redefining the meaning of "advice" under the LMRDA.

Tuesday, February 11, 2014
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HR's ability to find a good employment attorney could become a bit tougher if a Department of Labor rule change involving the "advice exemption" under the Labor-Management Reporting and Disclosure Act goes into effect, experts say.

Under Section 23 of the LMRDA, neither an employer nor a consultant is required to file reports with the DOL if the consultant is merely giving or agreeing to give advice to the employer. But if the proposed rule is enacted, such agreements would be reportable in any case that goes beyond the plain meaning of "advice," in which a consultant engages in specific persuader actions, conduct or communication, regardless of whether advice is given.

Final rule changes are currently slated to be released in March and are expected to resemble the http://www.hreonline.com/images/119785384AdviceExemptionM.jpgproposed rules that were released by DOL in June 2011.

Since 1962, the "litmus test for triggering a disclosure obligation has always revolved around direct employee contact," explains Steven Bernstein, a partner in the Tampa office of Fisher & Phillips. "But that no longer will be the case if this rule change sees the light of day."

If the revised rule is enacted, employers would have to report the scope of their attorney relationships and associated fees, regardless of whether the attorneys had direct contact with their employees.

For the past 50 years, Bernstein says, the DOL has taken the position that " ‘even where the advice is embedded in a speech or statement prepared by the advisor to persuade, it must be treated as advice because the employer is the actual persuader.' "

He notes that the proposed rule makes clear that if persuasion is an indirect objective, that would now be enough to trigger a fee disclosure obligation.

The current interpretation of the "advice exemption" includes meeting with supervisors to conduct certain types of training; preparing or drafting sample speeches, letters or talking points; generating PPTs or web content; conducting union avoidance or similar webinars to update business reps on the status of recent activity; and reviewing employee manuals, union-free-policy statements or orientation materials.

These exceptions would disappear, however, under the new rule.

"Should the proposed rule take effect, then all that would be left of the advice exception would be the narrow language of the statue itself, which extends to strict advice matters such as appearances before tribunals, administrative hearings, bargaining and labor arbitrations," Bernstein says.

Critics point out that the new rules -- which have been in the works at the DOL for quite some time -- would undermine the ability of employers to receive advice from their employment attorneys.

"We've gone 50 years in this country with the understanding that if you, as a business, engage an attorney to provide labor-relations advice, you can go to sleep at night knowing that those fees paid for that advice are between you and your attorney," Bernstein explains. "That arrangement is now in jeopardy."

Bernstein predicts that if past actions are any indication, unions will use this publicly available information to their advantage during organizing campaigns.

Experts note that the proposed rule would inevitably make it more difficult for employers to find employment attorneys.

"First they want to take away your doctor under the ACA. Now, [the DOL] wants to take away your lawyer," says Michael Lotito, shareholder and co-chair of the Workplace Policy Institute at Littler in San Francisco.

Though the DOL doesn't state so, Lotito says, the purpose of the rule is to restrict HR leaders from reaching out to their lawyers. "The reason I say this," he says, "is because the lawyers are going to have to violate their ethical responsibilities under [state bar rules] with respect to confidentiality [in order to abide by the new rules]."

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Under the proposed rules, Lotito explains, "Once a firm engages in persuader activity for one client, it has to reveal the nature of the receipts and the disbursements for the last fiscal year from all of the clients it has provided labor-relations services to, even when it has not provided any persuader services."

The net result is there will be a significant number of law firms that will get out of the business entirely, says Lotito, adding that this is especially troubling in light of all of the evolving National Labor Relations Act issues facing employers today.

Not surprisingly, the American Bar Association voiced its concern over the proposed rules when they were first released in 2011. In a letter to the DOL, then-ABA President Bill Robinson said the "required disclosures proposed by the Department are unjustified and inconsistent with a lawyer's existing ethical duties under Model Rule. 1.6 (and related state rules) not to disclose confidential client information absent certain narrow circumstances not present here." He asked the agency to "preserve its existing, well-established interpretation of the advice exemption."

In addition to law firms, other third parties, such as public-relations firms and providers of employee-attitudes survey, would be affected by the new rules as well. "Though they may not have a attorney-client relationship, these firms are still going to have to file all of the reports, and organized labor is going to have a field day with the information," Lotito says.

Business groups such as the National Association of Manufacturers and National Retail Federation have voiced their concerns over the proposed rules.

If enacted, says Kelly Knott, senior director of government relations for the National Retail Federation in Washington, the rules would have a real impact on small businesses, which will have an especially difficult time finding attorneys who are going to be willing to report the information.

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