05.18.2016 0

Why does Labor Dept. limit access to lawyers?

By Nathan Mehrens

As originally published at http://www.investors.com/politics/perspective/why-does-labor-dept-limit-access-to-lawyers/

Kill all employment lawyers and advisors, or at least the services they provide. This seems to be the mantra of the U.S. Department of Labor as it engages in mission creep, doing its best to reduce the availability of legal and other advice available to employers and employees.

Two recent regulations are illustrative.

First, the department in its 127,000 word “persuader” regulation has decided that it and not state bars should set rules concerning the scope of the attorney-client privilege in the context of advice given by lawyers to employers.

The department has done this by radically reinterpreting the definition of “advice,” transmogrifying that term into something unmoored from its statutory context and historical interpretation.

As a result, many types of ordinary activities that are done by lawyers must now be reported on a public filing, including information that the states deem protected by the attorney-client privilege. In order to avoid this ethical dilemma, many firms are restructuring the types of services they offer, reducing the availability of advice that employers can obtain.

While the Labor Department may have expertise in some areas, regulation of the attorney-client relationship is not one of them. State bars should retain the authority to set rules for legal practice. Federal encroachment on this authority should not be tolerated.

While the “persuader” regulation is long, it’s short compared to their “fiduciary” regulation, covering those who provide investment advice for retirement accounts.

The Labor Department has apparently decided to become the finance industry’s primary regulator through this regulation. The regulation is so complex that the department took 395 pages just to describe its impact. At least one major finance company already has exited the market due to the impact.

Never mind that Congress has established an entire federal agency devoted to protecting investors. The agency, as the Labor Department should know, is the U.S. Securities and Exchange Commission. The SEC’s mission: “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”

Among other things, the SEC enforces the Investment Advisers Act, which applies to “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities.”

The list of prohibited actions that apply to these advisors is long and includes “any type of fraud or deceit,” and requires disclosures to and consent of the client for transactions. The Labor Department, nonetheless, is regulating heavily here as well.

While these two regulations will reduce the amount of advice available to employers and employees, they will ironically increase the market for advice to the lawyers and advisors that in turn give advice to employers and employees. The resulting guaranteed business for the lawyers who practice in this area will keep them busy as they attempt to traverse the department’s minefields.

One might ask why, with the obvious effects on advice, these regulations were promulgated. In the first instance, the “persuader” regulation is a transparent attempt to make union organizing campaigns more successful.

For the “fiduciary” regulation, one need look no further than the Labor Department’s homepage where they prominently display an ad for “myRA”: “a new kind of retirement savings account from the Treasury Department” that can be used as a starter for retirement savings. A freak coincidence maybe, but after promulgating what is being referred to as “ObamaCare” for your retirement accounts, one would be forgiven for believing that the government is trying to get you to buy their stuff instead of using an investment advisor.

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