Op-Ed: AG Rutledge – New and dangerous labor rule hurts small businesses

June 8, 2016

Claiming that it will be equitable for all parties even though it applies only to employer-side labor lawyers, and not union-side lawyers, the Labor Department released its Persuader Advice Exemption Rule. By ignoring more than 50 years of legal precedent, the Labor Department is thrusting a rule on businesses that is unlawful under the Labor Management Reporting and Disclosure Act, which has long preserved the confidentiality of attorney-client communications by exempting advice relating to labor relations issues from disclosure.

Small businesses, the job creators of our country, will be forced to disclose a great deal of sensitive information that is currently protected by the attorney-client relationship. The sanctity of an employer’s relationship with its legal counsel has, until now, been protected from disclosure regardless of which political party was in power. Preserving the sanctity of the attorney-client relationship benefits everyone — labor and management alike — and should not be a partisan issue. The Labor Department is quite simply putting the interests of labor unions before the common good and the need to grow jobs.

Under current law, an employer of any size must report when attorneys communicate directly with its employees. However, under this sweeping new rule, a business will have to file reports on any advice it receives from an attorney concerning efforts to influence its employees’ unionizing activities — triggering the disclosure requirement even if the attorney makes no contact with the employees.

In a February letter to the U.S. Office of Management and Budget, I raised this particular concern of small businesses because of the additional reporting requirement that applies specifically to outside counsel. Many large corporations employ in-house counsel and will be exempt from the new disclosure requirement. However, small businesses are less likely to employ in-house counsel; therefore, they would be required to report on confidential aspects of their relationship with outside attorneys, and failure to do so would result in serious penalties under the new rule.

While the Labor Department claims this rule will even the playing field and create more transparency, it actually jeopardizes the ability of employers to get the confidential legal advice needed to lawfully respond to such things as union bargaining, union elections and organizing campaigns. Job growth and economic development will be hindered at a time when we already have the lowest labor force participation rate in more than a generation.

What are job creators saying about this new rule? The National Retail Federation has called it “chilling.” The Associated Builders and Contractors fears it would discourage openness. And a senior counsel with the National Federation of Independent Business Legal Center concluded it would be next to impossible for lawyers to offer advice to business owners under the new rule.

Last month, I led a group of state attorneys general from across the country in filing a friend of the court brief in two federal cases, urging the courts to grant the plaintiffs’ motions for a preliminary injunction to stop the Labor Department’s new rule. And this month, Texas Attorney General Ken Paxton and I led a group of our colleagues in filing a motion to intervene in a Texas federal case challenging the rule. The American people would best be served by tabling this rule’s implementation until its full legality can be determined by a court of law.

As Arkansas’s chief legal officer, I will continue to work to protect Arkansans and all Americans from this harmful and unlawful rule. It’s time to put jobs, economic growth and small businesses’ ability to obtain attorney advice ahead of political posturing.

Leslie Rutledge is the 56th Attorney General of Arkansas. Elected on Nov. 4, 2014, she is the first woman and first Republican in Arkansas history to be elected to the office.