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Is Your HR Department Unknowingly Engaging in Unauthorized Law Practice?

While it is not apparent that many seemingly innocuous, routine human resources functions implicate the practice of law, common day-to-day compliance tasks like handling aspects of unemployment benefits appeals and responding to writs of garnishment present unique liability for unsuspecting employers across the state of Arkansas.

For instance, in a recent decision involving an appeal of the Arkansas Board of Review’s unemployment benefits determination — Bank of Fayetteville NA v. Dep’t of Workforce Services, 2016 Ark. App. 96 (2016) — the Arkansas Court of Appeals dismissed the bank’s appeal because a nonlawyer bank employee engaged in the unauthorized practice of law by signing the petition for appeal.

The court observed that, in Arkansas, all corporations must be represented by licensed attorneys — “[W]here a party not licensed to practice law in this state attempts to represent the interests of others by submitting himself or herself to jurisdiction of a court, those actions, such as the filing of pleadings, are rendered a nullity.” With the appeal dismissed for lack of jurisdiction — lack of an attorney’s signature on the petition — the bank did not preserve its rights and was required to pay its portion of the employee’s unemployment benefits.

HR personnel also risk engaging in the unauthorized practice of law when addressing writ of garnishment.

In typical cases, a debt collector serves the company’s payroll administrator with the writ and a document titled, “Allegations and Interrogatories.” Many unsuspecting HR employees complete the Allegations and Interrogatories — which look like simple fill-in-the-blank worksheets requesting employee-debtor pay information — and return the form to the debt collector. The debt collector then files the employer’s completed “worksheet” — that was signed by a nonlawyer representative — with the court of record. In this process, the employer has unknowingly invoked the court’s jurisdiction and, in the process, represented itself through a nonlawyer employee.

The Arkansas Supreme Court Committee of Unauthorized Practice of Law and the Arkansas Attorney General have determined that this practice violates Arkansas law. (See Advisory Opinion 34-260, Arkansas Supreme Court Committee of Unauthorized Practice of Law (September 30, 1991); Ark. Op. Att’y Gen. No. 82-145 (Sept. 14, 1982))

Penalties for the unauthorized practice of law can be significant.

Any corporation engaging in the unauthorized practice of law, and every officer, trustee, director, agent or employee of the corporation who directly or indirectly engages in or otherwise assists in the unauthorized practice of law, can be fined $100 to $5,000 per offense, according to Arkansas law.

In garnishment cases, the financial repercussion associated with a void pleading or default judgment may render the employer — not the employee — liable for a portion of the underlying debt. Employers may face particularly severe sanctions or increased scrutiny from enterprising class action attorneys if their conduct violates certain consumer protection statutes (e.g., wrongful garnishment under the Consumer Credit Protection Act), and they charge the statutorily authorized $2.50 garnishment fee.

Executing a corporation’s human resources function presents complex legal issues separate and apart from managing a business. While there is no shortage of compelling work for HR professionals, responsible managers should audit all routine policies and practices to avoid the unintended consequences attendant with the unauthorized practice of law in corporate pro se representation.

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