NLRB 2By: Marjorie C. Soto, Esq., Jeffrey A. Berman, Esq., and Mary Kay Klimesh, Esq.

Seyfarth Synopsis: Congressional Committee Head Virginia Foxx (R-NC) and Subcommittee Chair Tim Walberg (R-MI) ask NLRB General Counsel Griffin to either immediately rescind his January 31 report regarding the purported rights of faculty, students and scholarship athletes, or “step aside as general counsel.”

Yesterday, we reported that Richard F. Griffith, Jr., the General Counsel of the National Labor Relations Board, issued a report titled “General Counsel’s Report on the Statutory Rights of University Faculty and Students in the Unfair Labor Practice Context.” A copy of  yesterday’s Management Alert can be found here.

It did not take long for Griffin’s Report to catch the attention of Congress. Yesterday, Representative Virginia Foxx (R-NC), Chairwoman of the House Committee on Education and the Workforce, and Representative Tim Walberg (R-MI), Chairman of the House Subcommittee on Health, Employment, Labor, and Pensions, jointly issued a response to the Report, calling for Griffin to “rescind his memorandum immediately” or  “step aside as general counsel.”   In support of their request, the Representatives jointly stated that the “memorandum puts the interests of union leaders over America’s students, and it has the potential to create significant confusion at college campuses across the nation.”

Even if Griffin refuses to withdraw the Report, it reasonably can be anticipated that the General Counsel appointed by President Trump at the conclusion of Griffin’s appointment in November, or the soon-to-be Trump appointed Board majority, will revisit not only the Report but also the underlying decisions in Pacific Lutheran, Columbia and Northwestern.

NLRB By: Marjorie C. Soto, Esq., Jeffrey A. Berman, Esq., and Mary Kay Klimesh, Esq. 

Seyfarth Synopsis:  In a last minute attempt to leave his mark on the NLRB, the Board’s outgoing General Counsel issued a report attempting to expand the rights of university faculty and students, including scholarship athletes under the National Labor Relations Act.

Just months before the conclusion of his four-year term, Richard F. Griffin, Jr., the General Counsel (“GC”) of the National Labor Relations Board (“Board”), issued a report titled “General Counsel’s Report on the Statutory Rights of University Faculty and Students in the Unfair Labor Practice Context.”

The January 31, 2017 Report was issued with the stated intent to serve as a “guide for employers, labor unions, and employees that summarizes Board law regarding NLRA employee status in the university setting and explains how the Office of the General Counsel will apply these representational decisions in the unfair labor practice arena.” The decisions covered by the Report – – Pacific Lutheran University, Columbia University, and Northwestern University–all involved efforts of individuals to obtain representation by a union.

University Faculty

In Pacific Lutheran, the Board established a new test for determining when it would take jurisdiction over religious colleges and universities.  According to the GC, the Board “will…seek redress for unfair labor practices committed by religious schools against individual faculty member discriminatees who the university does not hold out as performing a specific role in creating and maintaining the university’s religious and educational environment.”

As a practical matter, this means that the GC believes that the faculty who are able to seek union representation because they were “not hired to advance the school’s religious purposes,” also are protected by the Act’s prohibition against discrimination for engaging in protected concerted activities. By implication, this may mean that faculty who are hired to advance a school’s religious purposes are not protected.

The GC also provided his analysis of the standard articulated in Pacific Lutheran regarding the managerial status of faculty members.  Specifically, the GC distinguished between managerial faculty (those who “formulate and effectuate management policies by expressing and making operative the decisions of their employer”) and non-managerial faculty (those whose decision-making is limited to “routine discharge of professional duties in projects to which they have been assigned…”).

The GC concluded that, in the unfair labor practice context, a “complaint will not issue against a university if [the Board] determine[s] that an asserted discriminatee is a managerial employee under the Board’s Pacific Lutheran test.”  He added, however, that even when the Board refuses to process a certification petition, it will still conduct an individualized analysis of the discriminatee’s employment position to determine whether that individual exercised sufficient managerial authority to exempt him from the NLRA.

University Students

Student Assistants. Here, the GC briefly summarized the Columbia University decision, stating that the Board “applied the statutory language of the [NLRA] and longstanding common-law principles to settle the issue of statutory coverage for graduate student employees, determining that student assistants are employees under the NLRA.” The GC relied on the 2000 NYU decision to conclude that graduate students met the common-law test of agency because they “‘perform their duties for, and under the control of’ their university, which in turn pays them for those services…” Similarly, the GC applied this precedent to the unfair labor practices context, concluding that, in his opinion, student assistants are well within the ambit of the NLRA and can therefore organize and receive its protections.

Non-Academic University Workers. The GC stated that, as to university students who are performing non-academic university work (e.g. maintenance or cafeteria workers, lifeguards, campus tour guides, etc.), they are “clearly covered by the NLRA and, as with student assistants, [the Board] will analyze unfair labor practice charges involving non-academic student employees accordingly.” In reaching this conclusion, the GC reasoned that the non-academic university worker category presented an easier question than the student assistants in Columbia as, in his opinion, under the common law agency test, there is no issue of whether or not the work performed by the student employee is “primarily educational work.”

Hospital House Staff. With respect to “hospital house staff” (medical interns, residents, and fellows), the GC concluded that they would “continue to be protected as employees under the NLRA, and [the Board] will continue to process unfair labor practice charges involving those employees.”  In reaching this conclusion, the GC reasoned that, just because certain hospital house staff members also happened to be students did not mean that they were exempt from the coverage of the NLRA. He cited the Boston Medical decision, which held that “nothing in the [NLRA] suggests that persons who are students but also employees should be exempted from the coverage and protection of the [NLRA].”

University Football Players. Here, the GC admittedly limits his analysis to the application of the statutory definition of employee and the common-law agency test to find that Division I FBS scholarship football players are employees under the NLRA, and therefore have the rights and protections of that Act. Referring to the Board’s decision in Northwestern, the GC expressly stated that it would be inappropriate for the Report to attempt resolve the sometimes “divisive” questions relating to whether student athletes may organize under the Act.

Conclusion

With Mr. Griffin’s four-year term ending later this year, it is likely that the new GC will want to revisit some or all of the Report. The soon to be Trump-appointed  majority of the Board likely will revisit not only the Report, but also the decisions in Pacific Lutheran, Columbia and Northwestern.

By: Jade M. Gilstrap

In the midst of what appears to be a proliferation of “micro-units,” on Tuesday, October 18, 2016, the NLRB declined to reconsider its decision to certify a unit of 14 service technicians employed by the Buena Park Honda dealership in Buena Park, California. Sonic-Buena Park H, Inc. d/b/a Buena Park Honda, 21-RC-178527.  In doing so, the Board rejected the employer’s argument that additional employees, particularly lube technicians, should be included in the unit, finding the two types of workers did not share “an overwhelming community interest,” necessitating their inclusion in the same unit.

Relying heavily on Specialty Healthcare & Rehab. Center of Mobile, 357 NLRB 934, 938 (2011), enfd. 727 F.3d 552 (6th Cir. 2013), the majority of the three-member board ruled that the petitioned-for unit of service technicians was appropriate based on an application of the “overwhelming community-of-interest” standard.  As articulated in Specialty Healthcare:

When employees or a labor organization petition for an election in a unit of employees who are readily identifiable as a group (based on job classifications, departments, functions, work locations, skills, or similar factors), and the Board finds that the employees in the group share a community of interest after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit, despite a contention that employees in the unit could be placed in a larger unit which would also be appropriate or even more appropriate, unless the party so contending demonstrates that employees in the larger unit share an overwhelming community of interest with those in the petitioned-for unit.

Because the facts clearly did not establish that the lube technicians shared an “overwhelming community of interest” with the service technicians, the dealership could not meet this burden. The Board noted that unlike the lube technicians, the service technicians were more skilled, paid substantially higher wages, and required to routinely update and maintain their training and skills, making them “clearly identifiable and functionally distinct.”  Accordingly, the Board held, “[i]n denying review, we find that petitioned-for employees are an appropriate unit and the Employer has not sustained its burden of establishing that any of the disputed classifications, either individually or collectively, share an overwhelming community of interest with the petitioned-for employees such that their inclusion in the unit is required.”

Although board member Philip A. Miscimarra agreed that “the interests of the service technicians [were] sufficiently distinct from the excluded employees and otherwise appropriate for inclusion in a separate unit,” he disagreed with the application of Specialty Healthcare and the “overwhelming community of interest” standard to evaluate whether the petitioned-for unit should be required to include additional employees.  Instead, Member Miscimarra argued that the Board should have applied its traditional principles, believing “bargaining unit determinations should be circumscribed and guided by industry-specific standards where applicable.”

Coffin  By: Monica A. Rodriguez, Esq.

Seyfarth Synopsis: New York district court judge in Krupinski v. Laborers Eastern Region Org. Fund, No. 15-cv-00982 (S.D.N.Y. Sept. 30, 2016), grants union’s summary judgment dismissing former union organizer’s FLSA claims.  

Former union organizer of LEROF, a non-profit organization associated with the Laborers International Union of North America (“LIUNA”) sued the Union for unpaid wages under the FLSA.

Did the Union properly classify the union organizer as exempt? This was the question at issue before the court. Both the Union’s summary judgment motion and Plaintiff’s partial summary judgment motion focused on the answer to this question. The court agreed with the Union that the Union organizer’s job duties were duties of an exempt employee.

The court first reviewed Plaintiff’s primary duties. As an organizer, Plaintiff’s primary objective was to motivate, educate, and train construction workers and to convince non-union workers to join LIUNA. Plaintiff frequently worked off-site to participate in “rat and casket” actions. According to the organizer, these actions, or demonstrations, were organized to protest poor working conditions at non-unionized worksites and used inflatable rats and coffins as props.

Plaintiff argued that the physical labor in setting up the inflatable rats, constantly adjusting and maintaining the rats, and carrying and unloading the caskets rendered his duties mostly manual in nature. The court rejected his argument noting that the physical tasks were merely incidental to the primary, non-manual duty of organizing workers.

The court also found that the undisputed facts showed that plaintiff’s primary duties were to increase LIUNA’s membership and market share. Organizers were essentially the face of LIUNA to the public and non-unionized workers. The court noted that his duties, thus, mirrored several duties listed in the Secretary of Labor’s regulation as examples of exempt type of work.

The court also analyzed Plaintiff’s discretion and independent judgment on matters of significance. Plaintiff identified target workers and potential candidates for house calls during union campaigns, searched for and reported potential health code violations at non-union job sites, and varied his approach during organizing campaigns depending on the situation. The court found that Plaintiff undoubtedly exercised discretion and independent judgment when engaging in this work. Moreover, because labor union organizing campaigns are of significance to the Union, the court noted, Plaintiff’s role in these campaigns was important for determining his status as an exempt employee.

The court concluded that the Union successfully showed that its former organizer was an exempt administrative employee. As a result, the court granted the Union’s summary judgment motion burying the union organizer’s FLSA claims six feet under.

By: Adam J. Smiley, Esq.

Seyfarth Synopsis: NLRB General Counsel releases an Advice Memorandum finding that the misclassification of independent contractors amounts to a standalone violation of Section 8(a)(1) of the NLRA.

On August 26, 2016, Richard Griffin, the General Counsel of the National Labor Relations Board (“NLRB”), released an Advice Memorandum outlining his legal theory that the misclassification of employees as independent contractors constitutes a standalone violation of Section 8(a)(1) of the National Labor Relations Act (“NLRA”) because, in his view, the misclassification interferes with and restrains the exercise of Section 7 rights.[1]

In Pac. 9 Transp., Inc., the Employer used independent contractor drivers to perform services at the ports of Los Angeles and Long Beach.  In late 2012, the International Brotherhood of Teamsters began a “non-traditional” organizing campaign of the drivers, and as part of the campaign began filing individual wage and hour claims with the California State Labor Commissioner on behalf of drivers, claiming that the Company had misclassified them as independent contractors.  On November 13, 2013, the Teamsters filed an unfair labor practice charge against the Company (21-CA-116403), alleging that the Employer unlawfully threatened and interrogated certain drivers.  In response to the charge, the Company argued that the Region lacked jurisdiction because the drivers were independent contractors.  The Region dismissed this argument and determined that the drivers were statutory employees, and ultimately concluded that the Company had violated the NLRA.

On April 24, 2015, the Teamsters filed another charge (21-CA-150875), alleging that the Company’s purported misclassification of its drivers, by itself, violated Section 8(a)(1).  The Advice Memo regarding this charge concludes that, “the Region should issue a Section 8(a)(1) complaint alleging that the Employer’s misclassification of its employees as independent contractors interfered with and restrained employees in the exercise of their Section 7 rights.”

As we discussed in a previous blog post, the General Counsel has recently focused on misclassification issues.  While this Advice Memo focuses on a single case, it appears that the General Counsel seeks to apply his theory more broadly and involve the Board in other disputes regarding independent contractors.  And the extraordinary remedy suggested by the General Counsel – which is contained in a closing footnote – instructs the Region to seek an order requiring that the Employer stop referring to the drivers as independent contractors, and “require that the Employer take affirmative action to rescind any portions of its Agreements with its drivers that purport to classify them as independent contractors and to post the appropriate notice.”  In other words, the General Counsel of the NLRB seeks to expand the purview of labor policy to dictate the worker classification decisions of employers.

This novel theory will surely be challenged. The very premise of the General Counsel’s determination that a mistaken classification decision violates Section 8(a)(1) is tenuous and untested.  And even if a court agrees with this concept, Board action is ripe for a preemption challenge, at the very least regarding violations under the Fair Labor Standards Act.

We’ll keep you posted on future developments on this important issue.

[1] The Advice Memorandum was issued on December 18, 2015, but was not publically released until the underlying unfair labor practice was resolved.

By:  Christopher W. Kelleher, Esq., Mary Kay Klimesh, Esq. & Jeffrey A. Berman, Esq.

Seyfarth Synopsis:  The National Labor Relations Board issued three important decisions this week that will significantly impact private colleges and universities.

Student Assistants Eligible to Unionize

By a vote of 3 to 1, the Board held that college and university student assistants — including undergraduates — who perform services in connection with their studies, are “employees” under Section 2(3) of the NLRA, and therefore have the right to bargain collectively. Columbia University, 364 NLRB No. 90. In doing so, the Board overruled Brown University, 342 NLRB 483 (2004), which held that student assistants are not statutory employees. The ruling directly contradicts the Board’s nearly 80-year treatment of students under the Act.

Because Section 2(3) does not adequately define the term “employee,” the Board looked to common law agency principles to determine whether student assistants are covered. The Board thus found that even when the economic relationship “may seem comparatively slight” relative to the academic relationship, “the payment of compensation, in conjunction with the employer’s control, suffices to establish an employment relationship[.]” The Board found no compelling statutory or policy considerations to hold otherwise.

Member Miscimarra, the Board’s lone dissenter, argued that the relationship between the students and the university is “primarily educational,” and thus does not fit “the complexities of industrial life.” The dissent warned that the Majority disregarded “what hangs in the balance when a student’s efforts to attain [a] … degree are governed by the risks and uncertainties of collective bargaining and the potential resort to economic weapons” such as strikes, slowdowns, lockouts, and litigation.

Religious Universities Covered by NLRA

The issue in Seattle University, 364 NLRB No. 84 and Saint Xavier University, 364 NLRB No. 85 was whether these religiously affiliated institutions should be exempted from the Board’s jurisdiction based on First Amendment guarantees against entanglement between church and state. The universities argued that as religious institutions, their faculty members are not covered by the National Labor Relations Act. At the very least, they argued, teachers in religious studies departments should be excluded from the proposed bargaining units, which comprised part-time and contingent faculty.

In both cases, the Regional Director determined that the university’s faculty members generally were covered by the NLRA and that the unit appropriately included religious studies faculty. On review, the Board applied its test set forth in Pacific Lutheran, 361 NLRB No. 157 (2014), which permits Board jurisdiction unless: (1) the university or college holds itself out as providing a religious educational environment; and (2) it holds out the petitioned-for faculty members as performing a specific role in creating or maintaining the school’s religious educational environment. (For more about the Board’s decision in Pacific Lutheran University, 361 NLRB 157 (2014), see here ).  The Board found that both universities met this test when it came to faculty in the religious studies departments, thereby excluding them from the bargaining units.

While this might sound like good news, the Board denied review of the Regional Director’s determination that faculty in other departments were covered. The Board thus continues to ignore the Supreme Court’s mandate in NLRB v. Catholic Bishop of Chicago, 440 U.S. 490 (1979) that the NLRA must be construed to exclude teachers in church-operated schools. The Board is not entitled to base jurisdiction on the conclusion that certain teachers perform a role in creating or maintaining the school’s religious educational environment. However, that is exactly what happened in these two cases. According to the Supreme Court, this type of inquiry by itself may impermissibly impinge on rights guaranteed by the Religion Clauses of the Constitution.

Conclusion

The Board continues to broadly exercise its authority in order to maximize the number of employers and employees covered by the Act, this time in cases involving three universities. We can expect challenges to all three decisions.

 

 

 

By:  Christopher W. Kelleher, Esq.

Seyfarth Synopsis: The NLRB ruled that students who work as teaching assistants at colleges and universities are “employees” under the NLRA and are thus permitted to engage in collective bargaining.

On August 23, 2016, the National Labor Relations Board issued a 3-1 decision in Columbia University, Case 02-RC-143012, holding that private college and university student assistants — including undergraduates — who perform services in connection with their studies, are “employees” under Section 2(3) of the National Labor Relations Act, and therefore have the right to bargain collectively.

In doing so, the Board overruled Brown University, 342 NLRB 483 (2004), which held that student assistants are not statutory employees. The ruling directly contradicts the Board’s treatment of students under the Act for nearly all of its 80-year history.

Because Section 2(3) does not adequately define the term “employee,” the Board looked to common law agency principles to determine whether student assistants are covered. The Board thus found that even when the economic relationship “may seem comparatively slight” relative to the academic relationship, “the payment of compensation, in conjunction with the employer’s control, suffices to establish an employment relationship[.]” The Board found no compelling statutory or policy considerations to hold otherwise. The decision applies only to private schools and universities.

Member Miscimarra, the Board’s lone dissenter, argued that the relationship between the students and the university is “primarily educational,” and thus does not fit “the complexities of industrial life.” The dissent warned that the Majority disregarded “what hangs in the balance when a student’s efforts to attain [a] … degree are governed by the risks and uncertainties of collective bargaining and the potential resort to economic weapons” such as strikes, slowdowns, lockouts, and litigation.

Red Light   By: Alison Loomis, Esq.

Seyfarth Synopsis: A challenge to Seattle’s first-of-its-kind ordinance, which established the right for on-demand drivers to collectively bargain, was dismissed by a Washington federal court on the basis that the suing entity lacked standing. 

Seattle recently enacted an ordinance granting “on-demand” drivers the right to bargain collectively. The ordinance, which took effect on January 22, 2016, established a mechanism through which a union could request recognition as a qualified driver representative (“QDR”) for on-demand drivers, and ultimately, negotiate pay and conditions of employment on their behalf with their driver coordinator company (such as, for example, Uber).  If recognition was granted, the QDR would contact the company whose drivers it seeks to represent to obtain the drivers’ contact information.  Once the QDR had the contact information, it could then solicit those drivers regarding their interest in union representation.  If and when a majority of the drivers expressed interest in representation, the city of Seattle would certify the QDR as the exclusive driver representative for all drivers associated with that driver coordinator and the driver coordinator would be required to negotiate with the QDR regarding topics including payment, hours and conditions of work, and equipment standards.

On March 3, 2016, the U.S. Chamber of Commerce, a trade group that has two driver coordinator companies as members, filed a complaint against the city of Seattle, alleging, among other things, that the ordinance was preempted by the NLRA and the Sherman Antitrust Act. Chambers claimed that the ordinance would “restrict the market freedom relied upon for all for-hire drivers who are part of independent-contractor arrangements” and would “insert a third-party labor union into the relationship between independent contractors and companies.”  In seeking an injunction to stop the enforcement of the ordinance, Chambers alleged that two of its member companies suffered present harm and would likely face a “substantial risk of injury” in the future as a result of the ordinance.

The city of Seattle filed a motion to dismiss the lawsuit on the grounds that Chambers did not have the requisite standing. In granting the city’s motion, the District Court for the Western District of Washington at Seattle noted that the Chambers’ two member driver coordinator companies had not yet suffered harm, even if they faced the eventual prospect of a union organizing drive.  The court dismissed the lawsuit “without prejudice,” meaning that Chambers can effectively revive the action at a later date, assuming it gains standing.

In the interim, we’ll wait until the light turns green, and a challenge to this legislation ripens.

By: Paul Galligan and Jade M. Gilstrap

Seyfarth Synopsis: Overturning decade old precedent, the Board found that temporary workers supplied by a staffing agency may be included in a bargaining unit with regular employees of a host employer without the consent of both employers. The Board will apply “traditional community of interest” factors in determining whether such a unit is appropriate.

On Monday, in a 3-1 decision, Miller & Anderson, Inc. et. al., 364 NLRB No. 39 (July 11, 2016), (Decision) the NLRB overturned its prior precedent and continued its efforts to expand the joint-employer platform by making it substantially easier for temporary workers to be included in bargaining units with employees of the user employer.

For over a decade, the Board followed its holding in Oakwood Care Center, 343 NLRB 659 (2004), requiring staffing agencies and user employers to both provide consent before a union could organize a bargaining unit which included regular employees of the host employer and temporary employees supplied by the staffing agency.  The Oakwood Board opined that Congress had not given the Board authority to direct elections in bargaining units comprised of employees of more than one employer, and that the complexity of a combined unit gave rise to significant conflicts between the multiple employers and group of employees.

In specifically overturning Oakwood, the Board emphasized that “[r]equiring employees to obtain employer permission to organize in such a unit is surely not what Congress envisioned,” as the consent mandate “upend[s] the Section 9(b) mandate and allow[s] employers to shape their ideal bargaining unit, which is precisely the opposite of what Congress intended.”  To that end, the Board concluded that employer consent is no longer necessary for bargaining units that combine jointly employed and solely employed employees.  Instead, the Board will apply the “traditional community of interest factors” in deciding whether a given unit is appropriate.

In doing so, the Board claims to have returned to its holding in M.B. Sturgis, 331 NLRB 1298 (2000), which it overturned in Oakwood 4 years later. M.B. Sturgis itself overturned 40 years of Board precedent.  However, the Board’s decision in Miller & Anderson has far wider reaching implications than that of Sturgis, given the significant changes to the joint-employer landscape established in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015).

In his dissent, Member Miscimarra raised concerns about how the new standard will be applied in light of the broad joint-employer standard set forth in the Browning-Ferris:  “As a result of today’s decision, our statute is being stretched further to combine (i) all the challenges associated with joint-employer bargaining under the expansive Browning-Ferris standard, plus (ii) additional issues caused by mandating bargaining where one or more business entities do not have any employment relationship with some employees in the bargaining unit.  Indeed, if the unit consists mostly of employees who are solely employed by one joint employer (the user employer), the majority of unit employees will have no employment relationship with the other employer (the supplier employer).”

Like many employers, Member Miscimarra is justifiably concerned that non-employer businesses, like staffing agencies, will be forced to bargain with members of the combined unit even if they do not have the slightest authority or potential authority to “indirectly” affect employment terms and conditions. The Board majority, however, seems to have no fear of injecting itself into complex business relationships, spanning different interests and industries with no regard for competing or conflicting employee or employer interests, all in the interests of giving unions a leg up.

Miller & Anderson, combined with the Browning-Ferris decision from 2015 and the Quickie Election rules, form a trilogy with broad implications for employers who now face the possibility of increased unionization of their workforces and those of their staffing agencies in double quick time.  Accordingly, employers should select their staffing agencies wisely, mindful of the possibility of having to bargain with temporary employees with whom they have little or no business relationship in conjunction with a staffing agency that may have conflicting interests.

By:  Christopher W. Kelleher

Seyfarth Synopsis: On June 27, 2016, a federal district court in Lubbock Texas issued a nationwide preliminary injunction preventing the Department of Labor’s new persuader regulations from taking effect this July 1, 2016.

The United States District Court for the Northern District of Texas dealt the Department of Labor (DOL) a major blow yesterday when it entered a nationwide injunction prohibiting the enforcement of DOL’s new “Persuader Rule.” (Decision) The Rule, which was set to take effect on July 1, requires certain public reporting by employers and their consultants (including attorneys).  The specific parameters of the reporting requirements are discussed in numerous prior blogs, including here and here and here.

The Court held that the Plaintiffs (including several states and business associations) would suffer irreparable harm absent injunctive relief.  Not only does the Rule reduce access to comprehensive legal advice and representation, but it also chills First Amendment rights, “including the right to express opinions on union organizing and to hire and consult with attorneys.”  Moreover, the regulation “conflicts with the promulgated rules of every State regarding an attorney’s ethical obligation to maintain client confidences.”

The Court determined that the DOL lacks the authority to promulgate and enforce such an arbitrary and capricious regulation.  The Court further concluded that the harm associated with depriving employers of access to legal counsel and burdening their constitutional rights outweighs any potential harm to the DOL.

While there is some uncertainty surrounding how the DOL will respond, several similar challenges are circulating through the courts, and one or more of these cases will eventually be heard by the federal courts of appeals.  For the time being, this decision is a significant victory for employers, as it preserves their right to obtain sound legal advice protected from disclosure by the attorney-client privilege.