New Labor Department Rule Limits Firms' Ability to Seek Legal Advice

April 25, 2013

The U.S. Department of Labor will soon require that businesses report to the Labor Department the attorneys or consultants who advise them on union-organizing activities, says Diana Furchtgott-Roth, a senior fellow with the Manhattan Institute.

The new rule is a revised interpretation of the advice exemption to the Labor Management Reporting and Disclosure Act, which has for 50 years stood as a protection for firms seeking legal advice on unionization issues. In addition to the reduced protection, the new rule will also create a significant regulatory burden on businesses which must now spend time and money on the necessary paperwork.

  • The cost of the proposed rule could be between $7.5 billion and $10.6 billion for the first year of implementation and between roughly $4 billion and $7 billion for each year thereafter, for a total regulatory impact of over $60 billion for the 10-year period following implementation.
  • The Obama administration estimates a compliance of only $826,000 per year, meaning that the projected regulatory impact does not warrant a full cost-benefit analysis.
  • The proposed rule would create a double standard: it is okay to seek advice about tax issues, sex discrimination and whistleblowing in confidence, but union-related consultations must be disclosed.
  • The proposed rule comes at a time when union membership has been steadily decreasing and unions are desperate to swell their ranks and fund their pensions.

The new rule would discourage labor lawyers from advising firms, thereby giving an advantage to unions while violating the privacy of the attorney-client relationship. It will reduce the ability of firms to consult with lawyers and strengthen the power of the unions, while increasing the likelihood that firms make poor choices in the absence of legal advice.

Source: Diana Furchtgott-Roth, "Labor Disclosure Rule Is Unfair to Business," MarketWatch, April 17, 2013.

 

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