“Other law” is always changing – the DOL’s new Final “Persuader” Rule – Part 1 of 2

The scope of confidentiality lawyers owe to their clients has long been a subject that I find fascinating.  Over the last few years, I’ve mulled how its broad scope will continue to play out with current and future generations of both lawyers and clients who routinely, almost even instinctively, share seemingly every detail of their lives on one online platform or another.  That general topic though of what confidentiality under the ethics rules might look like in 10 years is a discussion for another day, if ever.  The fact remains, though, that in jurisdictions pattered after the ABA Model Rules, there exists a version of Model Rule 1.6 — like Tennessee’s RPC 1.6 — that establishes an obligation of confidential treatment as to all information related to representation of a client.

The rule contemplates that anything can be disclosed provided you have the client’s express consent to do so or, alternatively, if disclosure is impliedly authorized to carry out the representation.  Beyond that, jurisdictions that hew to the ABA approach, then offer a list of circumstances in which a lawyer has discretion to make a disclosure, but isn’t obligated to do so.  Among those circumstances are instances where the lawyer reasonably believes the disclosure is necessary “to comply with other law.”  Model Rule 1.6(b)(6).

In Tennessee, we have carved out a further category of topics where a lawyer is obligated to disclose information, despite it otherwise being confidential.  For Tennessee lawyers, the comply with “other law,” exception to the duty of confidentiality is housed in that provision and, thus, is a mandatory duty of disclosure.  RPC 1.6(c)(3).

Keeping up with the vast array of ways that “other law” might appear to require lawyers to disclose information about their representation of clients can be a difficult enough task when your reason for interest is only about the exercise of a discretionary right of disclosure.  It can get significantly more stressful to keep up with developments in other law if the stakes are ratcheted up by a mandatory ethical obligation.

The “other law” aspect of the duty of confidentiality is why, for example, a client’s payment of your fee with $10,500 in cash is a development that would require a lawyer to fill out the appropriate paperwork to report that transaction to the IRS on Form 8300 because of federal law.  The fact that the fee was paid in cash on a particular date and in that amount is certainly information related to representation and, thus, confidential under RPC 1.6, but because other law requires the disclosure — the duty of confidentiality falls.  There are other existing examples, but I’ve already taken the scenic route to the actual point of today’s entry so one example will have to suffice.

Earlier this month, the U.S. Department of Labor published the final version of a long-discussed new “persuader” rule.  This issue was only on my radar screen because, at the end of an ethics seminar a few months ago, a lawyer approached me to ask if I was keeping up with the looming development and if I understood its potential for infringing on privilege and confidentiality for lawyers and law firms.  I wasn’t, and didn’t, at the time.  I am, but still not sure I do, now.

Admittedly, labor relations is not my native tongue, so a reader may lose a little something in my translation of the background leading to the adoption of the final persuader rule.  If you speak labor relations more fluently, or are interested in learning, you can read as much or as little as you’d like of the whole final rule in the Federal Register itself here.  You can also read the full versions of each of the other items I mention below if I have properly managed to include the links for each.

So, federal law, through the Labor Management Reporting and Disclosure Act of 1959 (LMRDA) has long required two sets of parallel reports that are supposed to be made in order to disclose expenditures that are made in connection, for example, with labor-organizing activities.  One report is required of labor organizations such as unions.  Another report has been required from employers when they hire a labor relations consultant to help it persuade employees about issues relating to bargaining and whether/how to organize.  Existing law provides that both direct persuader activities and indirect persuader activities are supposed to trigger such reports, but the law exempts employers from having to file a report when the purpose of hiring the consultant is just to get advice.  That exemption is set forth in Section 203 of the LMRDA.  Existing law also exempts from reporting attorney-client communications.  That exemption is set forth in Section 204 of the LMRDA.

According to the current U.S. Department of Labor, as explained in its Overview/Summary document, the Department has long been interpreting the law incorrectly to define “advice” in a fashion that extends to conduct that should be treated as “indirect persuasion,” and, thus, no reports are ever filed on the employer side other than for the hiring of consultants who have direct contact with employees.  The new persuader rule is clearly articulated by the Department of Labor as being about changing the interpretation of “advice” to limit its protective scope and cause reports to be filed regarding consultants that are helping employers craft messaging and other efforts at persuasion.

If you are following along still at this point, you will see the looming issue for lawyers and law firms retained by employers in situations involving labor organization issues.

Now, the Department of Labor, at least rhetorically, is going to great lengths to insist that the new rule it has enacted will not invade attorney-client privilege (confidentiality under the ethics rules isn’t really mentioned in the documents discussed below) and that reports won’t be required when an employer hires a lawyer or law firm just for the purpose of getting advice on complying with legal obligations.

The Department of Labor’s Overview/Summary states the Final Rule “exempts any agreement that involves only the provision of legal services” and also states that:

The Final Rule does not affect attorney-client privilege.  It only requires the disclosure of the identity of the client, the fee arrangement, and scope and nature of the persuader agreement in cases where the consultant has agreed to provide services other than legal services — specifically, to take action with intent to persuade employees regarding union representation or collective bargaining.

In the OLMS Fact Sheet regarding Employer-Consultant Agreements, discussing examples of exempt agreements, the Department explains:

As a general principle, no reporting is required for an agreement or arrangement to exclusively provide legal services.  For example, no report is required if a lawyer or other consultant revises persuasive materials, communications, or policies created by the employer in order to ensure their legality rather than enhancing persuasive effect.

In the Q&A materials put out by the Department of Labor, this point about not invading privilege is repeated:

Q.  Does this rule require disclosure of information protected by the principles of attorney-client privilege?

A.  No.  None of the information required to be reported (e.g., the identity of the parties, terms and conditions of the agreement, and specific persuader activities undertaken) is covered by the attorney-client privilege.  Privileged information is excluded from the reporting requirement by statute.

Yet, there seem to be a number of thorny interpretative questions lurking.  And, a dive into what the actual final rule says in the Federal Register leaves me pretty convinced that the DOL’s effort has blurred the issues of Section 203 and the issue of Section 204 and that its strong rhetoric about what it isn’t doing rings hollow.

I will do my best to describe my thoughts on that more fully in part 2.  So, stay tuned.