Opinion: Columnists

Diana Furchtgott-Roth: New labor rule will violate attorney-client privilege

By |

As members of the Senate Committee on Health, Education, Labor & Pensions consider the nomination of Thomas Perez for secretary of labor on Thursday, they should ask themselves one question:

Should businesses be required to disclose the names of attorneys from whom they seek advice on union-related issues? Should those attorneys have to disclose the names of all their clients?

This spring, under the new secretary, the U.S. Department of Labor is expected to issue a new interpretation of the "advice" exemption to the Labor Management Reporting and Disclosure Act.

The Labor Department's new interpretation would require businesses to report to the Labor Department the attorneys or consultants who advise them on union-organizing activities. In addition, names of all their attorneys' other labor-related clients are reported in another form.

The department will sweep away more than 50 years of precedent and contravene the express language and intent of the law originally passed by Congress.

I calculate, based on the number of firms in America, and time spent learning the new rule, that the proposed rule could cost $7.5 billion to $10.6 billion during the first year of implementation, and $4.3 billion and $6.5 billion each year thereafter. The total cost over 10 years could be approximately $60 billion.

This does not include the indirect economic effects of raising the cost of doing business in the United States.

This is many multiples of President Obama's much lower estimate, $826,000 per year, which notably (and perhaps conveniently) falls below the level required for mandatory cost-benefit review.

By compromising companies' ability to seek advice on compliance with federal labor law, the proposed rule would jeopardize both firms' and workers' statutory rights.

By raising the cost of doing business in America, the proposed rule would drive some businesses offshore and discourage others from locating here, harming economic growth.

The Labor Department's June 2011 proposal to require businesses to report any contact with advisers on union-related issues derives from the Labor-Management Reporting and Disclosure Act of 1959.

The proposal has gone through the notice of rulemaking and comment period, and is shortly due to be issued as a final rule.

The law's broad objective was to improve transparency in the unionization process by establishing uniform reporting requirements for unions and employers, as well as for hired consultants who make presentations directly to firms' employees.

But Section 203(c) of the law specifically states, "Nothing in this section shall be construed to require any employer or other person to file a report covering the services of such person by reason of his giving or agreeing to give advice to such employer. ..."

The law clearly states that attorney advisers are exempt from the reporting requirement, but the Labor Department seeks to make this advice public in order to make it harder for firms to get advice about union issues.

Union membership in America has steadily declined from 20 percent of workers in 1983 to 11 percent in 2012, and the Obama administration seeks to reverse the trend.

Whether by coincidence or not, the department first proposed the new rule six months after the so-called Employee Free Choice Act -- which would have taken away workers' right to a secret ballot in union elections and imposed mandatory arbitration for contract disputes between unions and newly unionized firms -- failed to pass the Democrat-controlled 111th Congress in 2009-2010.

Firms can receive private advice if they are charged with embezzlement, sexual harassment, malpractice or tax fraud. But if any firm wants to know how to deal with a union organizing drive, or any other union issue, the Labor Department's new rule would make the matter public.

Washington Examiner Columnist Diana Furchtgott-Roth (dfr@manhattan-institute.org), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research.

View article comments Leave a comment
Author:

Diana Furchtgott-Roth

Columnist
The Washington Examiner