ESA
Final Rules
Labor Organization Officer and Employee Report, Form LM-30
[ 7/2/2007]
[ PDF]
FR Doc 07-3155
[Federal Register: July 2, 2007 (Volume 72, Number 126)]
[Rules and Regulations]
[Page 36105-36190]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jy07-12]
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Part II
Department of Labor
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Office of Labor-Management Standards
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29 CFR Part 404
Labor Organization Officer and Employee Report, Form LM-30; Final Rule
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DEPARTMENT OF LABOR
Office of Labor-Management Standards
29 CFR Part 404
RIN 1215-AB49
Labor Organization Officer and Employee Report, Form LM-30
AGENCY: Office of Labor-Management Standards, Employment Standards
Administration, Department of Labor.
ACTION: Final rule.
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SUMMARY: The Employment Standards Administration's (``ESA'') Office of
Labor-Management Standards (``OLMS'') of the Department of Labor
(``Department'') publishes this Final Rule to revise the Form LM-30,
Labor Organization Officer and Employee Report, its instructions, and
related provisions in the Department's regulations. The Form LM-30
implements section 202 of the Labor-Management Reporting and Disclosure
Act of 1959 (``LMRDA'' or ``Act''), 29 U.S.C. 432, whose purpose is to
require officers and employees of labor organizations to report
specified financial transactions and holdings to effect public
disclosure of any possible conflicts between their personal financial
interests and their duty to the labor union and its members. This rule
clarifies the Form LM-30 and its instructions by explaining key terms
and providing examples of the financial matters that must be reported,
eliminates or modifies administrative exceptions in the old Form LM-30
that impeded the full disclosure of financial matters that constitute
conflicts, or potential conflicts, of interest, and improves the
usability of the reports by union members and the public.
DATES: Effective Date: This rule will be effective August 16, 2007.
FOR FURTHER INFORMATION CONTACT: Kay H. Oshel, Director, Office of
Policy, Reports, and Disclosure, Office of Labor-Management Standards,
U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5609,
Washington, DC 20210, olms-public@dol.gov, (202) 693-1233 (this is not
a toll-free number). Individuals with hearing impairments may call 1-
800-877-8339 (TTY/TDD).
SUPPLEMENTARY INFORMATION: An outline of this information and a note
regarding the references to statutory provisions in this document
follow:
Table of Contents
I. Background
A. Statutory Authority
B. Departmental Authorization
C. Background to and Overview of Rule
1. The Reasons for Today's Revisions of the Form LM-30
2. Legislative History
II. Discussion of Comments Received on Proposed Rule and
Department's Response
A. Why the Changes to the Form Are Needed Now
B. Why the Department Is Not Presently Requiring Unions To
Notify Their Officers and Employees (``Officials'') About Their
Annual Reporting Obligations
C. Why the De Minimis Exemption From Reporting Insubstantial
Gifts and Other Financial Benefits Has Been Simplified and Subjected
to a $250 Limit, With an Exclusion for Gifts Valued at $20 or Less
and Certain Widely-Attended Gatherings
D. Why Reporting Exceptions Permitted Under the Old Rule Have
Been Eliminated or Modified To Provide More Information to Union
Members
1. Regular Course of Business Exception
2. Bona Fide Employee Exception for Transactions With an
Employer Whose Employees the Official's Union Represents or Is
Actively Seeking To Represent
3. Exception for Bona Fide Loans or Interest From a Banking
Institution
4. Exceptions Relating to Stocks
5. Revision of Special Report Language
E. Why Union Officials, as a General Rule, Must Report Payments
Received as Members of a Company's Board of Directors
F. Why Officers of International, National, and Intermediate
Labor Unions, in Addition to Their Obligation to Report Payments and
Other Financial Benefits Received From Businesses and Employers That
Have a Direct Relationship With the Component of the Union to Which
They are Elected or Appointed, Must Also Report Payments and Other
Financial Benefits Received From Businesses and Employers Whose
Relationship is With a Subordinate Body of Their Union
G. Why Union Officials Must Report Payments Under Union--Leave
and No-Docking Practices Subject to an Exception for Payments of 250
Hours or Less Per Year Made in Accordance with a Collective
Bargaining Agreement
H. What Payments and Other Financial Benefits, Received From an
Employer or Business Whose Employees are not Represented by the
Union and Which Does Not Conduct Business With the Official's Union,
Must be Reported
I. When is a Union ``Actively Seeking To Represent'' Employees,
Thereby Triggering a Union Official's Obligation To Report Payments
and Other Financial Benefits Received From the Employer That is the
Subject of the Organizing Drive
J. How Union Officials Will Determine Whether an Entity From
Which They Receive a Payment or Other Financial Benefit Does a ``A
Substantial Part'' of its Business With an Employer Whose Employees
are Represented by the Official's Union or the Union it is Actively
Seeking to Represent
K. Why Payments and Other Financial Benefits Received From
Section 3(l) Trusts and Service Providers to Such Trusts Must Be
Reported
1. Alleged Procedural Shortcoming
2. Routine Exceptions
3. Relationship With Other Statutes
4. Trusts as Employers and Businesses
L. When Payments and Other Financial Benefits Received From a
Union Other Than an Official's Own Union Must be Reported
M. How the Proposed Definitions Have Been Clarified To Ease a
Filer's Completion of the Form LM-30
1. Definitions Adopted by Today's Rule
2. Other Issues Related to Definitions
N. Details Relating To Proposed and Revised Form and
Instructions
1. Comparison of the ``Old'' and Proposed Forms
2. Comments on Proposed Form
3. Completion of the Revised Form
III. Regulatory Procedures
A. Executive Order 12866
B. Small Business Regulatory Enforcement Fairness Act
C. Unfunded Mandates Reform
D. Executive Order 13132 (Federalism)
E. Regulatory Flexibility Act
F. Paperwork Reduction Act
G. Executive Order 13045 (Protection of Children From
Environmental Health Risks and Safety Risks)
H. Executive Order 13175 (Consultation and Coordination With
Indian Tribal Governments)
I. Executive Order 12630 (Governmental Actions and Interference
With Constitutionally Protected Property Rights)
J. Executive Order 12988 (Civil Justice Reform)
K. Environmental Impact Assessment
L. Executive Order 13211 (Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use)
IV. Text of Final Rule
Appendix
Note: Throughout this document, the Department refers to various
statutory provisions as ``section ----.'' All such references,
unless otherwise noted, are to Title 29 of the U.S. Code. Further,
unless otherwise noted, all the sections are part of the Labor-
Management Reporting and Disclosure Act of 1959, which is set forth
in Chapter 11 of Title 29, 29 U.S.C. 401-531. Following is a list of
the most frequently cited LMRDA provisions in this document with
corresponding citations to the U.S. Code: section 3(l), 29 U.S.C.
402(l); 201, 29 U.S.C. 431; section 202, 29 U.S.C. 432; and section
203, 29 U.S.C. 433. The only other provision of the U.S. Code
frequently referred to in the document by the section number in the
public law in which it was enacted is ``section 302(c),'' a
reference to a provision of the Labor Management Relations Act, as
amended, 29 U.S.C. 141-188. A reference to
[[Page 36107]]
section 302(c), 29 U.S.C. 186(c), appears in the text of section
202(a)(6) of the LMRDA, 29 U.S.C. 432(a)(6).
I. Background
A. Statutory Authority
Section 208 of the LMRDA states in part:
The [Department] shall have authority to issue, amend and
rescind rules and regulations prescribing the form and publication
of reports required to be filed under this title and such other
reasonable rules and regulations (including rules prescribing
reports concerning trusts in which a labor organization is
interested) as he may find necessary to prevent the circumvention or
evasion of such reporting requirements.
29 U.S.C. 438. Today's rule prescribes the disclosure form required
to be filed by a union officer or employee if such an official, his or
her spouse, or minor child hold an interest in or receive payments from
certain entities. The reporting requirements are contained in section
202, which provides in its entirety:
Sec. 202. (a) Every officer of a labor organization and every
employee of a labor organization (other than an employee performing
exclusively clerical or custodial services) shall file with the
Secretary a signed report listing and describing for his preceding
fiscal year--
(1) Any stock, bond, security, or other interest, legal or
equitable, which he or his spouse or minor child directly or
indirectly held in, and any income or any other benefit with
monetary value (including reimbursed expenses) which he or his
spouse or minor child derived directly or indirectly from, an
employer whose employees such labor organization represents or is
actively seeking to represent, except payments and other benefits
received as a bona fide employee of such employer;
(2) Any transaction in which he or his spouse or minor child
engaged, directly or indirectly, involving any stock, bond,
security, or loan to or from, or other legal or equitable interest
in the business of an employer whose employees such labor
organization represents or is actively seeking to represent;
(3) Any stock, bond, security, or other interest, legal or
equitable, which he or his spouse or minor child directly or
indirectly held in, and any income or any other benefit with
monetary value (including reimbursed expenses) which he or his
spouse or minor child directly or indirectly derived from, any
business a substantial part of which consists of buying from,
selling or leasing to, or otherwise dealing with, the business of an
employer whose employees such labor organization represents or is
actively seeking to represent;
(4) Any stock, bond, security, or other interest, legal or
equitable, which he or his spouse or minor child directly or
indirectly held in, and any income or any other benefit with
monetary value (including reimbursed expenses) which he or his
spouse or minor child directly or indirectly derived from, a
business any part of which consists of buying from, or selling or
leasing directly or indirectly to, or otherwise dealing with such
labor organization;
(5) Any direct or indirect business transaction or arrangement
between him or his spouse or minor child and any employer whose
employees his organization represents or is actively seeking to
represent, except work performed and payments and benefits received
as a bona fide employee of such employer and except purchases and
sales of goods or services in the regular course of business at
prices generally available to any employee of such employer; and
(6) Any payment of money or other thing of value (including
reimbursed expenses) which he or his spouse or minor child received
directly or indirectly from any employer or any person who acts as a
labor relations consultant to an employer, except payments of the
kinds referred to in section 302(c) of the Labor Management
Relations Act, 1947, as amended.
(b) The provisions of paragraphs (1), (2), (3), (4), and (5) of
subsection (a) shall not be construed to require any such officer or
employee to report his bona fide investments in securities traded on
a securities exchange registered as a national securities exchange
under the Securities Exchange Act of 1934, in shares in an
investment company registered under the Investment Company Act or in
securities of a public utility holding company registered under the
Public Utility Holding Company Act of 1935, or to report any income
derived therefrom.
(c) Nothing contained in this section shall be construed to
require any officer or employee of a labor organization to file a
report under subsection (a) unless he or his spouse or minor child
holds or has held an interest, has received income or any other
benefit with monetary value or a loan, or has engaged in a
transaction described therein.
B. Departmental Authorization
Section 208 of the Act, 29 U.S.C. 438, provides that the Secretary
of Labor shall have the authority to issue, amend, and rescind rules
and regulations prescribing the form and publication of reports
required to be filed under Title II of the Act and such other
reasonable rules and regulations as she may find necessary to prevent
the circumvention or evasion of the reporting requirements. Secretary's
Order 4-2007, issued May 2, 2007, and published in the Federal Register
on May 8, 2007 (72 FR 26159), contains the delegation of authority and
assignment of responsibility of the Secretary's functions under the
LMRDA to the Assistant Secretary for Employment Standards and permits
the redelegation of such authority.
C. Background to and Overview of Rule
In today's rule, the Department revises the Form LM-30, Labor
Organization Officer and Employee Report based on its review of public
comments received in response to its Notice of Proposed Rulemaking
(``NPRM''), 70 FR 51166 (Aug. 29, 2005). The Form LM-30 is used by
officers and employees of labor organizations subject to the LMRDA.
Section 202 of the Act requires public disclosure of certain financial
interests held, income received, and transactions engaged in by labor
organization officers and employees (generally referred to herein as
``union officials'' or ``officials'') and their spouses and minor
children. Subject to exclusions, these interests, incomes, and
transactions include:
1. Payments or benefits from, or interests in, an employer whose
employees the filer's union represents or is actively seeking to
represent;
2. Transactions involving interests in, or loans to or from, an
employer whose employees the filer's union represents or is actively
seeking to represent;
3. Interests in, income from, or transactions with a business a
substantial part of which consists of dealing with an employer whose
employees the filer's union represents or is actively seeking to
represent;
4. Interests in, income from, or transactions with a business that
deals with the filer's union or a trust in which the filer's union is
interested;
5. Transactions or arrangements with an employer whose employees
the filer's union represents or is actively seeking to represent; and
6. Payments from an employer or labor relations consultant to an
employer.
As sometimes used herein, the short-hand phrase ``payments or other
financial interests'' or its equivalent is used to refer to the various
payments, transactions, arrangements and other monetary and financial
interests that must be reported. Payments, as a general rule, include
gifts, gratuities, restaurant meals, and entertainment.
The Form LM-30 must be filed annually by a union officer or
employee (other than those solely engaged in performing clerical or
custodial duties) if the official, the official's spouse, or minor
child (or children) receives a payment or other financial interest from
a business or employer in connection with certain activities,
identified in section 202. Section 202's disclosure obligations for
union officials (as embodied in the Form LM-30) are an integral part of
the Act's reporting structure. The Act requires annual reports by
unions as ``institutions'' under section 201 (Forms LM-2, LM-3, and LM-
4), by employers, who must
[[Page 36108]]
report payments to unions and their representatives under section 203
(Form LM-10), and by unions for trusts in which they have an interest
(``section 3(l) trusts,'' a reference to section 3(l) of the Act
defining such trusts) under sections 201 and 208 (Form T-1).
In the NPRM the Department invited comment with respect to the
benefits of the proposed changes, the ease or difficulty with which
union officials would be able to comply with these changes, and whether
the changes would be meaningful, useful, and in accord with the LMRDA
disclosure purposes. The initial 60-day comment period provided for in
the NPRM was subsequently extended to January 26, 2006. 70 FR 61400
(Oct. 24, 2005). The Department received over 1,000 comments. Of these
comments about 50 were unique; the rest were form letters. Almost 300
of the comments were from unions or union members, most of whom were
critical of all or parts of the proposal; about 700 were from
individuals who generally supported the proposal, about 25 were from
business or trade organizations, who expressed diverse views on the
proposal; about 10 were from law firms, on their own behalf or their
clients, who mostly opposed the proposal; two were from benefit fund
administrators, who opposed the proposal; and one was from an academic
who reported on his limited study of the reactions of union officials
to the proposed form and instructions from which he concluded these
documents needed substantial improvement. Over 280 of the union
commenters were members of one local. In their form letters, they urged
rejection of the rule ``in its entirety.'' They characterized the
proposed requirements as ``frivolous.'' They asserted that the existing
form was adequate to ensure ``due diligence'' by union officials,
adding that the proposed union-leave and no-docking requirements would
turn shop stewards into accountants because of the duty to ``calculate
their time.'' Of the individuals supporting the proposal, the
Department received about 660 form letters. These individuals asserted
that such reforms were long overdue, noting that under the current form
it is difficult to determine when a report is required and that the
proposed form's inclusion of clear definitions and examples would
improve reporting.
The historically low filing rates during the years preceding the
initiation of this rulemaking process demonstrated substantial non-
compliance with the Act. The Department recognized that its own
compliance assistance efforts in this area needed improvement and thus
it has retargeted its resources to educate the affected community about
the Form LM-30 reporting obligation and to increase its enforcement
efforts. At the same time as the Department was working on the proposed
rule, it announced an initiative to improve Form LM-30 compliance. As
part of this effort, the Department substantially augmented its
published guidance to Form LM-30 filers, primarily by posting
information on OLMS Web pages and by further disseminating this
information by notifying subscribers to its free, automated list serve.
On April 25, 2005, the Department announced a special enforcement
policy under which new Form LM-30 filers, absent extraordinary
circumstances, would not have to submit reports for prior years, even
if such reports should have been filed. Specifically, the Department
advised the regulated community that it would not require a new filer
to submit reports covering the same financial interest for any prior
years absent extraordinary circumstances. To take advantage of this
grace period, the new filer had to submit his or her initial report
voluntarily during a ``grace period,'' which ended August 15, 2005.
With the substantial voluntary assistance of the AFL-CIO and other
labor organizations to educate union officials about their reporting
obligations, the Department experienced a large upsurge in the number
of Form LM-30 filings over historical levels. To help union officials
better understand their filing obligations, the Department proposed to
change the instructions to the old form by defining and explaining key
concepts and terms used by the statute and the form, and providing
examples of situations where reporting is required. The Department also
proposed to redesign the reporting format to better assist filers and
improve the utility of the collected information to union members, the
Department, and the general public. Following its review of the
comments and taking into account the Department's recent Form LM-30
filing experience--as requested by some commenters, the Department
remains convinced that this approach is sound and therefore today's
rule preserves the overall approach outlined in the NPRM. At the same
time, the comments were helpful in reconsidering some aspects of the
rule and improving the content of the instructions and the form. The
Department has revised the layout of the form. Instead of the
subsection-by-subsection approach in the proposed form and instructions
that parallels the structure of section 202 and its subsections (i.e.,
sections 202(a)(1) through 202(a)(6)), the rule organizes the form and
instructions by the source of the reportable payment to a union
official. Thus, the form lists the types of employer relationships that
trigger a reporting requirement and the types of business relationships
that trigger a reporting requirement. The instructions identify the
types of payments and other financial interests that must be reported
by a union official if received from an employer, differentiating
between payments received from an employer whose employees the filer's
union represents or is actively seeking to represent and those received
from certain other employers. The instructions also identify the types
of payments that must be reported if received from businesses that
maintain business dealings with the official's union, a trust in which
the official's union is interested, or certain employers. In the NPRM,
the Department requested comment on whether labor organizations should
be required to notify their officers and employees of their Form LM-30
reporting obligations. After review of the comments and the number of
recent filers, the Department has decided to not require unions at this
time to provide such notification to their officials.
In the NPRM, the Department proposed to revise its longstanding de
minimis exception by adopting a quantitative standard of $25 as the
amount that would trigger a reporting obligation. Numerous comments
attacked the $25 threshold as unreasonably low, while other commenters
argued that there should be no de minimis level at all. The Department
adopts $250 as the amount above which a report is required and $20 as
the amount above which payments or benefits must be counted when
calculating whether the union official's $250 reporting threshold has
been met. The rule also includes a limited exclusion for widely
attended gatherings, allowing union officials to attend two such
gatherings without incurring a reporting obligation provided the
employer or business paying for the gathering spent $125 or less per
attendee per gathering.
One provision of the Act, section 202(a)(6), may be read to impose
a requirement on union officials to report payments from all employers.
The Department's proposal to construe this obligation in this manner
was opposed by most of the comments that discussed this point. In light
of these comments, today's rule clarifies the scope of the reporting
obligation under section 202(a)(6), identifying particular situations
that pose a conflict of interest
[[Page 36109]]
that otherwise would not be captured by the other five subsections of
section 202(a).
The Department also proposed to remove certain administrative
exceptions that were available to filers under the old rule: Purchases
and sales in the regular course of business at prices generally
available to any employee of the employer; work performed and payments
and benefits received as a bona fide employee of the employer; certain
loans; and specified interests relating to stock ownership. The rule
generally adopts the proposals as set forth in the NPRM to narrow the
scope of these exceptions and thus makes reportable interests and
payments that present previously unreported potential conflicts of
interest.
The Department requested comment on whether to retain the
distinction between securities traded on a registered national stock
exchange and securities traded elsewhere, such as the NASDAQ stock
market, notwithstanding the language in the Act limiting the exception
to registered securities exchanges. See section 202(b) (ties exception
to such exchanges registered under the Securities Exchange Act of 1934
and other enumerated statutes). After reviewing the comments, the
Department retains its interpretation that it should not extend this
limited exception to exchanges that have not been registered. The
Department, however, notes that on July 15, 2006, the Securities and
Exchange Commission (``SEC'') approved NASDAQ's application for
registration as a national securities exchange, effective July 31,
2006.
Payments received by union officials from employers for work done
on the union's behalf are reportable because such payments are not
received as a bona fide employee of the employer making the payment.
The Department explained in its proposal that union officials must
report any payments for other than ``productive work'' for the
employer, including union-leave and no-docking payments. Similarly, the
proposed definition of ``labor organization employee'' clarified that
an individual who is paid by an employer to perform union work is an
employee of the union if he or she is under the control of the union,
while so engaged. Today's rule adopts the proposed definition of ``bona
fide employee'' and ``labor organization employee,'' making union-leave
and no-docking payments reportable. However, today's rule stipulates
that if such payments are made pursuant to a collective bargaining
agreement and the payments are made for 250 or fewer hours during the
year then there is no reporting obligation.
The meaning given ``labor organization'' defines the scope of a
union official's obligation to report interests in or payments by
certain employers and businesses. Essentially the question presented by
the Department's proposal is whether this obligation applies to only an
official's immediate organization, e.g., a local union or international
union in which he or she holds office, or whether it extends to
situations involving organizations affiliated with the immediate
organization. For instance, is an international officer required to
report payments received from a business that sells products or
services to intermediate and local affiliates or from employers whose
employees are represented by a subordinate union? Under today's rule,
an international union officer must report such payments. The same
obligation exists under the old rule. Today's rule further clarifies
that the same reporting obligation applies to payments received by an
intermediate union officer. The Department, however, does not impose a
reporting obligation on local or intermediate union officials who
receive payments from an entity that does business with a higher
affiliated organization. The rule also excepts employees of
international, national, and intermediate unions from this reporting
requirement. Further, the reporting obligation on officers of national
and intermediate unions does not extend to payments received as
employment compensation by their spouse or minor child that otherwise
would be reportable because of the payer's relationship with a
subordinate union.
Although the Department's old rule applies to payments received
from a section 3(l) trust and the Department proposed no departure from
this rule, numerous comments were received arguing that the Form LM-30
reporting obligation has never been applied to payments by trusts to
union officials. These commenters are mistaken. The Department always
has maintained the position that payments from trusts and vendors to
such trusts enjoy no special excepted status under the Act's reporting
provisions. Some commenters argued that such reporting would only be
duplicative of reporting already required by ERISA and could discourage
union trustees from attending conferences designed to educate trustees
about their duties as trustees. The Department believes that the
concerns about burden and overlap with ERISA disclosure requirements
are overstated. In light of the comments, however, today's rule
clarifies that a payment by a trust is treated no differently than
other payments by an employer or a business to union officials.
Section 202(a)(3) imposes a limited reporting obligation on a union
official who has an interest in or receives payments from a business
that buys, sells, leases, or otherwise deals with the business of an
employer if the latter's employees are represented by the official's
union or it is actively seeking to represent these employees. The
obligation attaches only if the vendor's dealings with the employer
comprise a ``substantial part'' of the vendor's business. The
Department proposed to define ``substantial'' as more than 5% of the
vendor's business. Most of the comments criticized the threshold as too
low. Today's rule sets the threshold at 10%.
In addition to some of the terms discussed above, the Department
has clarified some of the proposed definitions. By clarifying these
terms and the concepts that underlie the Act's reporting provisions,
the rule ensures transparency in the personal financial affairs of
union officials that may pose conflicts between the official's duty to
their union and its members and the official's personal interests.
A number of comments were received from employer and industry
associations. Most of these comments focused on the obligation of
employers to file a Form LM-10 on certain payments made by employers or
labor relations consultants to unions or union officials. Today's rule
is specific to Form LM-30 filers. It does not amend the Department's
current regulations or guidance specific to the Form LM-10. The
Department, however, has carefully considered all the comments
submitted by these groups and addresses them herein insofar as they
address particular aspects of the Form LM-30 proposal. Form LM-10
Frequently Asked Questions (FAQs) on the OLMS Web site at http://www.olms.dol.gov
informs the public that the Department will not
enforce certain Form LM-10 reporting requirements until both the Form
LM-30 rulemaking is completed and further written guidance is issued on
the Form LM-10. This written guidance will be issued in revisions to
the FAQs that will be announced through the OLMS list serve which can
be subscribed to at http://www.dol.gov/esa/aboutesa/org/olms/olms-mailinglist.htm
.
1. The Reasons for Today's Revisions of the Form LM-30
The Form LM-30 has remained essentially unchanged since 1963.
[[Page 36110]]
During this time, there have been many significant changes in the ways
in which unions operate and conduct their financial affairs.
Individuals too have more and varied financial interests than was the
case forty years ago. As explained in the NPRM, many unions manage
benefit plans for their members, maintain close business relationships
with financial service providers such as insurance companies and
investment firms, operate revenue-producing subsidiaries, and
participate in foundations and charitable activities. The complexity of
these financial practices, including business relationships with
outside firms and vendors, increases the likelihood that union
officials may have interests in, or receive income from, these
businesses. As more labor organizations conduct their financial
activities through sophisticated trusts, increased numbers of
businesses have commercial relationships with such trusts, creating
financial opportunities for union officers and employees who may
operate, receive income from, or hold an interest in such businesses.
In addition, employers also have fostered multi-faceted business
interests, creating further opportunities for financial relationships
between employers and union officers and employees. In this context,
disclosure is critical to promoting good union governance, fostering
ethical behavior, and deterring and detecting self-dealing.
As noted in the NPRM, on many occasions the Department has
discovered during an audit or investigation that a union officer or
employee received a reportable payment or other financial benefit but
had failed to file the Form LM-30 as required. The Department
identified several such situations in the NPRM, including the
following:
A local president owned 50% of a business that resurfaced
the union's parking lot. Over two years, the business received $9,000
from the union.
A union designated certain attorneys to represent injured
members. Some of these attorneys, who were employers, furnished cash or
items of value such as trips and golf clubs to union officials.
A union hired the accounting firm of an employee's spouse.
The firm received over $29,000 from the union over two years.
An officer of a union, whose members worked at a theater,
formed a business with two partners. He put his share of the business
in his wife's name although he actually managed the business, which
employed members of his local to work for the theater. He and his wife
received almost $75,000 in profits, expense reimbursements, and salary
from the business.
A union president owned the building in which the union
rented office space.
A union employee's spouse owned an advertising company
that printed materials for the union and its funds. In one year, the
company received over $245,000 as payment for her company's services.
Four local officers formed a company that provided payroll
services to the local as well as to theatrical companies that employed
members of the local. Two other officers of the local received over
$20,000 as employees of the company.
The spouse of a union officer owned a company that
provided cleaning and maintenance services to the union and a trust in
which the union was interested. In one year, the company received over
$94,000 from the union and the trust.
A union officer's spouse owned a janitorial business that
provided daily janitorial services to the union at $800 per month.
A union officer was part-owner, along with his wife and
daughter, of a copier supply company. He was an officer of several
unions, including one that employed his daughter as a benefit
representative and union trustee. All of the unions purchased office
equipment and services from the family's company.
During a campaign for a State government office, a
business agent received contributions from employers who were covered
by the union's collective bargaining agreement.
A union employee owned a heating and air conditioning
business that performed HVAC work for the union.
In these instances, compliance with the Form LM-30 requirements
would have provided union members with valuable information concerning
financial practices of their unions' officials. This information would
have assisted union members in evaluating the efficacy of the work
performed by union employees and the leadership provided by union
officers. Furthermore, the information would have alerted them to
potential conflicts of interests and guided them as to which actions or
decisions of their officers and employees might require greater
scrutiny in order to determine whether the conflicts had affected the
union official's service to the union. Armed with this information,
union members could express their concerns at membership meetings, see
section 101(a), 29 U.S.C. 411(a), evaluate the use of union monies as
reported on the union's annual financial report, see section 201(b), 29
U.S.C. 431(b), cast more informed votes at internal union elections,
see sections 401-403, 29 U.S.C. 481-483, employ union procedures for
removal of officers guilty of serious misconduct, see section 401(h),
29 U.S.C. 481(h), and exercise their right to obtain judicial relief
for violations of the official's fiduciary responsibilities. See
section 501(b), 29 U.S.C. 501(b).
In other instances, as described in the NPRM, compliance with Form
LM-30 requirements would have revealed criminal conduct. For example,
the president of a national union had the sole authority to appoint or
remove attorneys from a list of ``Designated Legal Counsel.'' These
attorneys represented injured union members who sought compensation
from the railroad for on-the-job injuries. Rather than selecting
attorneys on the basis of their skills, the president awarded the
designation to attorneys who gave the union president cash or other
things of value. In another instance, contractors were hired to make
repairs and improvements to the offices of a local union. The
contractors also performed work on the officers' homes. All the
expenses of the work, including about $1.2 million for work on the
officers' homes, was charged to and paid by the union. A third example
involved a contractor, an investment firm that managed pension and
investment accounts for unions. This company collapsed in September
2000, costing its clients about $355 million. The company's former
chairman was indicted on counts of fraud, money laundering, witness
tampering, and making illegal payments to union benefit plan trustees.
As part of its scheme to buy the influence of pension fund trustees,
who were union officers, the investment firm hired relatives of pension
trustees as well as provided plan trustees with gifts including rifles,
season tickets to sporting events, and fishing and hunting trips to
various locations in the western U.S., Canada, Africa, Argentina and
Mexico.
As the above incidents demonstrate, a statement made in 1986
continues to ring true: ``The plunder of union resources remains an
attractive [target for certain individuals and organizations]. * * *
The most successful devices are the payment of excessive salaries and
benefits to * * * union officials and the plunder of workers'' health
and pension funds.'' President's Commission on Organized Crime, Report
to the President and Attorney General, The Edge: Organized Crime,
Business, and Labor Unions
[[Page 36111]]
(1986), at 12. Added transparency about a union official's conflicts of
interest will help ensure that all union officials keep paramount the
interests of their union and its members. Most union officials will
never be tempted to subordinate their union's interests to their own
financial interests; the rule will help them avoid the perception that
their financial interests, left unreported through inadvertence or
misunderstanding, may engender unfair suspicion. Others, though
tempted, will be deterred from taking such action. See Archibald Cox,
Internal Affairs of Labor Unions Under the Labor Reform Act of 1959, 58
Mich.L.Rev. 819, 827 (1960) (``Internal Affairs of Labor Unions'')
(``The official whose fingers itch for a ``fast buck'' but who is not a
criminal will be deterred by the fear of prosecution if he files no
report and by fear of reprisal from the members if he does'').
The Form LM-30 has been redesigned to facilitate full and accurate
completion by the filer and review by members of the filer's union and
the public. The instructions now contain useful definitions of key
terms and concepts required to complete the form and numerous practical
examples to assist filers in completing the form. Union officials will
also better understand the disclosure obligations relating to actual or
potential conflicts of interest and will be mindful of their duty to
hold their union's interests above their own personal financial
interests. Financial transparency, as noted above, also may deter fraud
and self-dealing and facilitates discovery of such misconduct when it
occurs. Transparency promotes the unions' own interests as democratic
institutions. By these improvements, union members will obtain a more
accurate picture of the personal financial interests of their union's
officers and employees, as those interests may bear upon their actions
on behalf of the union and its members. With this information, union
members will be better able to understand any financial incentives or
disincentives faced by their union's officers and employees and to make
more informed choices about the leadership of their union and its
management of its affairs. Through these actions, the Department
advances the LMRDA's declared purpose ``that labor organizations,
employers, and their officials adhere to the highest standards of
responsibility and ethical conduct in administering the affairs of
their organizations.'' Section 2(a). As such, today's rule will better
achieve the purposes of the LMRDA than the old reporting regimen.
2. Legislative History
To better understand the purposes served by disclosure, a brief
review of the history of the LMRDA's reporting and disclosure
requirements for union officials is appropriate. As explained in the
NPRM, at 70 FR 51166, the LMRDA was passed in 1959 by a bipartisan
Congress that found: In labor and management fields:
[T]here have been a number of instances of breach of trust,
corruption, disregard of the rights of individual employees, and
other failures to observe high standards of responsibility and
ethical conduct which require further and supplementary legislation
that will afford necessary protection of the rights and interests of
employees and the public generally as they relate to the activities
of labor organizations, employers, labor relations consultants, and
their officers and representatives.
Section 2(a).
The legislation was the direct outgrowth of a Congressional
investigation conducted by the Select Committee on Improper Activities
in the Labor or Management Field, commonly known as the McClellan
Committee, chaired by Senator John McClellan of Arkansas. In 1957, the
committee began a highly publicized investigation of union racketeering
and corruption; its findings of financial abuse, mismanagement of union
funds, and unethical conduct provided much of the impetus for enactment
of the LMRDA's remedial provisions. See generally Benjamin Aaron, The
Labor-Management Reporting and Disclosure Act of 1959, 73 Harv. L. Rev.
851, 851-55 (1960). During the investigation, the committee uncovered a
host of improper financial arrangements between officials of several
international and local unions and employers (and labor consultants
aligned with the employers) whose employees were represented by the
unions in question or might be organized by them. Similar arrangements
also were found to exist between union officials and the companies that
handled matters relating to the administration of union benefit funds.
See generally, Interim Report of the Select Committee on Improper
Activities in the Labor or Management Field, S. Report No. 85-1417
(1957) (``Interim Report''). For examples of some of the improper
arrangements directly or indirectly involving officials of these
unions, see Interim Report, pp. 42-86, 122-30, 150-57, 222-55, 376-420,
441-50. See also Robert F. Kennedy, The Enemy Within (1960) (discussing
the committee's investigation).
The statute was designed to remedy these various ills through a set
of integrated provisions aimed at union governance and management.
These included a ``bill of rights'' for union members, which provides
for equal voting rights, freedom of speech and assembly, and other
basic safeguards for union democracy, see sections 101-105 of the
LMRDA, 29 U.S.C. 411-415, financial reporting and disclosure
requirements for unions, union officers and employees, employers, labor
relations consultants, and surety companies, see sections 201-206 and
211 of the LMRDA, 29 U.S.C. 431-436, 441; detailed procedural,
substantive, and reporting requirements relating to union trusteeships,
see sections 301-306 of the LMRDA, 29 U.S.C. 461-466; detailed
procedural requirements for the conduct of elections of union officers,
see sections 401-403 of the LMRDA, 29 U.S.C. 481-483, safeguards for
unions, including bonding requirements, the establishment of fiduciary
responsibilities for union officials and other representatives; and
criminal penalties for embezzlement from a union, for loans over $2,000
by a union to officers or employees, for a union's employment of
certain convicted felons or permitting them to hold union office, and
for payments to employees for prohibited purposes by an employer or
labor relations consultant, see sections 501-504 of the LMRDA, 29
U.S.C. 501-504; and prohibitions against retaliation for exercising
protected rights, see sections 601-611 of the LMRDA, 29 U.S.C. 521-531.
The reporting requirement for union officials operates in tandem
with the Act's establishment of a fiduciary duty for union officials
and representatives. Section 501, 29 U.S.C. 501. Congress addressed
conflicts of interest in both sections 202 and 501(a) of the Act. The
latter section provides in part:
The officers, agents, shop stewards, and other representatives
of a labor organization occupy positions of trust in relation to
such organization and its members as a group. It is, therefore, the
duty of each such person, taking into account the special problems
and functions of a labor organization, to hold its money and
property solely for the benefit of the organization and its members
and to manage, invest, and expend the same in accordance with its
constitution and bylaws and any resolutions of the governing bodies
adopted thereunder, to refrain from dealing with such organization
as an adverse party or in behalf of an adverse party in any matter
connected with his duties and from holding or acquiring any
pecuniary or personal interest which conflicts with the interests of
such organization * * *.
Both provisions address the potential and actual conflict between a
union representative's personal interests and his or her duty to the
union and its
[[Page 36112]]
members. See Theodore Clark, Jr., The Fiduciary Duties of Union
Officials under Section 501 of the LMRDA, 52 Minn. L. Rev. 437, 458-60
(1962).
The McClellan Committee hearings disclosed a history of self-
dealing by certain union officials, often at the expense of their
union's membership. Then Senator John F. Kennedy was the chief sponsor
of the Senate bill, S. 505, which served as the foundation for the
LMRDA. In introducing the bill for the Senate's consideration, Senator
Kennedy addressed concerns about the involvement of union officials in
matters that blurred their personal interests and their union's
interests, which concerns would be remedied by the legislation. Senator
Kennedy used the experience of the Teamsters union, as revealed by the
investigation of the McClellan Committee, to underscore the purposes to
be achieved by the Act:
First. It will no longer be possible for the dues of Teamster
members to be * * * used by [the union's] officers to build their
own personal financial empires without the knowledge of the members
themselves--or without investigation by the press and public
authorities.
Second. [A union official] would be required to disclose all his
business dealings with insurance agents handling the union's welfare
funds, his private arrangements with employers, his hidden
partnerships in business ventures foisted upon his members, and all
other possible conflicts of interest.
* * * * *
Sixth. [Union officials] will find future collusion with
employers vastly restricted--with no more loans from employer
groups, no more attacks on rival unions through middlemen * * *, and
no more secrecy shrouding the use of union funds to bail out a
collaborating employer.
105 Cong. Rec. S817 (daily ed. Jan. 20, 1959), reprinted in 2 NLRB
Legislative History of the Labor-Management Reporting and Disclosure
Act of 1959 (``Leg. History''), at 969.
The improper dealings by the Teamsters officials, to which Senator
Kennedy refers, are detailed in the Interim Report, at e.g., 48, 59-60,
64-86, 222-54, 443-50. These dealings, like those identified by
officials of other unions in the Interim Report, included actions
undertaken by national officers, or others acting at their behest,
involving matters affecting not only the national union's operation but
also matters of importance to local and intermediate bodies of their
union. See e.g., Interim Report, at 4-7, 46-49, 51, 55, 59-60, 63, 69,
74, 81, 87, 122-25, 128, 130, 179, 186-87, 224, 228, 230-40, 244, 250,
252, 264-66, 268, 281, 284-85, 295, 297, 300, 444-48. See also The
Enemy Within, at 97, 99, 104-05, 106, 221-24.
As explained in the Senate Committee Report, S. Rep. No. 187 (1959)
(``Senate Report''), at 15, reprinted in 1 Leg. History, at 411: ``The
hearings before the McClellan committee brought to light a number of
instances in which union officials gained personal profit from a
business which dealt with the very same employer with whom they engaged
in collective bargaining on behalf of the union.'' Id. The committee
endorsed the concern expressed in the AFL-CIO's Ethical Practices Code
that the union official ``may be given special favors or contracts by
the employer in return for less than a discharge of his obligations as
a trade-union leader.'' Id.
In explaining the purpose of the disclosure rules for union
officers and employees, the Senate Report presented ``three reasons for
relying upon the milder sanction of reporting and disclosure [relative
to establishing criminal penalties] to eliminate improper conflicts of
interest,'' which we summarize as follows:
Disclosure discourages questionable practices. ``The
searchlight of publicity is a strong deterrent.'' Disclosure rules
should be tried before more severe methods are employed.
Disclosure aids union governance. Reporting and
publication will enable unions ``to better regulate their own affairs.
The members may vote out of office any individual whose personal
financial interests conflict with his duties to members,'' and
reporting and disclosure would facilitate legal action by members
against ``officers who violate their duty of loyalty to the members.''
Disclosure creates a record. The reports will furnish a
``sound factual basis for further action in the event that other
legislation is required.''
Senate Report, at 16, reprinted in 1 Leg. History, at 412.
The Report further stated: ``No union officer or employee is
obliged to file a report unless he holds a questionable interest or has
engaged in a questionable transaction. The bill is drawn broadly
enough, however, to require disclosure of any personal gain which an
officer or employee may be securing at the expense of the union
members.'' Senate Report, at 14-15, reprinted in 1 Leg. History, at
410-11. The House Committee Report, H.R. Rep. No. 741 (1959) (``House
Report''), at 11, reprinted in 1 Leg. History, at 769, conveyed the
same message. Both the Senate and House Reports recognize that a
reportable interest is not necessarily an illegal practice. As the
House Report stated:
In some instances matters to be reported are not illegal and may
not be improper but may serve to disclose conflicts of interest.
Even in such instances, disclosure will enable the persons whose
rights are affected, the public, and the Government, to determine
whether the arrangements or activities are justifiable, ethical, and
legal.
House Report, at 4, reprinted in 1 Leg. History, at 762. See Senate
Report, at 38, reprinted in 1 Leg. History, at 434 (``By requiring
reports * * *, the committee is not to be construed as necessarily
condemning the matters to be reported if they are not specifically
declared to be improper or made illegal under other provisions of the
bill or other laws''). ``Reports are required as to matters which
should be public knowledge so that their propriety can be explored in
the light of known facts and conditions.'' Id. As stated by Senator
Barry Goldwater after the LMRDA had been passed:
Briefly, what must be reported are holdings of interest in or
the receipt of economic benefits from employers who deal or might
deal with such union official's union, or holdings in or benefits
from enterprises which do business with such union official's union.
105 Cong. Rec. A8512 (daily ed. Oct. 2, 1959), reprinted in 2 Leg.
History, at 1846.
Conflict of interest standards, including disclosure obligations of
individuals and entities occupying positions of trust, are well
grounded in U.S. law. As stated in the House Report, repeating almost
verbatim the same point in the Senate Report:
For centuries the law of fiduciaries has forbidden any person in
a position of trust subject to such law to hold interests or enter
into transactions in which self-interest may conflict with complete
loyalty to those whom he serves. * * * The same principle * * *
should be equally applicable to union officers and employees
[quoting the AFL-CIO's Ethical Practices Code]: ``[A] basic ethical
principle in the conduct of union affairs is that no responsible
trade union official should have a personal financial interest which
conflicts with the full performance of his fiduciary duties as a
worker's representative.''
Senate Report, at 11, reprinted in 1 Leg. History, at 769. See
generally Restatement (Second) of Trusts (1959) Sec. Sec. 170, 173;
Restatement (Second) of Agency (1958) Sec. Sec. 381, 387-98.
Section 202 is an effort, in part, to make effective the disclosure
requirements associated with the fiduciary standards applied to union
officials in Title V of the LMRDA, a duty that includes an obligation
to report potential conflicts of interest. Both Titles II and V of the
Act represent an effort to codify various requirements
[[Page 36113]]
contained in an extensive code of ethics voluntarily adopted by the
AFL-CIO in 1957 and applied to its affiliated unions and officials. See
Senate Report, at 12-16, reprinted in 1 Leg. History, at 408-12; House
Report, at 9-12, reprinted in 1 Leg. History, at 767-70. See also
Internal Affairs of Labor Unions, 58 Mich. L. Rev. at 824-29. The
following excerpts from this code demonstrate the similarities between
a union official's fiduciary duty and the disclosure requirements of
section 202.
[A] basic ethical principle in the conduct of trade union
affairs is that no responsible trade union official should have a
personal financial interest which conflicts with the full
performance of his fiduciary duties as a workers' representative.
[U]nion officers and agents should not be prohibited from
investing their personal funds in their own way in the American free
enterprise system so long as they are scrupulously careful to avoid
any actual or potential conflict of interest.
In a sense, a trade union official holds a position comparable
to that of a public servant. Like a public servant, he has a high
fiduciary duty not only to serve the members of his union honestly
and faithfully, but also to avoid personal economic interest which
may conflict or appear to conflict with the full performance of his
responsibility to those whom he serves.
There is nothing in the essential ethical principles of the
trade union movement which should prevent a trade union official, at
any level, from investing personal funds in the publicly traded
securities of corporate enterprises unrelated to the industry or
area in which the official has a particular trade union
responsibility.
[These principles] apply not only where the investments are made
by union officials, but also where third persons are used as blinds
or covers to conceal the financial interests of union officials.
Ethical Practices Code IV: Investments and Business Interests of Union,
105 Cong. Rec.*16379 (daily ed. Sept. 3, 1959), reprinted in 2 Leg.
History, at 1408. See also Ethical Practices Code II: Health and
Welfare Funds, id., 2 Leg. History, at 1406-07.
The Department intends by today's rule to better achieve the
purposes of the LMRDA, as reflected by its legislative history.
II. Discussion of Comments Received on Proposed Rule and Department's
Response
A. Why the Changes To the Form Are Needed Now
Several commenters recommended that the Department should evaluate
its recent compliance experience with Form LM-30 reports submitted by
union officials using the old form before considering any changes to
the form. One commenter stated that there is no problem with the old
form. Another asserted that the affected community has spent a ``huge
amount of time getting up to speed on the present form,'' arguing that
the proposed form is more confusing than the current form because it
requires filers to identify for each reportable interest the particular
statutory provision to which it relates.
A labor educator, noting the upsurge in Form LM-30 filings about
the time of the comment period on the proposed rule, suggested that the
Department should postpone any changes until it completed a thorough
analysis of these submissions. Although this commenter acknowledged
that the old form presents some challenges to a filer's easy
understanding of the reporting requirements, he asserted that the
proposed form poses greater opportunity for mistake and confusion. Two
commenters argued: ``[R]adically changing the form at the same time as
the Department provides comprehensive guidance on what is considered
reportable [on the old form] will only impede the efforts to encourage
accurate and full reporting.''
The old Form LM-30 posed substantial challenges to filers. As
discussed in the NPRM and as demonstrated by comments on the proposal,
filers have been unsure about the kinds of payments that trigger the
need to file a Form LM-30. See 70 FR 51172-73, 51175. Keeping the
status quo would leave in place exceptions that permit union officials
to avoid disclosing payments that would otherwise be reportable under
the statute, denying union members information about their officials'
interests in and payments by employers and businesses that raise
conflict of interest questions. Deferring the final rule for an
exhaustive analysis of all the Form LM-30 filings during the April
through mid-August 2006 ``grace period,'' numbering about 13,000 would
cause undue delay with little additional gain. The Department's
preliminary and ongoing review of these filings demonstrates that the
old form is unclear and that today's rule will rectify many of the
problems observed in those filings.
One commenter recommended that the Department, well in advance of
the filing deadline, ``should grant a reasonable extension for filing
and/or make any aspects of the final rule that are more restrictive
than the current rule prospective only. DOL should only apply any
changes prospectively, and it should provide a reasonable opportunity
for necessary recordkeeping and related efforts to facilitate accurate
reports and compliance.'' Another commenter argued that no new
requirements should be imposed on service providers until rulemaking on
the Form LM-10 is completed. Another commenter argued that no changes
in reporting should occur any sooner than a filer's fiscal year that
begins after the final rule takes effect.
DOL is applying these changes prospectively only. This final rule
will apply to fiscal years beginning on or after ------, 2007.
Therefore, no report subject to today's rule will be due until at least
------, 2008. There is ample time from publication of this final rule
until ------, 2008 for all filers to obtain any information they need
to comply with the filing requirements.
B. Why the Department Is Not Presently Requiring Unions to Notify Their
Officers and Employees (``Officials'') About Their Annual Reporting
Obligations
In the NPRM, the Department requested comments on whether the
Department should require unions to provide notice of the filing
requirements to their officers and employees. The NPRM discussed
possible notification options. Under one option, unions would be
required to notify their officers and employees of their Form LM-30
obligations within 30 days of their installation into office or hire,
respectively. Unions would be required to provide initial notification
within 60 days of the enactment of the regulation, and annually
thereafter to all officers and employees. Under the proposal, a union
could meet this requirement by providing a copy of the Form LM-30 and
its instructions. E-mail notification might be considered. As an
alternative, a general notice, provided in a union publication
addressed to each officer and employee, might be adequate for this
purpose.
A number of comments were received on the notification question.
Commenters were divided on the question. Some commenters strongly
supported mandatory notification, pointing to low numbers of past
filers as evidence that notification is essential. No union commenter
supported the proposal. Commenters were divided as to whether the
Department has authority to require notification under sections 105 or
208 of the LMRDA. One commenter asserted that the Department lacks
authority to issue a notification requirement under section 105,
arguing that this provision does not allow imposition of a detailed
code of union conduct. Another commenter used section 105 to illustrate
its position that Congress knew how to establish a notification
requirement, arguing that its
[[Page 36114]]
failure to so provide in section 202 evinces the intention to excuse
unions from any obligation to provide such notice. Another commenter
argued to the contrary, stating that mandatory notification is
consistent with section 105 which states, ``[e]very labor organization
shall inform its members concerning the provisions of this Act.'' While
acknowledging that section 208 arguably permits a notification
requirement, a commenter argued that the Department must first
demonstrate that such a rule is necessary to prevent the circumvention
or evasion of the reporting obligation. It argued that
``circumvention'' and ``evasion'' connote a willful disregard of the
filing obligation, actions that require as a premise that the filer
already is aware of the filing obligation.
A commenter argued that the Department should impose a broader
notification requirement on unions. Unions should be required, in its
view, to provide notice to both officials and their members about both
the filing obligations of union officials and the union's own reporting
obligations to file a Form LM-2, 3 or 4. Another commenter viewed
notification as a ``first-step in the right direction.'' It stated a
preference for a system whereby the Department would provide annual
reminders about Form LM-30; each union would be required to file with
the Department the names and addresses of all its officers and
employees. On the other hand, several commenters argued that reliance
on voluntary efforts would better achieve the goal of informing
officials about their filing obligation. One of these commenters stated
that voluntary education works better than mandatory notification given
that unions have a variety of governance structures and that they
operate, in effect, in different industries calling for different
approaches. Another commenter suggested that DOL ``work informally'' to
obtain compliance. This commenter explained that under the old
regulation, unions take various steps to inform their officials about
Form LM-30 requirements, such as by holding meetings or providing
written notices. The commenter argued that the choice of a method to
inform union members should be left to the union. Several commenters
argued that notification was unnecessary in light of new Department
guidance, pointing to the rise in filings to support its claim.
The Department believes it possesses the authority to impose a
notification requirement. However, the Department has concluded, based
on its review of the comments and the recent experience with Form LM-30
filers, that a mandatory notification requirement is unnecessary on the
present record to effectuate the disclosure purpose served by section
202 of the Act. After unions and their counsel became aware of the
Department's increased emphasis in securing compliance with section
202, many contacted their officers and employees to inform or at least
remind them of their obligation to file a Form LM-30 if they engaged in
any of the activities identified by the form and its instructions.
While in previous years less than 100 forms were typically filed each
year, during the 2005 grace period contemporaneous with this
rulemaking, 13,326 reports were filed. During FY 2006, 4,348 Form LM-30
reports were filed. Given the historic increases in Form LM-30s during
the grace period with stepped up Departmental compliance assistance and
voluntary efforts by major unions to educate affiliates and officials,
there is currently not a sufficient record to conclude that a mandatory
requirement is needed.
The Department applauds the voluntary efforts by the AFL-CIO and
other unions to apprise union officials about their Form LM-30
reporting obligations. However, insufficient time has passed to
conclude that union officials, without receiving regular notice by
their union of these obligations, will remain aware of these
obligations. If future compliance figures indicate that new union
officials are uninformed about their Form LM-30 filing obligations or
that others appear to have forgotten their obligations, the Department
may then reassess the need for imposing a notification requirement.
C. Why the De Minimis Exemption From Reporting Insubstantial Gifts and
Other Financial Benefits Has Been Simplified and Subjected to a $250
Limit, With an Exclusion for Gifts Valued at $20 or Less and Certain
Widely-Attended Gatherings
Section 202(a) of the LMRDA calls for disclosure of ``any'' stock,
bond or other interest, ``any'' income, ``any'' loan, and ``any''
payment or other thing of value received by a union official, his or
her spouse, or minor child[ren] from employers and businesses as
defined in sections 202(a)(1) through 202(a)(6). While this inclusive
language may be read to require a report on any such payments
regardless of amount, the Department always has excepted from reporting
payments of insubstantial or de minimis value. Thus, the old
instructions to the Form LM-30 inform filers: ``You do not have to
report any sporadic or occasional gifts, gratuities, or loans of
insubstantial value, given under circumstances or terms unrelated to
the recipient's status in a labor organization.'' This exemption
applies by its terms to all reports due under section 202. The LMRDA
Interpretative Manual (``LMRDA Manual''), as revised in March 2005,
states that anything with a value of $25 or less will be considered de
minimis and therefore not reportable if it is given on an ``infrequent
or sporadic'' basis under circumstances unrelated to the recipient's
status in a labor organization. LMRDA Manual, Sec. 241.700.
The Department sought comments on the de minimis exception
generally and specifically on whether the $25 threshold is appropriate,
whether the burden is reasonable, and whether reporting of all
transactions should be required without regard to their value. 70 FR
51175. In November 2005, following a review of Form LM-30 reports filed
during the Department's grace period, which revealed the reporting of
numerous payments that union members and the public would regard as
trivial, and based on comments from union representatives that the
threshold was too low, the Department issued guidance advising that
``gifts, gratuities or loans with a value of $250 or less'' would be
considered insubstantial for the purposes of Form LM-30 reporting.
In the NPRM, the Department noted the inclusive language used by
Congress in defining the scope of the reporting obligation and the
absence of any general substantiality test for the LMRDA's reporting
provisions. See section 202(a)(3); 29 U.S.C. 432(a) (limiting reports
specific to certain ``substantial'' dealings). The Department also
noted that exceptions based on insubstantiality are commonly read into
statutes that do not expressly contain them and that the financial
disclosure reports for certain Federal government employees contain a
de minimis exemption.
The Department in today's rule retains a de minimis exemption.
Under this exemption, payments or gifts totaling $250 or less from any
one source during the reporting year need not be reported. In addition,
the Department decides that payments or gifts valued at $20 or less
need not be included in determining whether the $250 threshold has been
met. The Department has concluded that a dollar-specific test for de
minimis payments is preferable to one that requires filers to make a
fact-specific determination of what is ``insubstantial'' or ``unrelated
to the filer's status in a labor organization'' or ``sporadic and
occasional.'' The Department also has crafted a limited reporting
exclusion for a union official's
[[Page 36115]]
attendance at ``widely attended gatherings.'' If during the year, an
officer or employee attends one or two widely-attended gatherings for
which an employer has spent $125 or less per attendee per gathering,
the officer or employee has no Form LM-30 obligation with regard to
tracking or disclosing these events. A gathering will be considered
``widely attended'' if it is expected that a large number of persons
will attend and that attendees will include both union officials and a
substantial number of individuals with no relationship to a union or
its section 3(l) trust.
The Department received numerous comments on the de minimis
question, mostly in favor of retaining the exemption and the adoption
of a quantitative threshold substantially higher than the $25 figure
discussed in the NPRM. Particular comments are discussed below.
A few commenters argued that no de minimis level should be adopted
at all. One commenter stated that full disclosure was appropriate
because it allowed a union's members to decide whether a gift to a
union official presented a negligible conflict of interest or not. The
Department acknowledges that there would be some benefit in eliminating
the exception; this change would allow individual union members to
determine whether a particular payment poses a conflict of interest and
more importantly could lead to further inquiry about a union official's
actions. As stated in the NPRM, there is no statutory requirement for a
de minimis level. See Environmental Defense Fund, Inc. v. EPA, 82 F.3d
451, 466 (D.C. Cir. 1996). Nonetheless, abandoning a de minimis
threshold altogether would be a sharp departure from the Department's
historical practice. Moreover, as further discussed below, the
Department believes that elimination of the de minimis exception would
only marginally increase meaningful transparency. Furthermore, the
absence of a specific de minimis exception in section 202 is not
determinative; exceptions based on insubstantiality are commonly read
into statutes that do not expressly contain them, and this practice
demonstrates their practical value. See Wisconsin Dept. of Revenue v.
William Wrigley, Jr., Co., 505 U.S. 214, 231 (1992). For these reasons,
the Department retains the de minimis exception.
Many commenters noted the difficulty of applying the vague de
minimis standard in the old instructions and the historical absence of
helpful guidance in applying the exception. Several requested the
Department to provide at least an illustrative dollar figure and to
explain the meaning it attributes to the terms ``unrelated to the
filer's status in a labor organization'' and ``sporadic and
occasional.'' Some specifically requested the Department to provide
additional examples so that filers could better understand the de
minimis exception. Others argued for a test that was solely tied to the
dollar value of any gift or payment.
As acknowledged in the NPRM, the qualitative aspects of the rule
have proved difficult to apply. Based on its consideration of the
comments and further review of this question, the Department has
concluded that the purposes of section 202 can best be achieved by
modifying the test so that the value of the payment or gift is the sole
consideration affecting its disclosure. Additional conditions for
claiming the exception would often present filers with the burden and
expense of undertaking a fact-specific inquiry even though the amount
of the gift or payment, as recognized by the dollar threshold, is
insubstantial.
Some commenters favored replacing or at least supplementing the de
minimis rule with the creation of broad exceptions to the various
reporting requirements. These commenters requested exceptions for what
they viewed as routine activities necessary for conducting business.
Thus, exceptions, among others, were proposed for the following: any
expenses related to an employee benefit plan including educational
benefits, receptions and meals, routine business functions and
luncheons, all marketing expenses, marketing and entertainment expenses
provided equally to union and management trustees, and any promotional
or branded good containing a company name or logo. Most of these
comments were from employers or industry associations that anticipate
that union officials will rely on the vendors to keep track of any
gifts or payments so that they can readily determine whether they have
incurred a reporting obligation. Another commenter suggested that no
report should be required for any gratuity that would be considered a
``business expense'' by the IRS. One commenter characterized the rule
as ``incredibly burdensome'' and an ``unprecedented imposition'' on
service providers to trusts. Another commenter suggested, in effect,
that the Department should adopt the rules and exceptions provided
under the disclosure rules for Federal employees in place of the
Department's proposed de minimis rule.
Several comments expressed concern about the need to report
educational materials and seminars provided union trustees by vendors
offering or providing services to welfare and pension plans. These
commenters argued that even a high de minimis level would have a
chilling effect because union trustees would refuse the materials or
decline to attend a seminar in order to avoid the recordkeeping and
reporting burden or the perception by union members that the trustee's
attendance would be inappropriate. One commenter suggested that no
report should be required for educational resources provided to union
officials, so long as the sponsoring organization retained a statement
of the educational purpose of the resource, a list of its total
expenses relating to the otherwise reportable event, and if a seminar,
the list of attendees.
The Department declines to create any suggested broad category of
exceptions. Creating the broad exceptions suggested would frustrate the
purpose of the statute to make transparent possible conflicts and would
deny union members the ability to evaluate any concerns they might have
about the possibility that a union official might put his or her own
interests above those of the union and its members. Educational
seminars and resources may benefit trustees to pension or welfare plans
and the workers whom the plan is meant to benefit. The same event,
however, may well include gifts, meals, travel, lodging and
entertainment provided by service providers, or potential service
providers, to these plans. By requiring reporting, the Department need
not attempt the highly difficult task of crafting a rule that will
identify the questionable payments. Rather, union members and the
public can evaluate the situation on a case-by-case basis, and make
their own decisions on the choices made by their officials.
Furthermore, these commenters fail to recognize that the Secretary's
authority to fashion a de minimis exception is a limited one. The LMRDA
does not confer on the Secretary the authority to except from reporting
matters which Congress has evinced no intention to withhold from
disclosure and the de minimis principle, as evidenced by its name, only
applies to matters of relative insignificance. Although the disclosure
rules for Federal employees provide an alternative system for reporting
financial interests that may pose a conflict with an individual's
duties, that system was designed to meet the special needs and
interests of Federal employment and the various laws that govern such
employment. The
[[Page 36116]]
Department has borrowed some ideas from the disclosure rules for
Federal employees but to adopt the Federal disclosure rules wholesale
would be impracticable.
Most of the commenters advocated a dollar threshold substantially
higher than the $25 figure mentioned in the NPRM; many urged a figure
higher than $250. These commenters and others requested the Department
to exclude from the aggregate amount ``hospitality gifts'' of nominal
value, variously defined by particular commenters. Several commenters
urged the Department to adopt a two-tier approach similar to Federal
conflict of interest disclosure requirements for Office of Government
Ethics (OGE) Form 450 and Form SF 278. In general, these commenters
recommended that gifts totaling $250 or less from any one source need
not be reported and that ``insubstantial'' gifts (ranging from $75 to
$250) should not be included in determining whether the $250 threshold
has been met. Otherwise, many commenters argued, the recordkeeping
burden would be unreasonable because union officials would have to
track every cup of coffee and every lunch to determine whether and when
the $250 level was met. The general rule for employees covered by the
Federal disclosure rules is that they are prohibited from accepting any
gift because of their government position. Examples of prohibited gifts
are those that come from persons or firms that have contracts, grants,
or other business with the employee's agency, or are seeking such
contracts, grants or other business. These employees are also
prohibited from accepting gifts from entities that are either regulated
by the employee's agency or may be affected by the performance of the
employee's duties. An exception to this general rule applies to
unsolicited non-cash gifts of $20 or less up to a maximum of $50 per
year from a single source. 5 CFR 2635.204(a).
The Department believes that, by setting the threshold at $250 and
providing that payments or gifts valued at $20 or less need not be
included in determining whether the $250 threshold has been met, it has
achieved the appropriate balance between ensuring transparency of
potential conflicts and minimizing the reporting burden. This two-tier
approach has precedent in the Federal employee disclosure regime. By
excluding expenses of $20 or less from the $250 computation, the
Department substantially reduces the burden associated with aggregating
gifts or payments from a particular employer or business. There will be
no need to keep records of coffee and pastry service, modest lunches,
or similar ``hospitality gifts.''
Some commenters expressed the concern that requiring large numbers
of reports on relatively small amounts of payments ``buries'' from view
reports of greater value. The Department believes this fear is
unfounded, especially in light of the $250 aggregate threshold
established by today's rule. Even at a much lower figure, the number of
reports of interest to a particular union member would constitute only
a small fraction of the total number of reports filed and these reports
could easily be culled electronically from the other reports.
The Department does not find persuasive the comments urging that
payments higher than $20 should be excluded from the $250 reporting
threshold. While there may be merit to some arguments urging a somewhat
higher or lower amount, a $20 initial threshold minimizes reporting
burden and ensures disclosure of financial relationships that may pose
a conflict of interest. The Department, however, rejects the suggestion
that items valued substantially more than $20 should go unreported.
While in the Department's view, a single gift of $75 or even $100 is
unlikely to be a matter of substantial concern to some members, even a
few gifts of this magnitude would be of concern to most members. And
almost every member would be concerned if a union official received
several gifts of such value. By setting the amount at $100, for
example, a union official could receive a respectable set of golf
clubs, gloves, shoes, and other golfing attire through a series of $100
gifts without filing a Form LM-30. Most union members and members of
the public, the Department believes, would view the gift of a complete
set of clubs or other serial or packaged gifts as posing a potential
conflict of interest between the union duties of the recipient and
matters affecting the donor of the gifts.
The purpose of the de minimis exception is to minimize reporting
burden. A filer may not use the exception to hide the receipt of a
series of payments or gifts that are purposely set at $20 or less to
avoid reaching the $250 reporting threshold. For example, a filer would
have to report his or her receipt of individual tickets worth $20 or
less to all of a professional baseball team's home games that are
provided before each game rather than given as a complete package at
the start of the season. The Department is sensitive to the concern
that by setting the de minimis level at $250 today's rule could lead to
the unintended consequence that some union officials will choose not to
attend some widely-attended gatherings of value to them and their
union's members. However, the Department also believes that reporting
attendance at legitimate educational gatherings will also benefit the
filer by showing their union members that the filer is taking steps to
learn and advance the skills needed for their position. As stated
above, the Department's authority to fashion a de minimis exception is
constrained by the language of section 202. In the Department's view,
however, the Department is within the bounds of its discretion to craft
a limited reporting exception for such gatherings. Thus, the Department
concludes that no union official need report their attendance at one or
two such gatherings annually provided the expense incurred by the
employer or business holding the gathering is $125 or less per expected
attendee. The Department believes this change meets the concern of some
commenters that union officials and trustees would be discouraged from
attending educational seminars related to their union or trustee duties
if they were required to report such activities. The Department
considered, but rejected as impractical and perhaps beyond the
Department's authority, a broader qualitative exception for meetings.
None of the comments provided a ready basis for distinguishing between
the purposes of various meetings that would reduce the reporting burden
without impeding the disclosure of information relevant to assessing
the potential conflict of interest from the value of attendance at
several meetings or a single meeting of significant economic value to a
union official present at the meeting.
D. Why Reporting Exceptions Permitted Under the Old Rule Have Been
Eliminated or Modified To Provide More Information to Union Members
In the NPRM, the Department proposed the elimination of regulatory
exceptions from the reporting requirements of section 202. One of these
exceptions relates to the reporting by union officials of payments
received under ``union-leave'' and ``no-docking'' policies; this
exception is discussed separately. Although each exception is based on
statutory language excepting the reporting of specific interests in or
payments from an employer, the old Form LM-30 and its instructions
apply these specific exceptions more generally to other matters that
otherwise would have to be reported. As discussed in the NPRM, by
administratively enlarging exceptions to reporting, the Department
deprived union members of information
[[Page 36117]]
to which they were entitled under particular provisions of section 202.
70 FR 51175-78. The Department also proposed to eliminate a provision
in its regulations, 29 CFR 404.4, which now states that the Department
may require a union official to file a special report in situations
where the administrative exceptions departed from the language of the
statute. 70 FR 51178.
Under today's rule, as discussed below, the Department generally
has adopted the proposals set forth in the NPRM to narrow the scope of
these exceptions in order to better adhere to the statutory design. The
Department also has eliminated the ``special reports'' language as
unnecessary given the Department's express statutory mandate to conduct
investigations under the Act.
1. Regular Course of Business Exception
Section 202(a)(5) of the LMRDA requires union officials to report
any ``business transaction or arrangement'' with an employer whose
employees the union represents or is actively seeking to represent.
This section excepts from reporting two categories of transactions and
arrangements: (1) Payments and benefits received as a bona fide
employee of an employer whose employees the official's union represents
or is actively seeking to represent; and (2) ``purchases and sales of
goods or services in the regular course of business at prices generally
available to any employee of such employer.'' (Emphasis added).
Sections 202(a)(1) and 202(a)(2) require union officers and employees
to report payments from and other financial interests with such an
employer. These sections do not contain this ``employee discount in the
regular course of business'' exception, but the prior instructions
applied it to financial matters covered by these subsections.
The Department adopts its proposal to limit the exception to
financial matters reportable under section 202(a)(5). Thus, this
exception will no longer apply to matters reportable under sections
202(a)(1) or 202(a)(2). It will not be applicable to (1) Holdings in an
employer whose employees the union represents or is actively seeking to
represent, (2) transactions in such holdings, (3) loans to or from such
employer, and (4) income or any other benefit with monetary value
(including reimbursed expenses) received from such an employer.
The Department received a few comments specific to this issue. One
commenter supported the proposal to remove the exception, while two
others objected to the proposal. One commenter based its support of the
Department's proposal in the statutory language, noting that the
``regular course of business/employee discount'' exception is found
only in section 202(a)(5) and not in sections 202(a)(1) and 202(a)(2).
Therefore, this commenter contended, ``the current instructions create
an exception for transactions under the latter two subsections that
Congress did not envision.'' Numerous commenters objected generally to
reporting related to the routine conduct of business, especially in
connection with business conducted between section 3(l) trusts and
service providers, including financial institutions. For example, one
commenter asserted that the Department should not focus on ``routine
business transactions conducted at arms length,'' but rather on those
transactions that may be evidence of a potential conflict of interest.
One commenter offered a general argument against reporting of what
it considers to be routine business transactions, including payments or
loans to union officials. The commenter argued, in effect, that the
proviso in section 202(a)(6), excepting reporting on ``payments of the
kinds referred to in section 302(c) of the Labor Management Relations
Act,'' should be applied broadly to all the subsections of section
202(a). Thus, this commenter argues implicitly that section 302(c) of
the Labor Management Relations Act excepts from the section's criminal
prohibition the payment of money or other thing of value ``with respect
to the sale or purchase of an article or commodity at the prevailing
market price in the regular course of business.'' 29 U.S.C. 186(c)(3).
This commenter apparently believes that Congress also intended to
exclude such payments from any reporting by union officials,
notwithstanding the absence of such exception from subsections (a)(1)-
(5) of section 202.
The Department disagrees that Congress intended the section 302(c)
proviso in section 202(a)(6) to supplant the specific reporting
obligations prescribed by the other five subsections of section 202(a),
several which have unique exceptions narrowly applicable to the types
of payments for which reports must be filed. The Department concludes
that this construction is contrary to the plain language of the Act,
and would render superfluous specific exclusions Congress crafted for
particular types of payments. It would make no sense for Congress to
craft a disclosure-specific statute with explicit reporting obligations
and explicit exceptions and, at the same time, undo those specific
provisions by a vague reference to another statute.
Union members have an interest in knowing of such holdings,
transactions in holdings, loans, and income so they can evaluate
whether each is significant enough, or of such a nature, to constitute
a conflict of interest. The statutory exemption for payments and other
benefits received as a bona fide employee of the employer is sufficient
to exempt all the ordinary payments received as part of an employment
relationship; the exemption in the current form, the Department finds,
may provide a means to exclude other items that present conflicts of
interest for union officials. For example, a union officer who receives
income from the employer of union members for contract work could, at
least arguably, avoid disclosing the payment by relying on this
exemption. A union employee who purchases certain types of ownership
interests could avoid disclosing the holding by relying on this
exemption. A union official with an employer as a client has a conflict
between personal interests and union loyalties, as does an official
with an ownership interest in the employer. The change is consistent
with the plain language of the statute, which applies this exception
only to financial matters reportable under section 202(a)(5), not to
section 202(a)(1) or 202(a)(2). The elimination of this exemption will
result in more detailed and transparent reporting of financial
information that union members may find helpful in determining whether
their union's officers and employees are subject to financial pressures
inconsistent with their responsibilities to the union and its members.
2. Bona Fide Employee Exception for Transactions With an Employer Whose
Employees the Official's Union Represents or Is Actively Seeking To
Represent
Sections 202(a)(1) and 202(a)(5) include language that specifically
excepts ``payments and other benefits received as a bona fide employee
of such employer'' from reporting. Under the old Form LM-30 and the
instructions, however, this exception also was applied to matters for
which reports were required under section 202(a)(2). Section 202(a)(2)
requires union officials to report: (1) Transactions in holdings in an
employer whose employees the union represents or is actively seeking to
represent, and (2) loans to or from such an employer. Section 202(a)(2)
does not include the ``bona fide employee'' exception.
[[Page 36118]]
The Department proposed to limit this exception only to reports due
under sections 202(a)(1) and 202(a)(5), thereby eliminating the old
exception for reports (on payments other than loans) due under section
202(a)(2). See 70 FR 51176-78, 51188. The Department received only one
comment on this issue. It supported the proposal. Today's rule adopts
the proposal, which is consistent with the plain language of the
statute. A union official's decision to purchase or divest holdings in
the employer could be of significant importance to union members and
its reporting would prevent a possible conflict from escaping the
scrutiny of members. As noted in the proposal, sales and purchases of
an ownership interest in the employer are unlikely to constitute
payments received as a bona fide employee; by eliminating this
exception, a union official must now, for example, report payments made
to officials as stock options where the employer buys back such
options.
3. Exception for Bona Fide Loans or Interest From a Banking Institution
Section 202(a)(6) requires union officials to report ``any payment
of money or other thing of value (including reimbursed expenses)''
received from ``any employer'' or any labor relations consultant to an
employer. Under the old Form LM-30 and its instructions, the following
are excepted from reporting: ``[B]ona fide loans, interest or dividends
from national or state banks, credit unions, savings or loan
associations, insurance companies, or other bona fide credit
institutions.'' See Part C (ii) of the instructions to the old form.
The Department proposed to eliminate the exemption.
Upon review of the comments, the Department retains the general
exception but limits its scope because the Department has determined
that the exception is too broad. Under the final rule, this exception
will not apply to ``national or state banks, credit unions, savings or
loan associations, insurance companies, or other bona fide credit
institutions that constitute a `trust in which your labor organization
is interested'.''
The Department received two comments in support of the proposal to
eliminate this exception in toto. One commenter argued that the
exception in the Form LM-30 instructions had no statutory basis, and
that its existence tended to shield transactions that should be
reported. The Department received four comments opposed to this
proposal. These commenters stated that the elimination of this
exception would burden union officers and employees, employers, and the
Department; interfere with the privacy of the employees as well as the
financial institutions by revealing confidential information; and fail
to advance the goal of disclosing potential conflicts of interest. One
commenter argued that the Department's proposal to eliminate the
exception was an ``unwarranted intrusion on privacy,'' while providing
only minimal benefit to union members. This commenter questioned why
the public should be made aware of a ``bona fide mortgage'' from a
financial institution unrelated to the union and given on terms
generally offered to the public. Most mortgages along with other
encumbrances on property must be recorded with a government office,
typically at the county level, to be effective. These filings are
publicly available and as such the insinuation that the Department is
now making public information that was secret is unfounded. Further,
the vast majority of these loans will be made on neutral criteria not
related to the filer's status with a labor organization and as such
will not be reportable. The rare instance where the filer's status with
the labor organization is a criterion for issuance of the loan is
exactly the type of situation where a possible conflict of interest
exists. As such, reporting on transactions of this type is warranted.
Another commenter recommended that the Department only require
reporting of loans made to employees in whole or in part due to their
union status. The commenter expressed concern over the volume and
diversity of new transactions that would come under the scope of the
new Form LM-30, such as payroll advances, and the burdensome
recordkeeping requirements that would accompany the elimination of this
exception. One commenter argued that the ``overwhelming majority'' of
the estimated 206,000 union officers and employees would now have to
report under the new Form LM-30.
The Department has concluded that the exception as drawn in the
instructions to the old Form LM-30 is too broad. While there is a
strong argument that elimination of the exception would best serve the
disclosure purposes of the Act, the total burden associated with
requiring reports on payments received from all financial institutions
would be considerable. Loans, interest, and dividends earned during the
regular course of business with a bona fide financial institution are
among the most common financial transactions undertaken by individuals.
For example, without this exception, a union official would have to
report each mortgage or other bank loan received from any financial
institution in competition with a financial institution that deals with
the official's union. A union official would first have to identify all
the financial transactions with the official, his or her spouse or
minor children and then look at the corresponding institutions to see
whether they do business with the official's union, or compete with
those that deal with the official's union. In the Department's view,
the burden would outweigh the value of the additional information
disclosed.
The current exception has kept improper transactions from being
disclosed. As noted in the NPRM, the Department only belatedly became
aware of a situation where a credit union controlled by a local union
made 61% of its loans to four of its loan officers, three of whom were
officers of the local. 70 FR 51177. If the officials had been required
to report these loans, the members would have learned that their credit
union was making loans for reasons related to union status, not on a
borrower's ability to repay the debt, which posed a risk to the credit
union by failing to spread the lending risk more broadly. In short, the
members would have been able to determine whether the officials had
placed their own personal interests above the union's interest in the
credit union that it ostensibly controlled. By eliminating the
exception for institutions that are trusts, valuable information
regarding potential conflicts of interest will be publicly disclosed.
While the Department recognizes that an official's interest in
preserving the confidentiality of such information may be considerable;
nonetheless, this interest is outweighed by the need for union members
and the public to know of transactions between union officials and
related organizations. Thus, here the balance tips in favor of
disclosure in the limited situations proposed by today's rule.
This exception applies, and has always applied, only to reports due
under section 202(a)(6). Where the financial institution is an employer
whose employees the filer's union represents or is actively seeking to
represent, the exception would not apply. Nor would it apply where the
financial institution is a business that buys, sells, leases or
otherwise deals with the union, a trust in which the union is
interested, or in substantial part with the employer of the union
members.
One commenter ``strongly'' disagreed with the proposal, arguing
that it would impose a reporting obligation on union
[[Page 36119]]
officials, even though financial institutions are expressly relieved
from reporting such loans by section 203(a)(1) of the Act. Section
203(a)(1) specifically exempts ``payments or loans made by any national
or State bank, credit union, insurance company, savings and loan
association or other credit institution.'' The commenter pointed out
the potential ``reporting inequities'' of the Department's proposal and
argued that the inconsistent reporting obligation would make
comparative analysis of Forms LM-10 and LM-30 impossible. The
Department acknowledges that by modifying the exception, union
officials will be required to report on matters about which the
financial institutions themselves have no LMRDA reporting
responsibility. However, the commenter overlooked the limited scope of
the divergence. Section 203(a)(1)'s exception for ``credit
institutions'' does not extend to any payments or loans made by such
institutions to persuade or otherwise interfere with employee
collective bargaining or representation rights. See 29 U.S.C. 203(a)(2)
and (3). Furthermore, strong policy reasons exist for requiring union
officials to report their arrangements with financial institutions in
the limited circumstances required by today's rule.
4. Exceptions Relating to Stocks
The Department invited comments about whether to remove or retain
the administratively created exception related to the reporting of
holdings, transactions or receipts of income from securities that do
not meet the registration requirements of the Act, are of insubstantial
value, and occur under terms unrelated to an employee's status in a
labor organization. The old rule states: ``For purposes of this
exclusion, holdings or transactions involving $1,000 or less and
receipt of income of $100 or less in any one security shall be
considered insubstantial.'' 70 FR 51176.
On a related issue, the Department sought comments on whether to
retain the distinction between, on the one hand, securities traded on a
registered national stock exchange and, on the other hand, securities
that while traded on a high volume exchange, are not traded on a
registered national exchange (as was the case with NASDAQ until
recently). 70 FR 51177. Section 202(b) provides that a union official
is not required ``to report his bona fide investments in securities
traded on a securities exchange registered as a national securities
exchange under the Securities Exchange Act of 1934, in shares in an
investment company registered under the Investment Company Act of 1940,
or in securities of a public utility holding company registered under
the Public Utility Holding Company Act of 1935, or to report any income
derived therefrom.'' The NPRM listed all of the stock exchanges
currently registered under the Securities and Exchange Act of 1934:
``The American Stock Exchange, Chicago Board Options Stock Exchange,
International Securities Exchange, National Stock Exchange (formerly
the Cincinnati Stock Exchange), New York Stock Exchange, Pacific
Exchange, and Philadelphia Stock Exchange.'' The proposal noted that
NASDAQ was not registered as a national securities exchange.
Two commenters favored the complete elimination of the
insubstantiality exception for securities not meeting the registration
requirements. One of these commenters argued that the insubstantiality
exception flies in the face of clear statutory intent to require the
reporting of all stock transactions apart from bona fide investments in
securities traded on a national securities exchange. The other
commenter argued that union members, not this Department, should
determine what is and is not insubstantial. One commenter also
supported the exception for small holdings of unregistered securities
as long as the holdings are too small to give rise to a controlling
interest. Focusing on the comprehensibility of the exceptions to ``end-
user'' union officials and members, another commenter stated that the
``$1,000/100'' and ``publicly-traded securities'' exceptions are
specific and easily understood. By contrast, all of the union
commenters, along with a labor educator, favored the exception and
supported its broadening.
The Department believes that the $1,000/$100 exception is
warranted, and therefore it is retained in today's rule. Where the
value of securities and any interest thereon is less than these
threshold amounts, there is little risk of potential conflict between
an official's personal interests and his or her duties to the union.
Moreover, any such risk is outweighed by the burden associated with
such reporting. Thus, for these and the reasons already expressed more
generally herein on the application of the de minimis principle to the
reporting obligation, today's rule retains this limited reporting
exception.
One commenter objected to maintaining the exception for stock
traded on other than a registered, national stock exchange on the
ground that the statute does not provide for such an exception. Another
commenter argued that there should be no exceptions for transactions
involving the stock of the employer, regardless of whether the stock is
traded on a registered securities exchange. This commenter expressed
concern about the potential for insider trading by union officials who
have knowledge about the position of the company that the rank and file
members do not have. In support of his position, the commenter provides
an example in which members of a union executive board sell stock
options in a national exchange or private exchange shortly before
authorizing a strike against the company that issued the stock.
Other commenters argued that the existing exception for securities
traded on a registered, national stock exchange should be continued and
extended to cover stock transactions for shares traded on NASDAQ. All
of the union commenters, along with a labor educator, favored the
exception and supported broadening it. A commenter supported
maintaining the exception for stock that is held in a company unrelated
to the filer's labor organization because, in its view, there is no
potential for a conflict of interest. In support of their position,
they argued that the LMRDA's legislative history demonstrates that
Congress did not want to burden officials with reporting holdings of
publicly traded or regulated stocks ``because of the unlikelihood that
such holdings will amount to a substantial or controlling interest * *
* in the company in question. The argument follows that because NASDAQ
securities are publicly regulated and publicly traded, they fall within
the purview of what Congress sought to exempt from reporting under
section 202(b). One commenter illustrated its position with the
different reporting requirements that would apply if a union official
owned both Gateway and Dell stock: the Dell stock (traded on NASDAQ)
would be reported, whereas the Gateway stock (traded on the NYSE) would
not be reported. According to this commenter, there is no conflict of
interest in either instance, and accordingly neither transaction should
be reported. Another commenter noted that when the LMRDA was enacted in
1959, the shares of large corporations were exclusively traded on
registered exchanges. It explains that now, however, the shares of many
of those same large corporations are traded on the NASDAQ and that
shares traded on NASDAQ are subject to Federal registration
requirements.
The Department retains the rule set forth in the instructions to
the old rule, continuing the obligation of union officials to report
transactions with any
[[Page 36120]]
exchange unless and until they meet the requirements embodied in
section 202(b). As a pure matter of policy, the argument for adding
securities traded on a highly regulated, albeit ``unregistered,''
market to the general exception for stock traded on a registered,
national stock exchange may have merit. However, such argument founders
on the plain language used by Congress to craft the exception for
securities traded on a registered exchange as provided in the statute.
By conditioning a reporting exception on registration, Congress
obviously considered whether unregistered stocks should be similarly
exempted and decided against it. Similarly, the statutory language
prevents the Department from adopting a rule, as suggested by one
commenter, to require officials to report their holdings in such
securities that he or she has purchased in a company whose employees
the official's union represents or is actively seeking to represent.
Although the commenters have demonstrated that the exception
crafted by Congress, differentiating between certain kinds of stock
depending upon how they are traded, may lead to some perceived
anomalies, they do not show that this reporting obligation will impose
any undue burden on filers. Furthermore, on July 15, 2006, the SEC
approved NASDAQ's application for registration as a national securities
exchange, effective July 31, 2006. In announcing its decision, the SEC
stated that the ``vast majority'' of the companies listed on NASDAQ
have previously registered their securities under the Exchange Act.
Press Release, SEC (July 31, 2006), available at http://www.sec.gov/news/press/2006/2006-127.htm
(last visited on Nov. 21, 2006). Thus,
under today's rule, the exception provided by section 202(b) applies to
registered stocks traded on NASDAQ; and the instructions have been
revised to reflect this change. As some of the commenters suggested,
the distinction between highly regulated stocks that are traded on a
national, but unregistered exchange, and those traded on a registered
national exchange is not immediately apparent to many filers,
particularly insofar as NASDAQ-traded securities were concerned. The
Department believes that its proposed definition of ``publicly-traded
securities'' (albeit something of a misnomer in that registration of a
national exchange, not ``public trading,'' is the distinguishing
characteristic for reporting purposes) accurately set forth the
statutory reporting obligation. At the same time, however, the change
in the registration status of NASDAQ has largely eliminated the need
for a lengthy discussion of this point in the instructions. For this
reason, the final instructions more closely follow the abbreviated
discussion of this point in the current instructions, without the need
for a separate definition of ``publicly-traded securities'' or an
equivalent term.
5. Revision of Special Report Language
As noted, the old Form LM-30 administratively excepts union
officials from reporting various matters that otherwise would have to
be reported under the particular subsections of section 202(a). A
special report was intended to be used to obtain such information about
such unreported matters upon demand of the Department. See 29 CFR
404.4. The Department proposed to delete the special report provision.
At the time the Form LM-30 was created, the Department apparently
believed that more complete reporting, consistent with the reporting
requirements of section 202, could be realized through an ad hoc
special report that could be selectively required by the Department.
See 29 CFR 404.4. As discussed in the NPRM, these reports would allow
the Department to require the disclosure of the information that was
exempted from disclosure by operation of the administrative exceptions.
No procedures were established, however, to identify the circumstances
for which a special report would be required; and apparently the
Department has never requested a union official to provide a special
report. As noted in the NPRM, the elimination of the special report
provision does not diminish the Department's authority to assess each
Form LM-30 report for sufficiency, require amended reports, and to
commence investigations where it is necessary to determine whether any
person has or is about to violate any provision of the Act. 29 U.S.C.
440, 521.
E. Why Union Officials, as a General Rule, Must Report Payments
Received as Members of a Company's Board of Directors
If a union official serves as a director for an employer and
receives compensation or reimbursement for attendance at meetings, the
official must report such payments. Such payments may not have been
reported on the old Form LM-30 because of an official's reliance on an
earlier opinion by the Department on this issue. In the NPRM, the
proposed instructions provided the following example of a transaction
to be reported under section 202(a)(4):
You are a national union president and a trustee of a jointly
administered health care trust that insures union members through an
insurance company. Premiums for coverage are paid by the trust to
the insurance company. You are a member of the board of directors of
the health insurance company, which pays you an annual fee and
reimburses expenses for your attendance at board meetings. * * * As
the insurance company is doing business with a trust in which your
union is interested, you must report your annual fee and reimbursed
expenses under this subsection. The dealings between the health
insurance company and the trust must also be reported.
70 FR 51215.
The Department only received one comment on this point. The
commenter opposed the proposal, arguing that the Department should
confirm its 1986 opinion that directors' fees paid to union officers
serving on a corporate board need not be reported ``so long as the
corporation pays the union officer/director at the same rate it pays
the other directors, for the same services.'' The opposition was based
on the commenter's broader premise that Congress intended to generally
except any payments to union officials that are made in the regular
course of business. The Department disagrees.
In the commenter's view, the old Form LM-30, in effect, applies
language in section 202(a)(5)--excepting from reporting certain
transactions involving the ``purchases and sales of goods or services
in the regular course of business at prices generally available to any
employee of [the] employer'' who sold the goods or service--to modify
generally the reporting obligations under section 202. The commenter
argued that the instructions to the old Form LM-30 also apply, in
effect, language in section 202(a)(6)--excepting from reporting certain
payments ``of the kinds referred to in section 302(c) of the Labor
Management Relations Act''--to modify generally the reporting
obligations of section 202. The commenter, in essence, asserts that the
instructions to the old form, like the 1986 opinion on directors' fees,
which draws on similar language in section 302(c), properly effectuate
the intent of Congress and therefore should be preserved. The commenter
further asserts that there is no justification for additional
recordkeeping and reporting if the union representatives are being
treated the same as their fellow directors on a corporate board.
The Department disagrees with this commenter's opposition to this
reporting requirement. The commenter's reference to the 1986 opinion on
directors' fees refers to a letter by a senior Department official
responding to
[[Page 36121]]
a request for an opinion concerning directors' fees paid to union
officers serving on a corporate board. The official concluded that ``so
long as the corporation pays the union officer/director at the same
rate that it pays the other directors, for the same services,'' the
payments are not reportable. The opinion letter reversed a 1983
determination by another senior Department official that the fees must
be reported. After again carefully reviewing this question and the
example discussed above in the NPRM, the Department concludes that the
NPRM correctly illustrated a payment that is required under section
202(a)(4) (a business dealing directly or indirectly with an official's
union) and section 404.2 of the Department's regulations on reporting
by union officials (a business dealing with a section 3(l) trust that
involves the official's union).
If a union official serves on an employer's board of directors and
receives a fee, the employer has made a payment to a union official.
Such payments are typically not of the kind referred to in section
302(c) because the exception concerning compensation to employees is
not applicable unless the director is employed by the company on whose
board he or she sits, an atypical status for a corporate director.
Further, directors' fees are not an article or commodity, and it is
questionable whether such payments for these types of personal services
can be said to have a prevailing market price. Significantly, these
payments raise potential questions of a conflict of interest, due to
the employer's role in selecting the directors and setting the amount
of the fee. A union member has an interest in knowing whether decisions
made by his or her union officials may have been affected by the
official's competing personal financial interest. The commenter's
contention that no report should be filed where union-affiliated
directors receive the same compensation as non-union directors is not
persuasive. The LMRDA's reach extends only to regulating the conduct of
union officials, not to setting general standards of corporate
governance.
Thus, under today's rule, no separate reporting exception is made
for directors' fees. A union official must report his or her receipt of
directors' fees when made by an employer whose employees the payment
recipient's union represents or is actively seeking to represent.
Sections 202(a)(1), (2) and (5). Such fees will also be reportable when
made by a business, a substantial part of which consists of buying,
selling, or otherwise dealing with an employer whose employees the
payment recipient's union represents or is actively seeking to
represent, or any part of which consists of buying, selling, or
otherwise dealing with the recipient's union, or a trust in which the
recipient's union is interested. Section 202(a)(4). Finally, as
discussed in greater detail, the official must report his or her
receipt of directors' fees from an employer defined by this rule under
202(a)(6) including an employer in competition with an employer whose
employees the payment recipient's union represents or is actively
seeking to represent.
F. Why Officers of International, National, and Intermediate Labor
Unions, in Addition to Their Obligation to Report Payments and Other
Financial Benefits Received From Businesses and Employers That Have a
Direct Relationship With the Component of the Union to Which They are
Elected or Appointed, Must Also Report Payments and Other Financial
Benefits Received From Businesses and Employers Whose Relationship Is
With a Subordinate Body of Their Union
In the NPRM, the Department proposed to clarify the obligation of a
union official to report his or her interests in and payments (and
those of the official's spouse and minor children) from employers and
businesses that have a relationship with the official's union, albeit
at a different hierarchical level than the level at which the official
serves as an officer or employee. Under sections 202(a)(1) through
(a)(5), union officers and employees must report payments from,
holdings in, or transactions with: (1) An employer whose employees the
filer's labor organization represents or is actively seeking to
represent; (2) a business a substantial part of which consists of
dealing with an employer whose employees the filer's labor organization
represents or is actively seeking to represent; or (3) a business that
deals with the filer's labor organization or a trust in which the
filer's labor organization is interested. The scope of the reporting
obligation thus depends on what organization constitutes the filer's
``labor organization.'' As explained in the NPRM, many labor
organizations consist of a three-tier hierarchy, such as a local labor
organization, an intermediate body, and a national or international
labor organization. 70 FR 51182. The NPRM explained that the
Department's proposal clarifies the reach of the disclosure obligation
to include conflicts that arise between a union official and his or her
responsibility to both the immediate unit of the union that he or she
serves and any of its parent or subordinate bodies. The NPRM noted that
the LMRDA Manual provides that an officer at the highest tier of a
three-tier labor organization must report payments from businesses that
deal with employers whose employees are represented by a subordinate
union local. ``An international union officer must report his income
from [a] business [that has dealings with an employer whose employees a
local union represents] even though he is not an officer of the local
which represents the employees of the business, and even though his
duties as an international officer do not include representation
activities.'' LMRDA Manual, Sec. 241.100. The proposed rulemaking
noted that members of an LMRDA-covered labor organization would have an
interest in knowing if a subordinate labor organization purchases goods
or services from a business entity owned by a higher level labor
organization officer because local union personnel may choose to deal
with this business entity out of fear of alienating the higher level
officer. 70 FR 51183.
The old instructions are silent about the obligation of an officer
or employee to report interests or income from businesses that have a
relationship with parent or subordinate labor organizations of the
filer's immediate union body, i.e., the particular component of the
official's union in which he or she holds office or is employed. See 29
U.S.C. 432(a)(4). In the same way, the instructions are silent as to
whether labor unions affiliated with that of the union officer or
employee are encompassed by the phrase ``an employer whose employees
such labor organization represents or is actively seeking to
represent.'' See 29 U.S.C. 202(a)(1), (2), (5) (emphasis added). The
Department proposed to establish a rule requiring a union official to
report payments he or she received from a business or employer that had
a relationship with any component of the overall union hierarchy to
which the official belongs or whose employees any components of that
union represent or are actively seeking to represent. To accomplish
this result, the Department proposed to define ``labor organization,''
for purposes of Form LM-30 reporting as ``the local, intermediate, or
national or international labor organization that employed the filer,
or in which the filer held office, during the reporting period, and any
parent or subordinate labor organization of the filer's labor
organization.'' 70 FR 51174.
Commenters were divided on the proposal, with most opposed to what
[[Page 36122]]
they viewed as an expanded reporting obligation. Representative of the
comments favoring the proposal is the following: Union members deserve
to know whether union officers or employees ``receive benefits from
businesses whose employees are represented by, or are actively seeking
to be represented by, a parent or subordinate union, to form an opinion
about whether a conflict of interests exists.'' Representative of the
opposing viewpoint is the following: Union officers do not have the
resources to ``trace the repercussions of each potentially reportable
interest * * * up or down the organizational hierarchy and throughout
the national marketplace.'' As discussed below, the Department has
decided to modify the reporting obligation by excluding local officials
from reporting financial interests in businesses and employers that are
involved with higher level components of their union's hierarchy and
clarifying and reducing the reporting obligation of officials of
national, international, and intermediate level unions. Thus, the
Department has narrowed the reporting obligation from that proposed in
the NPRM by adopting the existing ``top-down'' approach. See LMRDA
Manual, Sec. 241.100.
The Department adopts a revised definition of ``labor
organization,'' which reads in the instructions as follows:
Labor organization means the local, intermediate, or national or
international labor organization that employed the filer, or in
which the filer held office, during the reporting period, and, in
the case of a national or international union officer or an
intermediate union officer, any subordinate labor organization of
the officer's labor organization. Item 6 of the Form LM-30
identifies the relationships between employers and ``your labor
organization'' or ``your union'' that trigger a reporting
requirement. Item 7 of the Form LM-30 identifies the direct and
indirect relationships between a business (such as a goods vendor or
a service provider) and ``your labor organization'' that trigger a
reporting requirement. The terms ``your labor organization'' and
``your union'' mean:
a. For officers and employees of a local labor organization.
Your local labor organization.
b. For officers of an international or national labor
organization.
Your national or international labor organization and all of its
affiliated intermediate bodies and all of its affiliated local labor
organizations.
But note: A national or international union officer does not
have to report, payments from, or interests in businesses that deal
with employers represented by, or actively being organized by, any
lower level of the officer's labor organization. Such officers are
also not required to report payments and other financial benefits
received by their spouses or minor children as bona fide employees
of a business or employer involved with a lower level of the
officer's labor organization.
c. For employees of a national or international labor
organization.
Your national or international labor organization.
d. For officers of intermediate bodies.
Your intermediate body and all of its affiliated local labor
organizations.
But note: An officer of an intermediate body does not have to
report payments from or interests in businesses that deal with
employers represented by, or actively being organized by, any lower
level of the officer's labor organization. Such officers are also
not required to report payments and other financial benefits
received by their spouses or minor children as bona fide employees
of a business or employer involved with a lower level of the
officer's labor organization.
e. For employees of an intermediate body.
Your intermediate body.
The first sentence of the definition is also adopted as part of the
definitions section of the Department's regulations (to be codified as
29 CFR 404.1(f)). A summary of the principal comments on this issue and
the Department's response to the comments follows.
Some commenters expressed a belief that the proposed definition is
not supported by the statutory definition of ``labor organization'' at
section 3(i). Instead, they argued that the term ``labor organization''
refers to the immediate labor organization of the filer, exclusive of
any parent and subordinate entities. A commenter claimed support for
its argument in the legislative history of the LMRDA, specifically the
Senate Report, which discusses the conflict of interest that develops
when a union officer is involved in collective bargaining with a
business in which he or she has a financial interest. Id., at 15,
reprinted in 1 Leg. History, at 411. Some commenters argued that
interests and payments that would be reported under the Department's
proposal do not present conflicts of interest; one commenter explained
that transactions involving parent and subordinate organizations are
not reportable because the union officer is not bargaining on behalf of
those organizations.
The Department is not persuaded that the language of the statute
compels, or even that it can be best read to support, the conclusion
that Congress intended to confine a union official's reporting
obligation solely to the entity of a national or international union to
which a particular union official is elected, appointed, or hired. As
defined by the Act:
``Labor organization'' means a labor organization engaged in an
industry affecting commerce and includes any organization of any
kind, any agency, or employee representation committee, group,
association, or plan so engaged in which employees participate and
which exists for the purpose, in whole or in part, of dealing with
employers concerning grievances, labor disputes, wages, rates of
pay, hours, or other terms and conditions of employment, and any
conference, general committee, joint or system board, or joint
council so engaged which is subordinate to a national or
international labor organization, other than a state or local
central body.
Section 3(i); 29 U.S.C. 402(i). This definition, broad in scope,
does not answer the question posed by the Department's proposal.
Section 3(i) serves mostly a functional purpose, to distinguish labor
organizations from other groups or associations to which employees may
belong by focusing on the organization's purpose and activities to
collectively represent the employees in their dealings with employers
about matters affecting various aspects of its members' employment.
Section 3(j) of the Act, 29 U.S.C. 402(j), albeit focused on the nexus
between an organization and its effect on interstate commerce, is more
helpful in discerning whether Congress proceeded upon a general premise
that it was creating rights and obligations that would be specific to
only a particular component of a larger organization, i.e., legislating
on a separate, component-by-component basis. If Congress had that
intent, the Act should provide precise boundaries between entities that
otherwise are often combined in everyday usage. The statute, however,
does not contain such precision. Congress instead took an approach,
consistent with the common understanding of the term ``labor
organization'' and its flexible usage in which the existence and
overlapping responsibilities of entities that constitute or comprise a
labor organization are inferred unless otherwise indicated. Thus,
Congress understood that a union engages in representation through
various means, including certification, or through the employer's
``recognition or acting as the representative of employees.'' Id. This
section also recognizes that the term ``labor organization'' includes a
``local or subordinate body'' to such an organization and a higher body
of which it is part. See sections 3(j)(1) through 3(j)(5).
As section 3(j) recognizes, the term ``labor organization''
requires a flexible meaning, depending upon the particular context in
which it is used. For example, while section 101 of the Act establishes
a bill of rights conferring on ``every member'' of a labor organization
``equal rights and privileges within such organization,'' it obviously
does not
[[Page 36123]]
create for every member of a national ``labor organization,'' the same
rights as members of a particular component of the organization in
voting for that component's officers, but it does confer such rights
insofar as they are exercised within the ``larger organization.'' In
contrast, section 104 takes a different approach; in imposing on a
``labor organization'' the duty to provide copies of collective
bargaining agreements, it distinguishes between the particular duty
``in the case of a local labor organization'' and the duty ``in the
case of a labor organization other than a local labor organization.''
This approach obviously contrasts with the approach taken by Congress
in crafting the reporting obligation to file labor organization annual
financial reports in section 201 of the Act. Although the filing
obligation is cast in terms of ``each labor organization,'' the context
makes clear that the obligation applies to the financial affairs of a
particular component of a labor organization. With respect to section
202, the context does not make clear whether the obligation is limited
to a particular component of the union or not. Each of the particular
requirements may be applied to an official's ``immediate labor
organization'' or the ``larger labor organization'' to which the
official belongs. As discussed below, the Department believes that this
ambiguity, based on its review of the statute's legislative history and
public policy considerations, should be resolved in favor of
disclosure. At the same time, as discussed below, the Department has
taken into account the burden which such a reporting obligation may
entail and has crafted a rule that achieves a balance between
disclosure and undue burden.
Although some commenters apparently would argue that the language
in section 202 evinces an intention to restrict the reporting
obligation to the official's immediate union, this contention begs the
question of what was intended by the referent, ``such labor
organization,'' as used in that section. As explained above, the
structure of the LMRDA does not compel nor even strongly suggest that
intention. The Department believes that the disclosure purposes of the
Act are best met by giving the term ``labor organization'' its broader
reach in applying the reporting obligation. As discussed above, section
3(j) recognizes that representation of employees is exercised in
different ways, not merely through a union component that holds
``certified'' status. Moreover, as the statute's legislative history
and the Department's own experience bear out, national and
international unions often exercise authority that affects subordinate
bodies (and their members) in their relationship with employers even
though a subordinate union holds the certification or recognition with
the employer and may have retained formal authority over such matters.
Given the broad reach of the term labor organization section 202's use
of the term ``such'' in combination with ``labor organization'' does
not qualify or restrict the reporting obligation.
The argument, in effect, that Congress intended to restrict a union
official's reporting obligation to the particular component of the
union he or she serves as an officer or employee also is belied by the
legislative history of the LMRDA. As discussed in greater detail
herein, the genesis of the LMRDA's reporting provisions was the
conflicts of interest between the personal financial interests of
national and international union officials and their duty to promote
the interest of all the members of their union. The hearings of the
McClellan Committee revealed numerous instances whereby such officials
took actions to advance the interests of employers with whom they had
obtained financial benefits or the officials' own personal financial
interests, overriding local officials and the interests of these
locals. See Interim Report, at 4-5, 69-70, 73-74, 85-86, 122-28, 130-
31, 228, 230, 240-41, 250, 252, 262, 265-66, 298, 441-45; The Enemy
Within, at 26, 94, 97-98, 104-06, 219-20. At the same time, the hearing
did not show a reciprocal pattern whereby local officials were able to
interject themselves into matters handled at higher levels of their
union to advance the interests of an employer with whom the local
official had a financial relationship.
Apart from the question of legal authority, several commenters
expressed concern about the wisdom of the Department's proposal,
suggesting that the information sought by the Department did not pose a
conflict of interest and that, even if it did, the burden of reporting
outweighed any benefit from obtaining the information. For example, a
commenter asserted that filers will be confused by the requirements and
many individuals will unintentionally fail to report transactions
because ``they lack knowledge of any connection between the employer
involved and the newly expanded `labor organization' of which the
individual is considered to be an officer or employee.''
The Department believes that union members have an interest in
knowing if an international, national, or intermediate union officer
receives payments and benefits from, or holds an ownership interest in,
a business that deals with subordinate labor organizations or trusts in
which these labor organizations are interested. The national or
international officer could use his or her position to influence
subordinate labor organizations to utilize the services of that
business. Moreover, his or her financial interests in those businesses
create the same potential for putting the official's personal financial
interests above his or her duties to the union and its members. The
proposed instructions include several examples of situations that would
create a tension between a union official's duty to the ``larger
union'' which the official serves and his or her own personal finances.
See 70 FR 51189-91. Union members are entitled to this information in
order to determine if their interests are best served where a union
official has such financial ties. Without such disclosure, it is
unlikely that a union member would be able to determine whether such
payments reflected a ``cut'' of the union's funds that were advanced
for a particular purchase or to disguise a payment for services
rendered by the official in favor of an employer whose employees are
represented by or may be the target of organizing by a subordinate
union of the official's union. Such reporting also prevents
circumvention or evasion of the Act's other reporting obligations.
Requiring union officials to report such payments not only allows
members to ``follow the money'' that otherwise would be identified in
the union's Form LM-2, but also increases the likelihood that the
employer making the payment also will comply with its own obligations
under section 203 of the Act.
The concern about the conflicts between the personal financial
interests of national and international officials and the interests of
the union's members at all levels of the union underlies the
Department's interpretation in the LMRDA Manual, at Sec. 241.100,
quoted above. After carefully considering the comments received on this
point and reevaluating the legislative history, the Department has
decided to impose the reporting obligation only on union officers who
have dealings with businesses and employers that deal with components
of the union subordinate to the level of the union which the official
serves as an officer. In reaching this decision, the Department
recognized that a much greater probability exists that an official with
a position higher in the union hierarchy would be able to
[[Page 36124]]
wield influence on matters affecting a subordinate entity than the
reverse situation, and that officials in higher positions are more
readily able to obtain the information needed to meet this obligation
than someone lower placed in the union hierarchy. For similar reasons,
the Department has determined to limit the reporting obligation to the
national or international union's officers; under today's rule,
employees of the national or international union are not required to
report payments or other financial interests that solely relate to
subordinate entities of the international. Although section 202 would
allow such reporting, the Department believes that potential conflicts
are much more likely to arise where a payment or other financial
interest is received by a union officer rather than by an employee.
Furthermore, given the typically much larger number of employees than
officers in national and international unions, the overall reporting
burden of the rule is minimized by excepting employees from this
particular reporting obligation. To further reduce the overall
reporting burden, the Department has decided to except from reporting
payments or other financial interests received, as a bona fide
employee, by an officer's spouse or minor child in connection with
dealings relating to subordinate components of the officer's union--
payments that if made to the officer would be reportable. In this way,
the rule also represents a reduction in burden from the prior rule,
which required officers of international unions to report all payments
to their spouses and minor children from vendors to subordinate locals.
As noted, the cited interpretation in the Department's LMRDA Manual
only refers to officers of an international union (and by extension to
national unions); however, the same concerns that require such officers
to report possible conflicts involving subordinate components of the
union counsel for requiring intermediate union officers to report
possible conflicts involving locals or members that the intermediate
union oversees. The same potential for conflicts and manipulation
exists as to the relationship between intermediate union officers and
businesses and employers dealing with local labor organizations. For
example, local union personnel may choose to deal with a business
entity owned or controlled in whole or in part by an intermediate or
national or international union officer out of fear of alienating the
higher level officer. 70 FR 51183.
Some commenters expressed concern that the Department's proposal
would impose a substantial burden on union officials, requiring them to
identify the ``spider web like'' connections between the various
components of their union and the businesses and employers who are
represented by any of the components or who any of the components is
actively seeking to represent. As a general rule, local officials need
only report payments from and other financial interests in businesses
that sell products or services to the local or the local's section 3(l)
trusts and employers whose employees are represented by the local or it
is actively seeking to represent. The only other payments or interests
that they must report are those from ``other employers'' that involve
identified conflicts of interest. Thus, for reporting purposes, the
local official need only identify those entities which he or she holds
an interest in or receives a payment from and the relationship between
these entities and the official's local.
The burden is potentially greater for an officer of an
international, national, or intermediate labor organization, but so
too, as evidenced by the McClellan Committee hearings discussed above,
is the potential for a conflict between the officer's personal finances
and his or her duty both to the component of the union in which he or
she serves and its subordinate bodies. In the Department's view, when
officers have an ownership interest in a business, they should either
have personal knowledge of whether the business deals with subordinate
labor organizations or the ability to obtain this information from the
business. While the information may be more difficult to obtain where
the officer is an employee of the entity in question, rather than an
owner, any burden is outweighed by the benefit to union members of
obtaining reports of their official's conflicts of interests.
G. Why Union Officials Must Report Payments Under Union-Leave and No-
Docking Practices Subject to an Exception for Payments of 250 Hours or
Less Per Year Made in Accordance With a Collective Bargaining Agreement
The Department proposed to require union officials to report
payments received from employers for activities engaged in by the
officials on the union's behalf. The most common payments by employers
to individuals for conducting union business are made pursuant to
``union-leave'' or ``no-docking'' policies established in collective
bargaining agreements or by customary practice. Under a union-leave
policy, the employer continues the pay and benefits of an individual
who works full time for a union. Under a no-docking policy, the
employer permits individuals to devote portions of their day or work
week to union business, such as processing grievances, with no loss of
pay. The Department proposed that an officer or employee would have to
report any payments for other than ``productive work,'' including
union-leave and no-docking payments. The Department explained in its
proposed definition of bona fide employee that these payments are not
received as a bona fide employee of the employer; rather, they are
received as a representative or employee of the union.
Under the instructions to the old Form LM-30, such payments are not
reportable if they are: ``(a) Required by law or a bona fide collective
bargaining agreement, or (b) made pursuant to a custom or practice
under such a collective bargaining agreement, or (c) made pursuant to a
policy, custom, or practice with respect to employment in the
establishment which the employer has adopted without regard to any
holding by such employee of a position with a labor organization.'' See
instructions, Part A, exception (iv); see also LMRDA Manual Sec.
248.005. This section of the Manual, as noted in the NPRM, discusses
the situation where a union officer ``is excused from his regular work
to handle grievances and [is] paid his regular wages while handling
grievances.'' The Manual states: ``Such a situation will not normally
require reports from the union officer * * * on the theory that the
employee officer is being paid for work performed of value to the
employer who is interested in seeing to it that grievances are
immediately adjusted.'' LMRDA Manual, Sec. 248.005. See 70 FR 51181.
In the NPRM, the Department explained that the exception for
payments made to a bona fide employee is required by statute, but that
the statute is silent on the scope of the exception and specifically
its applicability to ``union-leave,'' ``no-docking,'' and similar
payments. The Department explained that under its proposal ``to be
exempt from reporting, payments and other benefits received as a bona
fide employee of the employer must be attributable to work performed
for, and subject to the control of, the employer.''
The Department also stated that the LMRDA Manual improperly focused
on whether the employer feels the money is well-spent; the correct
issue is whether or not the official is a bona fide employee of the
payer-employer during the time for which payment was made. In making
its proposal, the Department
[[Page 36125]]
endorsed the statement: ``Union-leave,'' and ``no-docking'' payments
may pose a conflict of interest since there are ``union negotiators who
may agree to reduced benefits for the employees in exchange for
financial support for the union.'' Caterpillar v. UAW, 107 F.3d 1052,
1060 (3d Cir. 1997) (Mansmann, J., dissenting). The Department noted
its view that such payments should be disclosed to union members to
enable them to evaluate the effect such payments might have on an
official's performance of his or her duties to the union.
The Department adopts a revised definition of ``bona fide
employee,'' as set forth in the next paragraph. Under today's rule,
payments to a union officer or employee under a union-leave or no-
docking arrangements set forth in a collective bargaining agreement are
exempt from reporting unless payment is for greater than 250 hours of
union work during the filer's fiscal year. Payments for union work
totaling greater than 250 hours over the course of the filer's fiscal
year are reportable as are any payments that are not made pursuant to
arrangements set forth in a collective bargaining agreement.
The revised definition of ``bona fide employee'' reads:
Bona fide employee is an individual who performs work for, and
subject to the control of, the employer.
Note: A payment received as a bona fide employee includes wages
and employment benefits received for work performed for, and subject
to the control of, the employer making the payment, as well as
compensation for work previously performed, such as earned or
accrued wages, payments or benefits received under a bona fide
health, welfare, pension, vacation, training or other benefit plan,
leave for jury duty, and all payments required by law.
Compensation received under a ``union-leave,'' or ``no-docking''
policy is not received as a bona fide employee of the employer
making the payment. Under a union-leave policy, the employer
continues the pay and benefits of an individual who works full time
for a union. Under a no-docking policy, the employer permits
individuals to devote portions of their day or workweek to union
business, such as processing grievances, with no loss of pay. Such
payments are received as an employee of the union and thus, such
payment must be reported by the union officer or employee unless
they (1) totaled 250 or fewer hours during the filer's fiscal year
and (2) were paid pursuant to a bona fide collective bargaining
agreement. If a filer must report payments for union-leave or no-
docking arrangements, the filer must enter the actual amount of
compensation received for each hour of union work. If union-leave/
no-docking payments are received from multiple employers, each such
payment is to be considered separately to determine if the 250 hour
threshold has been met. For purposes of Form LM-30, stewards
receiving union-leave/no-docking payments from an employer or lost
time payments from a labor organization are considered employees of
the labor organization.
The filer will report, separately, for each such employer the total
payments received from the employer during the filer's fiscal year for
the work performed on the union's behalf. The filer must also calculate
the hourly monetary value of any fringe benefits received, and include
this figure in the total.
The Department sought comments about any problems (or their
absence) that have arisen by not requiring the reporting of payments
received for union-leave, no-docking, and similar situations where a
union official was paid for unproductive time, and whether or not there
should be quantitative and/or qualitative distinctions to the
disclosure obligation. Numerous comments, mostly opposed to the
Department's proposal, were received on this question.
A few commenters favored the Department's proposed definition of
bona fide employee and the reporting of payments received by a filer in
union-leave or no-docking situations. One commenter maintained that any
payments made by an employer as part of no-docking or union-leave
arrangements could result in union officials agreeing to trade off
contract provisions that might benefit the entire bargaining unit in
exchange for privileges that would benefit only union officials.
Another commenter stated that union members may be unaware of such
payments. His statement was based on his knowledge that one of his
union's officers received payment from the employer for union-related
work and that such payment was not provided for in the collective
bargaining agreement. He stated that other members of his union did not
know that the official received these payments from the employer.
A large majority of the comments argued in favor of retaining the
no-docking and union-leave exception. One commenter argued that the
Department was abandoning a ``long-standing position without adequate
justification.'' This commenter cited a lack of statutory authority or
legislative history of Congressional intent to require union officials
to report such payments, adding that any benefit from such disclosure
was outweighed by the increased burden on filers. One commenter cited
the Senate subcommittee hearings on the LMRDA to support its position
that bargained no-docking and union-leave provisions were ``not
forbidden by the AFL-CIO Code of ethical practices.'' Hearings on Union
Financial and Administrative Practices and Procedures before the
Subcommittee on Labor and Public Welfare (1958) (``1958 Senate
Hearings''), at 349. Many of these commenters stressed the ``long-
standing nature'' of such practices by employers, and they particularly
emphasized how ``commonplace'' it is to find these provisions in
collective bargaining agreements. One commenter asserted that at the
time the LMRDA was enacted, just over half of all collective bargaining
agreements involving manufacturers contained no-docking provisions.
Several comments focused upon the Labor Management Relations Act and
its interaction with the LMRDA, and argued that national labor policy
is to encourage collective bargaining and a ``productive and harmonious
workplace.'' They noted that no-docking and union-leave provisions have
been found lawful by the courts when they are part of a collective
bargaining agreement. Some commenters maintained that sections
202(a)(1) and 202(a)(5) are parallel to section 302 of the Labor
Management Relations Act because each is concerned with the same kind
of employer payments to union officials. They further argued that
because section 302 has been interpreted by the courts to provide that
``payments pursuant to union-leave or no-docking arrangements are
payments `by reason of' an officer or employee's service as an employee
of an employer,'' sections 202(a)(1) and 202(a)(5) should be similarly
interpreted to allow for the time union officers spend on union-related
work to be considered the work of bona fide employees. See Caterpillar,
Inc., 107 F.3d at 1052.
Another commenter suggested that work performed under no-docking
and union-leave scenarios is indirectly, if not directly, performed for
the employer, and further stated that such pay by an employer is
analogous to other employee benefits such as sick leave, military
leave, jury leave, and similar fringe benefits. Many commentators
argued that union-leave, no-docking, and similar payments are usually
made under the terms of a collective bargaining agreement and that such
payments are usually tied to the same rate of pay that the union
representative would receive under the agreement for time worked at his
or her trade. One commentator argued, in effect, that there was no
conflict because the union would pay for the representative's time if
it was not provided for under the parties'
[[Page 36126]]
negotiated agreement. Many argued that there is nothing private or
secretive about such payments because the terms of the payments are
disclosed by reading the negotiated agreement and that union members
know that their representatives are paid for the time involved in
contract administration. Many commenters explained that union stewards
and other union representatives perform valuable tasks for the union
and the employer; they expressed the concern that by imposing a
reporting obligation on such payments future attempts to establish or
continue these roles would ``be chilled'' which, in turn, could lead to
``a breakdown in labor-management relations.'' A few commenters were
concerned that if the Department's proposal was adopted employees would
be less likely to volunteer for such positions and that union officials
would be less likely to engage in workplace activities that are
mutually beneficial to employers and unions.
Some comments suggested that requiring reporting of payments
included in collective bargaining agreements would burden employers. In
this regard, a commenter stated that if the Department's proposal is
adopted in the final rule, unions will ``inevitably want to negotiate a
practice pursuant to which employers track and code any no-docking time
on pay records of union officers and employees.'' Another commented
that the filing of ``numerous pointless reports'' would defeat the
purpose of uncovering conflicts of interest.
Two commenters offered possible alternative arrangements to the
existing exception. One recommended that if the Department established
a reporting obligation it should not require reports for activities
that are less than two hours in length. This commenter explained that
thirty minutes or less is usually required to resolve a question under
a parties' agreement and that meetings only rarely extend beyond two
hours. By modifying the proposal in this way, it argued, the reporting
burden would be minimal. The second commenter recommended that no
reports be required of any payments unless they totaled $10,000 per
year, an amount, it suggested, approximates about one-quarter of a
union steward's annual pay.
The LMRDA does not specifically address either the legality of
payments made under union-leave or no-docking arrangements or the
obligation, if any, for union officials to report such payments under
section 202 of the Act. None of the commenters have identified any
legislative history that would shed any light on this specific
question, and the Department's own research has uncovered none. As
noted in the comments, the practice whereby a union official employed
by an employer would receive his or her regular compensation while
engaged in contract administration on behalf of the union was
commonplace at the time the LMRDA was enacted. Contrary to the view of
some that the absence of any discussion in the legislative history
about this common practice evinces an intention to foreclose the
reporting of such payments, the Department believes that this silence
suggests that Congress simply did not consider such practices to be
prohibited under the LMRDA or the Labor Management Relations Act and it
did not express a view one way or another on the question of
reportability. Moreover, the logic of the ``intention by silence''
argument would require the exclusion of a myriad of payments and other
financial benefits received by union officials, such as
``featherbedding'' or ``no show'' payments, that were not explicitly
identified by the language of section 202 or its legislative history,
notwithstanding their inclusion under any reasonable reading of the
section's language.
The Department has reviewed the case law that has developed from
employer challenges to the legality of employer payments to union
officials for work performed on the union's behalf. Most courts that
have considered the question have found that such payments are not
subject to criminal sanctions. For example, one court has stated that:
``we see nothing in the language or logic of section 302(c)(1) [of the
Labor Management Relations Act] to suggest that Congress did not intend
to allow an employer to grant a bona fide employee who is a union
official paid time off in order that he may attend to union duties.''
BASF Wyandotte Corp. v. Local 237, International Chemical Workers
Union, Local 227, 791 F.2d 1046, 1050 (2d Cir. 1986). See also NLRB v.
BASF Wyandotte Corp., 798 F.2d 849 (5th Cir. 1986) quoting H.R.Rep. No.
245, 80th Cong., 1st Sess. 28-29 (1947), ``At the time of enactment of
Sec. 302, Congress was well aware that ``[e]mployers generally * * *
allow representatives of the union, without losing pay, to confer not
only with the employer but as well with employees, and to transact
other union business in the plant.'' See Caterpillar, Inc. v. United
Auto Workers, 107 F.3d 1052, 1056 (3d Cir. 1997) (``By paying
production workers for the part-time hours when they leave their
regular duties, the company is paying for services not actually
rendered for it, since those employees are already receiving their
regular hourly wages and benefits for their production line work. Yet,
no-docking arrangements have been consistently upheld by the courts as
not in violation of Sec. 302''). See also Herrera v. United Auto
Workers, 73 F.3d 1056 (10th Cir. 1996) (adopting the reasoning of
Herrera v. United Auto Workers, 858 F. Supp. 1529, 1546 (D. Kan.
1994)); NLRB v. BASF Wyandotte Corp., 798 at 855-57. At the same time,
however, the courts have signaled that they may be less inclined to
treat payments for union-leave as beyond criminal sanction. See Toth v.
USX Corp., 883 F.2d 1297, 1305; NLRB v. BASF Wyandotte Corp., 798 F.2d
at 856 n. 4; BASF Wyandotte Corp. v. Local 227, 791 F.2d at 1050. None
of the cases, however, address the different, but immediate, question
of whether such payments, without regard to their lawfulness, should be
excepted from reporting under section 202 of the Act.
The Department believes it significant that Congress in enacting
the LMRDA uses the term ``bona fide employee'' only in section 202.
Elsewhere it simply uses the term ``employee'' to designate a duty or
obligation. See, e.g., section 203(a), 203(e), section 502(a), section
503, section 609. Thus, the Department concludes that Congress intended
to limit the exception to individuals who, in fact, are receiving
payment for activities performed on the payer-employer's behalf. The
Department's reading also is consistent with the meaning generally
given ``employee'' under the common law, where ``control'' over an
individual's work is the essential component of this status. See, e.g.,
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-24 (1992).
The position adopted by the Department better comports with the
language of the statute, and its inferred intended application, as
discussed above, than an alternative reading that would interpret the
term ``bona fide employee'' to include payments made by an employer for
work performed on behalf of the union. Members have an interest in
knowing the amount paid to union officers or employees by the employer
for time spent on union business. This information would be significant
for members in assessing the effectiveness of union officers and
employees and in evaluating candidates for union office. For example,
during collective bargaining negotiations, an official who enjoys
union-leave or no-docking payments may agree, or feel pressure to
agree, to reduced benefits for employees in exchange for increases in
his or her employer payments as a
[[Page 36127]]
union representative. Similarly, where the continuation of the no-
docking or union-leave practice in the agreement becomes a possible
issue in negotiations, the official might be motivated, for personal
reasons and contrary to the union's best interest, to maintain what the
official views as a meaningful and beneficial diversion from work at
his or her trade. It also is conceivable that a union official may feel
pressure to forego the zealous pursuit of a grievance on behalf of a
union member for fear of alienating the employer and jeopardizing the
continued availability of these payments. In such instances, the union
official's personal financial interests pose a clear conflict with the
official's duty to the union and its members.
The Department received a number of comments indicating that union
members already know that some of their union officials are paid by
their employer for union-related activities. At the same time, other
comments indicated that such information is not as common or as
complete as suggested. Other comments received by the Department
indicate that some payments occur without members' knowledge and that
members have incomplete information about the amount of such payments.
The Department agrees that many union members are aware that some of
their officials receive employer payments for union-related activities,
especially where such payments are expressly provided for in a
collective bargaining agreement, but it seems doubtful that such
members are aware of the magnitude of such payments and other members
are likely unaware that this practice exists. As noted by one
commenter, it is unlikely that members will be aware of such payments
where the collective bargaining agreement is silent about the practice
Reporting such payments will allow union members to assess whether this
arrangement could tempt a union official to put his personal interests
in maintaining the arrangement above his or her duty to the union. A
union official may well prefer to spend his or her time engaged in
contract administration duties than, for example, performing manual
work on a construction site or the shop floor, or processing insurance
claims.
The Department recognizes that a reporting requirement may impose
some burden on union officials and employers that have ``union-leave''
and ``no-docking'' practices. The Department acknowledges that payments
by employers to union representatives often will benefit both union
members and employers. Thus, the Department has considered carefully
the comments suggesting that its reporting proposal would interfere
with the effectiveness of such arrangements.
The Department concludes that its proposal will not have a
significant effect on labor-management relations practices. No
commenter claimed that any single employer, never mind employers
generally, authorizes payments to union officials without accounting at
least informally for the time expended by such individuals in
conducting union business. Employers no doubt have a wide range of
practices in tracking such payments, with varying levels of scrutiny,
but the rule adopted requires no special procedures or expense, and
nothing any more burdensome than keeping a log of the amount of time
expended and compensation received while on union business paid by the
employer. Moreover, by excepting any reporting where payments approved
under a collective bargaining agreement do not exceed payment for over
250 hours, union officials can work for over 30 days with nothing to
report. Additionally, the Department finds unpersuasive the comments
that a reporting requirement will significantly impede the ability of
unions to obtain members willing to perform the jobs of stewards or
other union positions in which they receive compensation from their
employer for union-related activities. As noted, the Department is not
imposing any specific method of recordkeeping or accounting on union
officials to comply with the disclosure obligation. Moreover, this
practice will supplement the existing obligation of a union to report
``lost time payments'' it makes to officials and other members, either
identified by a particular member (if he or she is paid more than
$10,000 per annum by the union) or otherwise in aggregated form. See
section 201(b)(3).
The Department took into consideration the various concerns about
the effect of its proposal in arriving at the reporting threshold of
250 hours per year. Although union officers and employees will need to
keep records to determine whether the 250-hour threshold is exceeded,
there is no reporting burden for those who do not exceed this
threshold. Further, the recordkeeping time needed to determine whether
the threshold is exceeded consists of nothing more than keeping track
of the time one spends performing union work, and the amount paid, with
no need, for example, to consult with third parties or obtain records
maintained by others. The threshold of 250 hours per year will help
separate those who perform a significant amount of union work from
those who do not. For example, a union officer who spends only four
hours per week, or less than an hour per day, on union business would
not have to report no-docking payments, because his union activities
would correspond to 200 hours per year (subtracting two weeks for
vacation), fewer than the 250-hour threshold. On the other hand, a
steward, who is also a union officer or employee, who works 2 hours per
day on union business must report the payments he or she receives. In a
five-day work week this would convert to 10 hours of union work per
week and 500 hours per year (subtracting two weeks for vacation). Here,
the value of the officer's union-related work exceeds the 250-hour
threshold and is reportable. The Department believes this approach to
be better than one that would trigger a report if a particular meeting
lasted longer than a prescribed amount of time or if an official's pay
for union-related activities exceeded a particular dollar value, such
as the $10,000 suggested by one commenter. (Based on the commenter's
estimate of a typical steward's annual pay, the 250-hour rule requires
less reporting than a flat $10,000 threshold.) The former would depend
upon establishing an average for the amount of time taken to resolve a
particular contract administration issue, a difficult task even if the
data necessary to establish such a benchmark existed and an impossible
task on the current rulemaking record. The latter would impose a burden
on higher paid union officials without distinguishing between the
amount of time they perform work for which they were hired and work for
the union.
A commenter requested the Department to require union officials to
report any ``super-seniority'' protection they receive by virtue of
their union office. Some collective bargaining agreements provide
layoff and similar benefits to union officials allowing them to
continue on the employer's payroll, ahead of other more senior
employees, in order to provide continued representation of union
members. The Department believes that this request, in part, is beyond
the scope of the Department's proposal, which, by its terms, is only
concerned with employer payments for work performed on a union's
behalf. Super-seniority, as commonly understood, allows a union
official to remain on the employer's payroll for ``production
purposes,'' not merely to receive payment for work undertaken on the
union's behalf. A union official who receives pay from his
[[Page 36128]]
nominal employer for union activities is subject to the general
requirements set forth above without regard to the official's super-
seniority status.
H. What Payments and Other Financial Benefits, Received From an
Employer or Business Whose Employees Are Not Represented by the Union
and Which Does not Conduct Business With the Official's Union, Must Be
Reported
In the NPRM, the Department described section 202(a)(6) as a
``catch-all'' for interests held in or payments to a union official (or
his or her spouse or minor child) by an employer that would not
otherwise be reportable under subsections 202(a)(1) through 202(a)(5).
70 FR 51192. Under the proposal, any such interest in or payment by any
employer would have to be reported, except for those ``payments of the
kind referred to in section 302(c) of the Labor Management Relations
Act,'' the exception expressly provided in section 202(a)(6).
The NPRM thus proposed as a general rule that any payments by any
employer to any union official would have to be reported except for
payments expressly excepted under section 302(c) of the Labor
Management Relations Act. A union official would have to report the
payment without regard to whether a collective bargaining or other
direct relationship existed between the official's union and the
employer in question. In addition, the proposal identified some
particular payments that would have to be reported: payments not to
organize employees, to influence employees in any way with respect to
their rights to organize, to take any action with respect to the status
of employees or others as members of a labor organization, and to take
any action with respect to bargaining or dealing with employers whose
employees your organization represents or is actively seeking to
represent. See 70 FR 51192.
In the NPRM, the Department invited comments on this proposal as a
general matter and more particularly whether section 202(a)(6) limits
the reporting obligation to only payments that present an actual
conflict of interest, whether such an interpretation is a permissible
reading of the statute, and, if so, how the instructions could be
written to implement this interpretation, without granting
impermissible discretion to the filer to determine which financial
matters are reportable. The Department also requested comments
regarding the reporting of ordinary payments of wages and salaries of
the spouse and/or minor children of the officer/employee because
section 202(a)(6) could be read to require a union official to report
all employment compensation paid by any employer to his or her spouse
or minor child.
After its review of the comments, the Department adopts a rule that
is narrower than the proposal. Under today's rule, where a payment or
financial interest is not reportable under subsections (a)(1) through
(a)(5) of section 202, it is reportable as follows. A report must be
filed for any payment of money or other thing of value (including
reimbursed expenses) from (1) An employer that is in competition with
an employer whose employees the filer's labor organization represents
or is actively seeking to represent; (2) an employer that is a trust in
which the filer's labor organization is interested as defined in
section 3(l) of the LMRDA; (3) an employer that is a non-profit
organization that receives or is actively and directly soliciting
(other than by mass mail, telephone bank, or mass media) money,
donations, or contributions from the filer's labor organization; (4) an
employer that is a labor union that (a) Has employees represented by
the filer's union, (b) has employees in the same occupation as those
represented by the filer's union; (c) claims jurisdiction over work
that is also claimed by the filer's union; (d) is a party to or will be
affected by any proceeding in which the filer has voting authority or
other ability to influence the outcome of the proceeding; or (e) has
made a payment to the filer for the purpose of influencing the outcome
of an internal union election; or (5) an employer whose interests are
in actual or potential conflict with the interests of the filer's union
or the filer's duties to his or her union. This rule recognizes that it
is impossible to specifically identify all potential conflict-of-
interest payments.
Today's rule also adopts the rule set forth in the NPRM and the
instructions to the old Form LM-30, at Part C, requiring a report for
any payment from any employer or a labor relations consultant to any
union official for the following purposes:
Not to organize employees;
To influence employees in any way with respect to their
rights to organize;
To take any action with respect to the status of employees
or others as members of a labor organization;
To take any action with respect to bargaining or dealing
with employers whose employees your organization represents or is
actively seeking to represent.
Today's rule adds to this list the following: ``To influence the
outcome of an internal union election.''
The discussion below addresses the principal comments submitted on
this issue and the Department's response to those comments.
No comments were received on the Department's proposal to require
reporting in the circumstances identified in the bulleted points above.
As noted, these situations are included in the instructions to the old
form and are retained. The additional point requiring disclosure where
a union official receives a payment ``to influence the outcome of an
internal union election'' has been added to clarify a point already
encompassed by ``take any action with respect to the status of
employees * * * as members of a labor organization.''
Two commenters supported an expansive reading of section 202(a)(6)
to require a union official to report any and all interests in or
payments from any employer. They argued that only by strictly limiting
exceptions could the Department achieve the Act's goal of full
disclosure. A third commenter asserted that only an expansive reading
of section 202(a)(6) would provide union members and the public with
the information necessary for them to determine whether an interest in
or payment by an employer could pose a conflict of interest. This
commenter stated that Congress did not intend section 202(a)(6) to be
given such a limited reading and that even if such a gloss was added to
the statutory language filers would likely be unable to ``honestly,
fairly, and accurately'' determine whether a conflict exists.
Several commenters expressed a contrary point of view. They
asserted that unless section 202(a)(6) was narrowly applied, the
Department would be creating a ``general reporting'' mandate, something
that Congress intended to avoid in crafting section 202 of the Act. As
stated in one comment (citing to Senate Report, at 15, reprinted in 1
Leg. History, at 411): ``The bill requires only the disclosure of
conflicts as defined therein. The other investments of union officials
and their sources of income are left private because they are not
matters of public concern.'' The same commenter saw evidence of a
narrow construction from a statement in the House Report that section
202(a)(6) was intended to reach both ``the union official who may
receive a payment from an employer not to organize the employees,'' and
payments that may conflict with the official's ``fiduciary duties as a
worker's representative.'' Other commenters relied on statements by
Senator Goldwater as support for a narrow reading of section 202(a)(6).
See 105
[[Page 36129]]
Cong. Rec. A5812 (daily ed. Oct. 2, 1959), reprinted in 2 Leg. History,
at 1846) (the reporting requirements were directed at those
transactions ``which would constitute a conflict of interest,'' such as
``holdings or interest in or the receipt of economic benefits from
employers who deal or might deal with such union official's union'').
One commenter cited to testimony by Professor Archibald Cox before
the Senate subcommittee that was considering this legislation: ``The
bill is narrowly drawn to meet a specific evil. It requires only the
disclosure of conflicts of interest. The other investments of union
officials and their other sources of income are left private because
they are not matters of public concern.'' See Senate Report, at 15,
reprinted in 1 Leg. History, at 411. Cox was a Harvard law professor
who played a pivotal role in drafting the legislation that ultimately
became the LMRDA. Professor Cox also noted that the Kennedy bill that
presaged the LMRDA was based, in part, upon the Ethical Practices Code
formulated by the AFL-CIO. Professor Cox stated that an officer who
followed this Code would have ``virtually nothing to disclose to the
public.'' Hearings on S. 505 before the Subcommittee on Labor of the
Senate Committee on Labor and Public Welfare (1959) (``1959 Senate
Hearings''), at 123.
A few commenters conceded that the statute does not refer to
``conflicts of interest,'' but noted that forty years of Department
enforcement have limited this section to conflict of interest
situations. In this connection, they cited LMRDA Manual Sec. 248.005
that states, in part: ``[Section] 202(a)(6) is designed for those
situations which pose conflict of interest problems which are not
covered in the previous five sections of 202.'' Other commenters argued
that the inclusion of ``labor relations consultant'' and the reference
to section 302(c) of the Labor Management Relations Act evince an
intention to tie the reporting obligation to matters that directly
involve labor-management activities. Two comments expressed opposition
to the reporting of ordinary payments of wages and salaries to the
spouse and/or minor children of the officer/employee.
The Department is persuaded that section 202(a)(6) is best read to
require reporting by union officials only where such interests in or
payments by employers have the evident potential to pose a conflict
between the official's own financial interests and the official's duty
to his or her union and which would not otherwise be captured by the
other provisions of section 202(a). While the language of the statute
can be read more broadly, the Department believes that a better reading
is one which avoids redundant reporting of matters already included in
the previous five subsections but ensures that all significant
transactions and other payments to the official, his or her spouse, or
minor children that may impact upon the responsibilities of a union
official to the union he or she represents are reported. The Department
believes that its construction of section 202(a)(6) hews to the
accepted premise that Congress did not intend that union officials
would have to disclose virtually all their financial affairs, while
also ensuring that members receive information about situations other
than those identified in sections 202(a)(1) through 202(a)(5) that may
pose potential conflicts of interest for union officials. The
Department's construction reasonably targets employers that could
influence the conduct of union officers and employees and requires the
disclosure of an official's financial information only in those
situations.
Four of the first five subsections of section 202(a) have as their
focus transactions and interests, on the one hand, between a union
official (or indirectly through his or her spouse or minor child) and,
on the other, the official's own union or an employer whose employees
the union represents or seeks to represent. The other subsection
(section 202(a)(3)) has a similar focus, but requires reporting on
interests and payments involving a business that conducts a substantial
part of its business with an employer whose employees the union
represents or seeks to represent.
The Department believes that the focus of these provisions is
instructive in discerning the scope of the reporting obligation
encapsulated by section 202(a)(6). In each instance, the object of the
reporting is the official's union status and an employer whose
employees the union represents or seeks to represent. From this, the
Department infers that section 202(a)(6) also has as its object the
relationship between the official's union and a particular employer
that could pose a conflict between the official's own personal
interests and the obligation his or her union holds to employees it
represents or is actively seeking to represent, or who provide a
suitable target for representation. Thus, from this vantage section
202(a)(6) can be seen to target payments by or interests held in an
employer only when the employer has a direct interest in the
relationship between the official's union and an employer whose
employees the union represents or would seek to represent. And by its
terms, section 202(a)(6) only captures payments by ``employers.'' Thus,
the Department cannot require a union official to report payments under
section 202(a)(6) from an individual or an entity that is not an
``employer.''
A relationship between, on the one hand, a union official and, on
the other hand, a section 3(l) trust, labor organization, and not-for-
profit organization, including charities, along with ``competitors'' to
employers whose employees the union represents or would seek to
represent, may trigger a reporting obligation under today's rule. These
entities usually are ``employers,'' but sometimes not. A union official
is under no obligation to report these payments unless they are
received from an employer. As noted, section 202(a)(6) excepts
``payments of the kinds referred to in section 302(c) of the Labor
Management Relations Act.'' These payments notably include payments
received as compensation for services as a current or former employee
of the employer making the payment and as a general rule payments made
to or received from a trust fund set up for the sole and exclusive
benefit of employees and their dependents. See sections 302(c)(1) and
(5) (note that the latter contains several provisions that could affect
reportability in some specific circumstances). As implied by the
section 302(c) proviso to section 202(a)(6), Congress presumed that a
payment that arises from a bona fide employment relationship between an
employer and its employee typically will be above board with little
potential to pose a conflict between the union official's personal
interests and the official's duty to his or her union. For the same
reasons, a union official is not required under today's rule to report
payments received by the official's spouse or minor child as regular
compensation from their employer or as a benefit under the arrangements
permitted under section 302(c).
Thus, under this interpretation of section 202(a)(6), a union
official would have to report a payment received from an employer that
competes with a company whose employees are represented by the
official's union unless it was received by the official as regular
compensation for his current or past employment. For example, if a
union official receives a benefit such as a paid vacation or a gift of
golf clubs from an employer that competes with an employer whose
employees the official's union represents or is actively seeking to
represent, the official must report the benefit. In this example, the
union official would have to disclose the gift, even if the official is
an employee of the donor, except in the unlikely event that
[[Page 36130]]
such benefit is part of the official's regular compensation as an
employee of the donor. In this situation, the union official faces an
obvious potential conflict between his personal finances and the duties
he or she owes to the union and its members. Where, for example, the
union's negotiations will set the going wage rate for particular work
within the relevant market, an official may be more attuned to concerns
about rising labor costs if he or she is receiving payments from a
company whose operations are less efficient than those of the
represented employer. Similarly, a union official may be less vigilant
in challenging a represented employer's decision to withdraw employer-
paid dental coverage if he or she holds an interest in or receives
payments from a vendor that would provide alternative coverage
sponsored by the official's union.
Similarly, a union official must report a payment he or she
receives from a trust that is an employer unless it is a ``payment[ ]
of the kind referred to in section 302(c) of the Labor Management
Relations Act.'' As just discussed, a union official will not have to
report compensation received as an employee of a trust or as a general
rule payments received as a beneficiary of the trust. Any ``special
payments'' or gifts, however, will have to be reported unless they are
insubstantial as defined in today's rule.
Under today's rule, a union official will have to report a payment
or other financial interest he or she receives from a not-for-profit
employer that receives or is actively and directly soliciting (other
than by mass mail, telephone bank, or mass media) money, donations, or
contributions from the official's union. The potential conflict arises
because such a payment could influence the official's activities in
approving or overseeing the union's contribution to the charity.
The remaining situations for which a report will be required
relating to an employer (other than one whose relationship is described
by sections 202(a)(1) through 202(a)(5)) involve payments received by a
union official from a union-employer (other than his or her own) where
the official's personal financial situation poses a plain conflict with
his or her duties to the union in which the official serves as an
officer or employee. Payments must be reported where the payment
received by the union official is made by a union-employer that
Has employees represented by the official's union, e.g.,
the official's union represents the support and professional staff at
the headquarters of a national or international union, or it actively
seeks to represent;
Has employees in the same occupation as those represented
by the official's union;
Claims jurisdiction over work that is also claimed by the
official's union;
Is a party to or will be affected by any proceeding in
which the official has voting authority or other ability to influence
the outcome of the proceeding;
Has made the payment to the filer for the purpose of
influencing the outcome of an internal union election.
In each of these situations, a payment could serve as an inducement
to receive favorable treatment from a union whose interests are clearly
adverse to the official's own union--either in their labor-management
relationship, as actual or potential competitors for the same members
or work for such members, or actual or potential protagonists on
disputes or other inter-union matters. In the first situation, any
payment could serve as an inducement to agree to lower negotiated wages
for the members of the official's own union. In the second and third
situations, the two unions are ``competitors'' for the same or
potential members and the work they perform, thus placing them in an
adversarial position. In the fourth situation, the payment could
reflect an inducement for favorable treatment in the proceeding at the
expense of the official's own union that may have an interest adverse
to the party making the payment. In the last situation, the union
official, either directly or indirectly, has received a personal
benefit (gaining money to advance the official's own political agenda
within his or her own organization) that could serve as an inducement
to advance the interests of the party making the payment at the expense
of the interests of the official's own union.
The Department has attempted to clarify the form by describing
these situations that present actual or potential conflicts of
interest. Union officials who receive payments in these situations can
know, without ambiguity, of the need to file Form LM-30. It is
impossible, however, to delineate with precision all potential
conflict-of-interest payments. For that reason, the Department has
chosen to retain its rule that, under section 202(a)(6), all payments
from employers whose interests are in actual or potential conflict with
the interests of a filer's labor organization or a filer's duties to
his or her labor organization must be reported.
I. When Is a Union ``Actively Seeking To Represent'' Employees, Thereby
Triggering a Union Official's Obligation To Report Payments and Other
Financial Benefits Received From the Employer That Is the Subject of
the Organizing Drive
The term ``actively seeking to represent'' appears several times in
section 202; this term does not appear elsewhere in the LMRDA. The old
instructions do not define this term. In the NPRM, the Department
proposed to define ``actively seeking to represent'' to mean that a
labor organization has taken steps during the filer's fiscal year to
become the bargaining representative of the employees of an employer,
including but not limited to:
Sending an organizer to an employer's facility;
Placing an individual in a position as an employee of an
employer that is the subject of an organizing drive and paying that
individual subsidies to assist in the union's organizing activities;
Circulating a petition for representation among employees;
Soliciting employees to sign membership cards;
Handing out leaflets;
Picketing; or
Demanding recognition or bargaining rights or obtaining or
requesting an employer to enter into a neutrality agreement (whereby
the employer agrees not to take a position for or against union
representation of its employees); or otherwise committing labor or
financial resources to seek representation of employees working for the
employer.
Comments were invited as to the merit and clarity of the listed
activities and whether other examples would be helpful. 70 FR 51180.
Comments were sought as to whether it is appropriate to trigger the
reporting obligation on the decision to organize an employer's
workforce distinct from taking the first concrete step to organize.
After review and consideration of the comments, the Department has
concluded that the definition should be modified to clarify that a
report need only be filed where the active steps have occurred during
the filer's fiscal year. As discussed below, this clarification partly
addresses the concern of some commenters that such reporting may
disclose prematurely a union's efforts to organize an employer. The
Department has also modified the definition to clarify that leafleting
and picketing by a union, though presumptive evidence of actively
seeking to represent employees of an employer whose operations are
[[Page 36131]]
targeted by the union, will not trigger the reporting obligation with
respect to the targeted employer if the union's activity is entirely
without any organizational object. Otherwise, the definition of
``actively seeking to represent'' is identical to that proposed.
As noted in the NPRM, the proposed definition, in large part, is
based on a statement from the legislative history. See Senate Report,
at 15, reprinted in 1 Leg. History, at 411 (The phrase ``actively
seeking to represent'' denotes ``more than that the union hopes some
day to become the bargaining representative of a group of employees or
claims jurisdiction to organize them. It requires specific
organizational activities such as sending organizers into a community,
handing out leaflets, picketing, or demanding recognition and
bargaining rights''). House Report, at 11; reprinted in 1 Leg. History,
at 769. As noted in the NPRM, the Department believes that the term
``actively seeking to represent'' is intended to distinguish between
situations where a union has taken concrete steps to organize and those
where the union merely has an interest in organizing employees of the
employer in question. For example, a union may wish to represent
employees of a certain employer, and may even have finalized an
organizing plan, but has not yet begun to implement the plan. The
Department explained that in such circumstances the union is not yet
actively seeking to represent employees of this employer.
Commenters argued that the Department's proposal would improperly
impede a union's organizing efforts. One commenter stated that Congress
intended to limit this term to only those instances where the union had
instituted some kind of organizational activity, either sending
organizers into the plants or picketing or distributing leaflets within
the plant. The Department disagrees with the suggestion that its
proposal departs from the legislative history. The Department's
proposal is consistent with the illustrations provided in the Houses
and Senate reports on the LMRDA, as quoted in the NPRM. These reports
explicitly recognize that this reporting obligation is not solely
triggered by in-plant activity. Among the illustrated situations that
would trigger a reporting obligation is where a union ``send[s]
organizers out into the community.'' In context, it is plain that this
term refers to a community in the sense of the geographic area within
which an employer's facilities are located, not a limited application
to employees comprising a community delimited by the employer's
facilities.
Some commenters expressed concern about the difficulty of applying
the general requirement to report payments that arise after a union
``otherwise commits labor or financial resources to seek representation
of employees working for a particular employer.'' They also argue that
this proviso may go beyond the asserted limitation intended by Congress
in describing this aspect of the reporting obligation to ``specific
organizational activities.'' The Department recognizes that this factor
lacks the specificity of the other factors used to describe the reach
of the term ``actively seeking to represent.'' Its wording, however, is
deliberate in order to capture the general purpose of the test and
reduce any prospect that a filer would read the list of factors as
exhaustive. At the same time, this factor was designed to distinguish
between general union strategizing or planning, which would not be
reportable, and concrete activities that have been directed at a
particular employer. In this connection, one commenter raised a concern
that the test proposed by the Department failed to clearly indicate
whether a decision by the union to undertake organizing activity in the
future triggers the reporting obligation or whether the concrete,
future action triggers the reporting requirement. The instructions have
been clarified to make plain that the former does not trigger the
reporting obligation.
Another commenter asserts that the Department should establish ``a
bright line rule'' where the Department would define ``actively seeking
to represent'' as (1) Having a pending election petition before the
NLRB during the reporting period at issue, or (2) demanding voluntary
recognition from the employer during the reporting period involved. The
Department disagrees that the bright line suggested above would be
beneficial. The suggested rule is unnecessarily narrow and would fail
to effectuate the clearly expressed intention to include other concrete
steps that evidence ``actively seeking to represent,'' including
leafleting and picketing, as identified in the House and Senate reports
discussed in the NPRM.
Commenters suggest that payments and activities relating to ``area
standards'' picketing should not be considered as steps taken to
actively represent an employer's workers. Instead, these commenters
asserted leafleting and picketing often are used in area pay and
benefit standards disputes, serving as just a preliminary step to
determine whether or not to initiate an organizing campaign. Therefore,
according to the commenter, such steps should not trigger a reporting
obligation. The Department believes that there is a reasonable basis
for treating leafleting and picketing by a union as evidence that a
union is ``actively seeking to represent'' the employees of the
targeted employer and for triggering a reporting obligation where there
are other indicia of a union's effort to ``actively seeking to
represent'' such employees. In this regard, the Department notes that
there is no evidence that Congress intended a limited application of
the reporting obligation to situations where the leafleting or
picketing is solely undertaken for the object of organizing an
employer's workforce. Moreover, although the commenter suggests
otherwise, it is the Department's view that in many instances
informational or standards picketing reflects a union's first concrete
steps to organize an employer and, as such, is an action within the
intended reach of ``actively seeking to represent.'' At the same time,
the Department recognizes that there are instances where such picketing
or leafleting is wholly unrelated to organizational or representational
objectives. For example, if a union pickets a sporting goods retailer
solely for the purpose of alerting the public that the retailer is
selling goods that are made by children working in oppressive
conditions in violation of accepted international labor standards, the
picketing in these circumstances would not meet the ``actively seeking
to represent'' standard. The revised Form LM-30 instructions in today's
rule alert filers to this distinction.
A commenter endorses the inclusion of ``requesting an employer to
enter into a neutrality agreement'' in the proposed definition as a
concrete example of ``actively seeking to represent'' an employer's
employees. It asserted that neutrality agreements have become the
preferred method of organizing employees. No comments were received
suggesting that entry into a neutrality agreement does not reflect an
active step to represent the employer's employees. Thus, the Department
will continue to recognize the execution of such agreements as evidence
that a union is actively seeking to represent the employees of the
employer with whom the agreement was reached.
Some commenters expressed the concern that exposing a union's use
of ``salts'' in an organizing campaign would make the employer aware of
the campaign and hinder organizing efforts and might target the
official, his or her spouse, or minor child for dismissal by the
employer if any of them are working as the ``salt.'' As reflected in
the Department's proposal, the term ``salt''
[[Page 36132]]
refers to an individual who applies for a position with an employer
that is the subject of an organizing drive intending to surreptitiously
work on the ``inside'' in support of the union's organizing activities
and as it directs.
The Department recognizes that some organizing activities are
initiated without notice to the public or an employer, but there would
appear to be few situations, where the disclosure of a reported
interest on the Form LM-30 would be the first open acknowledgment of
the union's active efforts to represent employees. In response to the
concern that the disclosure of a reportable interest would alert an
employer to the presence of a ``salt'' in the employer's workforce, the
Department notes that payments from the employer for whom the salt
performs the manufacturing or other work for which he was hired are
payments to a bona fide employee; as such, these payments would not be
reportable. Likewise, any payments by the union to the salt as an
employee of the union also would not be reportable on the Form LM-30.
The Department recognizes that there may be some instances, however,
where an official would have to file a Form LM-30 because of the
employment of salts by a particular employer. For example, if a union
official owns a cleaning service that does substantial business with a
company in which the official's union has placed ``salts,'' the union
official would have to file a report, disclosing payments from the
company to the official's cleaning service. Although this report if it
came to the attention of the target employer would disclose the union's
objective to organize its employees, if and when the employer becomes
aware of such information, the employer likely would already have
learned of the union's campaign. There would ordinarily be a
substantial delay between the salt activity and the report's filing.
Form LM-30s are filed annually and are due 90 days after the end of the
filer's fiscal year. Thus, the definition of actively seeking to
represent is not expected to significantly compromise the use of salts
in organizing.
The Department acknowledges, however, that the timely submission of
the Form LM-30, in some instances, may put at risk the secrecy of a
union's organizing campaign and the relationship that gives rise to the
reporting obligation. For this reason, the Department has carefully
considered whether it would be appropriate to take steps to minimize
the risks from such disclosure.
In crafting the Form LM-2, the Department, sensitive to union
concerns about the premature disclosure of their organizing tactics,
established reporting categories and itemization rules designed to
minimize similar risks, while at the same time adhering to the
requirements of section 202 of the Act, 29 U.S.C. 431. See 68 FR 58395-
97. Although, for example, the Department chose to allow the
disaggregated reporting of some organizing expenditures, it rejected
the option to shield from disclosure all expenditures related to
``salts.'' The Department recognized that section 201(b)(3) expressly
provided that unions annually report the ``salary, allowances, and
other direct or indirect disbursements (including reimbursed expenses)
to each officer and also to each employee who * * * received more than
$10,000 in the aggregate from such labor organization and any other
labor organization affiliated with it or with which it is affiliated *
* *.'' 29 U.S.C. 431(b)(3). Thus, as recognized in the preamble to the
Form LM-2: ``[I]f a ``salt'' is paid $10,000 or more per year as an
employee of the union, the union is obliged by statute to list him by
name on the Form LM-2 and to report the amount of his compensation.''
The statutory language added support to the policy determination in the
Form LM-2 context that ``salt'' information was necessary for union
members to be properly informed about their union's finances. In
contrast, the same policy reasons did not, in the Department's view,
compel that a union itemize organizational expenses (other than these
payments to union officials). The Department reasoned that even without
such itemization, the particular information would be available to
union members upon request pursuant to section 201(c), 29 U.S.C.
431(c). See 68 FR 58397; see also 68 FR 58386-87. Thus, the Department
decided to allow Form LM-2 filers the option to report such payments
without itemization, recognizing that the information relating to these
expenditures would be made available to union members under section
202(c) of the LMRDA.
With regard to the immediate Form LM-30 reporting issue, the
Department is guided by the language of section 202(a)(1), (2) & (5) of
the LMRDA, requiring union officials to disclose specified conflicts of
interest, including ``any income or other benefit with monetary value *
* * derived * * * from an employer whose employees such labor
organization * * * is actively seeking to represent.'' 29 U.S.C.
432(a)(1), (2) & (5). In the Department's view, this language evinces a
particular concern by Congress about conflicts that arise while a union
is actively seeking to represent employees. The same concern is the
basis for the Department's determination, as a matter of policy, that
such payments pose serious questions regarding conflicted loyalties
(including the possibility of collusion in some instances). As such
this information is particularly important to union members, the
Department, and the public. The need for transparency, thus outweighs,
in the Department's view, any risk to a union's covert organizing
activities by requiring the disclosure of any interests, transactions,
and payment that arise while the filer's union is actively seeking to
represent the targeted employees. Further, the statute authorizing the
Form LM-30, 29 U.S.C. 432, contains no provision that would mitigate
the lack of transparency caused by crafting a filing exemption for
payments that would disclose the use of salts in organizing. Unlike the
statute authorizing the Form LM-2, 29 U.S.C. 431, there is no statutory
provision for union members to obtain records from union officers and
employees necessary to verify the Form LM-30.
Two commenters argued that the proposed definition poses particular
difficulties for a local official who may be unaware of organizing
activities undertaken by his or her international union or an
international official that is unaware of a local's efforts to organize
a particular employer. Similarly, several officers from large
construction unions felt that the reporting requirement was too broad
since it would be difficult for officers and employees to know about
all instances of picketing, billing and other initial organizing
efforts that go on in a single reporting year. The Department
recognizes that the expanded scope of reporting may pose some
difficulties for particular union officials. In consideration of this
concern, as reflected in the comments summarized above, the Department
has narrowed the scope of the reporting obligation for local and
intermediate officers from that proposed in the NPRM. They do not have
to report on matters affecting higher levels within their union.
Officers of a national or international union, however, remain
responsible for reporting activities affected by picketing or
leafleting by subordinate units of their organization. Further, union
officers and employees voluntarily receive reportable payments from or
hold reportable interests in employers. The union officer or employee
is perfectly free to refrain from taking such payments or holding such
interests. If there is a fear that an organizing campaign could
possibly be
[[Page 36133]]
exposed by filing a Form LM-30 the union officer or employees does not
have to take the payment or hold the reportable interest.
One commenter recommended that the Department clarify that payments
from employers not to organize an employer, i.e., attempts at ``labor
peace,'' should be reported. Another suggested that neutrality
agreements ``are especially ripe for sweetheart deals'' where union
officers and union employees can benefit at the expense of bargaining
unit employees as, without reporting requirements for these instances,
``it is nearly impossible'' for workers to learn what gifts an employer
has given a union or the union's officials during an organizing drive.
Apart from the asserted vulnerability of neutrality agreements to
manipulation by employers and union officials, these commenters express
a concern oft repeated in the comments that union officials should be
required to report all payments they receive from employers. As
discussed herein, Congress did not intend to impose such a sweeping
obligation. Moreover, the Department is confident that today's final
rule requires the disclosure of any payments that would impede the
collective bargaining or internal union rights of a union's members.
J. How Union Officials Will Determine Whether an Entity From Which They
Receive a Payment or Other Financial Benefit Does a ``A Substantial
Part'' of its Business With an Employer Whose Employees Are Represented
by the Official's Union or the Union It Is Actively Seeking To
Represent
Section 202(a)(3) requires union officials to report any interests
in and payments from, ``any business a substantial part of which
consists of buying from, selling or leasing to, or otherwise dealing
with, the business of an employer whose employees such labor
organization represents or is actively seeking to represent'' (emphasis
added). The old rule does not define ``substantial part.'' The
Department proposed to define this term as 5% or more of the business's
annual receipts. The Department requested comments on various aspects
of this proposal, including whether a percentage threshold should be
imposed, whether the percentage threshold should be higher or lower
than 5%, whether a percentage of receipts is the appropriate
consideration, and whether union officials with holdings in, or income
from, a business would be able to determine the percentage of the
business's income that comes from dealings with the employer. 70 FR
51186.
The Department did not receive many comments on this proposal. Most
of the comments, as discussed below, either opposed the quantification
of ``substantial'' or suggested that it be set at an amount higher than
5%. After review of the comments, the Department has determined that
10% or more of a business's annual receipts will be considered ``a
substantial part'' of its business.
Two commenters recommended that the Department not define
``substantial part'' in quantitative terms. A labor educator stated
that his study participants characterized the 5% threshold as too low;
he also stated that the participants were concerned about the potential
difficulty of obtaining information about the percentage of business a
vendor conducts with a particular employer. Another commenter expressed
the same concern, noting that information about a vendor's receipts is
generally not publicly available and employers would be reluctant to
provide such confidential information. The same commenter expressed the
view that a 5% threshold likely would be too low for a union officer to
be aware of a vendor-employer relationship that required reporting. Two
commenters suggested that that the Department should define
``substantial part'' as a ``sufficient magnitude of business that its
loss would materially affect the financial well-being of the business
enterprise in question.'' While this statement may be helpful as a
capsule view of the purpose underlying this particular reporting
obligation, the statement does not provide filers a ready gauge to
determine when a report must be filed. Further, such an approach would
make relevant facts that would be difficult for union officials to
ascertain. For a precarious business with overwhelming debt to service,
the loss of 2% of revenue could be devastating. A different business,
in an environment in which demand outstrips its production capacity,
the loss of clients constituting a much higher percentage of its
business may not be as much of a concern. It is difficult to imagine
how a union official could learn the facts necessary to determine
whether the loss of a client would materially affect the business
enterprise. Thus, in the Department's view, the questions posed by its
proposal are (1) What volume of business, expressed as a percentage of
the vendor's annual receipts, is necessary to achieve the proper
balance between insubstantial dealings and those that pose a risk of a
conflict of interest, and thus, trigger the reporting obligation; and
(2) whether a filer will be able, without undue burden, to obtain
information needed to make the threshold determination.
In the NPRM, the Department explained that ``substantial part,'' as
used in section 202(a)(3) and the instructions, refers to the magnitude
of the business transacted between any business in which a union
official holds an interest or receives payment from (referred to herein
as ``the vendor'') and the employer whose employees the filer's labor
organization represents or is actively seeking to represent, as a
percentage of all business transacted by the business. 70 FR 51186. The
purpose of the ``substantial part'' language is to relieve union
officials from having to report income or transactions that do not have
potential conflict-of-interest implications. In the NPRM, the
Department expressed its view that an official who has an interest in,
or receives income from, a vendor that receives 5% or more of its
income from the employer of the union members may well face a conflict.
The Department explained that a business with 5% of its receipts from a
single client would have the opportunity and inclination to make
demands or offer inducements to retain that business. In negotiations
with the union, the employer could use its relationship with the
business as a bargaining tool, either threatening to end the
relationship or promising to provide additional business opportunities.
The Department is not persuaded that there is any benefit in
leaving the term ``substantial part'' undefined. The Department
acknowledges that, in other contexts, statutes and regulations leave
``substantial'' undefined or use qualitative factors to give content to
the term, e.g., 18 U.S.C. 1093 (defining substantial as ``such
numerical significance,'' the loss of which would destroy the ``group
as a viable entity''). For reporting purposes, however, the utility of
a less subjective approach is obvious. A definition that pegs
``substantial'' to the volume of business conducted by a vendor with a
particular entity as a percentage of all business provides a ready,
easy to understand gauge to determine a union official's reporting
obligation.
One commenter asserted that the 5% threshold represents a
significant departure from the Department's earlier interpretation of
``substantial part.'' In support of this assertion, the commenter cited
to a provision in the LMRDA Interpretative Manual (``LMRDA Manual''),
which provides as follows:
[[Page 36134]]
245.200 Substantiality of Dealing
Union Officers A and B of a local union are co-owners of a
building corporation. The corporation, through intermediaries who
are regular meat wholesalers, sold meat to employers who bargain
with the local union. In 1962, some 80% of the corporation's
business of approximately $100,000 was with such employers. Both A
and B owe reports for the year 1962 * * *, since both the interest
and the income are ``derived from any business a substantial part of
which consists of buying from, selling or leasing to, or otherwise
dealing with, the business of an employer whose employees such labor
organization represents or is actively seeking to represent.''
LMRDA Manual Sec. 245.200. (Emphasis in original). The commenter
reads this provision to establish 80% as the threshold for reporting
about a union official's interest in or payments from a vendor. He
suggested that the Department should adopt the same quantitative
threshold in the final rule. Noting his concerns about the difficulty a
potential filer would face in obtaining information about the measure
of a vendor's dealings with a target employer, he further proposed that
no report need be filed unless the filer possesses actual knowledge
that the vendor performs 80% or more its business for the target
employer.
The Department rejects the suggestion that the above-quoted section
of the LMRDA Manual can be fairly read to establish a reporting
threshold. The Manual indicates only that an officer who receives a
payment from a business that receives 80% of its receipts from the
employer of the union members must file a report. It does not state
that receipts of less than 80% from the employer would be unreportable.
The 80% figure in the example reflects a rather obvious situation where
a substantial business relationship exists thus requiring a report. The
illustration provides no assistance in determining the minimum volume
of business that would trigger the reporting obligation. Similarly, the
Department finds no merit to the suggestion that a reporting obligation
attaches only where a union official possesses actual knowledge that
the vendor's volume of business with a relevant employer was greater
than the reporting threshold. The folly of this approach is obvious
where the reporting threshold is set at 80%; it would allow a union
official to avoid a conspicuous reporting obligation and provide an
incentive for a union official to remain willfully ignorant of the
business relationship between a vendor in which he or she holds an
interest or from which he or she receives a payment and an employer
whose employees the official's union represents or is actively seeking
to represent.
The Department does, however, accept the proposition that
increasing the threshold decreases the burden on filers by reducing the
number of reportable transactions. For that reason, the Department is
persuaded that an upward adjustment is appropriate. As noted, the
purposes served by section 202(a)(3) require a reporting threshold that
balances the burden associated with reporting insubstantial matters and
the benefit served by the disclosure of any potential conflicts between
a union official's personal finances and the duties owed by him or her
to the union and its members. To the extent there is some uncertainty
as to where best to strike the balance, the Department believes that a
lower threshold best ensures that disclosure will serve a prophylactic
purpose. Based on the comments and a reassessment of the potential
difficulties posed to filers in obtaining information from a vendor,
the Department has decided to double the reporting threshold to 10%.
The Department believes that setting the threshold level at 10% will
achieve the balance required by the statute.
The Department recognizes that some union officials with a
reportable interest or payment may encounter difficulty in obtaining
information about the amount of business a vendor conducts with the
employer whose employees are represented by the official's union. The
Department, however, believes that the burden is overstated, especially
where the union official holds an ownership or operating interest in
the vendor. In those instances, there should be little trouble in
obtaining the needed information. In instances where the union official
is an employee of the vendor or receives an occasional payment, some
problems are more likely to arise. In such instances, the union
official should request such information in writing from the vendor. If
the vendor refuses to provide the information, the official should
contact the Department for assistance in obtaining the information. In
the meanwhile, the union official should make a good faith estimate,
based on the information reasonably available, whether the 10%
threshold has been met. If such estimate exceeds the 10% threshold,
then the union official should file the report and explain that the
vendor failed to provide requested information. If the estimate yields
a figure less than 10%, no report is required, but the union official
should retain the written request for information he or she presented
to the vendor and any work sheet used to arrive at the less than 10%
figure. If an investigation is conducted, there is no risk of
prosecution absent unusual circumstances calling into doubt the
legitimacy of the good faith estimate.
K. Why Payments and Other Financial Benefits Received From Section 3(l)
Trusts and Service Providers to Such Trusts Must be Reported
Numerous unions, law firms, and organizations representing
financial service providers submitted comments urging the Department to
modify or eliminate aspects of its proposed rule as it would affect a
union official's obligation to report payments and other financial
benefits received from section 3(l) trusts. In the NPRM, the Department
stated that it had received compliance inquiries about whether payments
from a union to a trust in which the union is interested constitute
``dealing[s]'' between the trust and the union under section 202(a)(4).
In the NPRM, the Department also invited comment on whether trusts
set up by unions to provide benefits to their members, such as pension
or welfare plans, constitute ``employers'' under section 202(a)(6) or
``business[es]'' under section 202(a)(3) and section 202(a)(4) so that
payments from such organizations to union officials would be
reportable. 70 FR 51182. Several commenters expressed the view that the
Department was improperly extending the reporting obligation to
payments received from service providers to trusts. In a similar vein,
several commenters suggested that the Department was improperly
requiring reports by labor union officials serving as employees or
representatives of trusts on matters for which reporting already is
required by ERISA. As part of their concerns, several commenters
objected to the proposal on procedural grounds. In essence, they
asserted that service providers and other potential Form LM-10 filers
will be bound by the Department's final Form LM-30 rule, denying them
the full opportunity for notice and comment.
A summary of the principal comments on these various points
concerning a union official's obligation to report payments and other
financial benefits received from section 3(l) trusts and the interplay
between ERISA and the LMRDA and the Department's response to these
comments follows. The Department first briefly addresses the contention
that the Department's proposal is procedurally flawed because it
prescribes rules that must be followed by employers under section 203
of the Act without providing that community the full opportunity for
notice and comment. The Department next
[[Page 36135]]
discusses the concern that requiring union officials to report their
interests in or payments by trusts as employers or vendors providing
services to those trusts represents a departure from the Department's
asserted longstanding policy excepting reports about payments by trusts
and their vendors and the contention that the Department's position is
contrary to ERISA or, at the least, impedes that Act's proper
administration. The Department, in the final paragraphs of this
section, discusses the issue whether trusts and other not-for-profit
entities constitute businesses, followed by the separate, yet related
question, whether trusts and other not-for-profit entities constitute
``employers.''
1. Alleged Procedural Shortcoming
Today's rule is specific to Form LM-30 filers. It does not amend or
modify in any way the Department's current rules specific to the Form
LM-10. Any interpretation or guidance issued on the Form LM-10 remains
in effect unless later changed by the Department. Any interpretation,
guidance or amendment to Form LM-10 will conform to legal requirements
appropriate to the nature of any such changes, including notice and
comment rulemaking where required. Thus, the Department finds that any
concerns that the Department's proposal is procedurally flawed are
misplaced.
2. Routine Exceptions
Many commenters urged the Department to not ``extend'' the
reporting requirements to include payments to union officials by trusts
or their service providers. Several asserted that the Department had
never required union officials (or employers under Form LM-10) to
report such payments. Numerous commenters objected generally to any
reporting of gifts associated with the routine conduct of business,
especially in connection with marketing by service providers to gain
and maintain business with union-related trusts. Some objected
generally, on the ground that Congress never intended that routine
business expenses would be the subject of reporting. Some commenters
offered a variation of this argument, asserting that Congress intended
a general reporting exception for payments made in the regular course
of business. A common theme in the comments is the claim that the
affected community has understood that the LMRDA focuses solely on
financial transactions involving unions and employers whose employees
are represented by a union or a union has targeted for representation.
In their view, the statute does not impose reporting obligations on
financial institutions or service provider activities that have no
connection to the union's labor-management relationship. A variant of
the theme, unique to financial institutions, is that no reporting
obligation exists for union officials who receive payments from
financial institutions. Their position is based on the language of
section 203, which excepts financial institutions from reporting
``payments or loans'' made to union officials. This issue is discussed
below.
The suggestion that the Department is imposing a new reporting
obligation on union officials for payments received by them from
service providers to trusts is incorrect. A union official's obligation
to report such payments has been plainly stated for over forty years in
instructions to the Form LM-30. Indeed, the old Form LM-30 includes the
explicit statement that ``every [union official] must file a detailed
report describing certain financial transactions engaged in, and
interests held by, the [official] or his/her spouse or minor child
[including] * * * legal and equitable interests in, transactions with,
and economic benefits from certain businesses * * * which deal[ ] with
the union or a trust in which the [union] is interested.''
Instructions, Part III. The first Form LM-30 promulgated by the
Department required filers to disclose ``An interest in or derived
income or economic benefit with monetary value from a business * * *
any part of which consists of buying from or selling or leasing
directly or indirectly to, or otherwise dealing with your labor
organization or with a trust in which your labor organization is
interested.'' See BNA, Daily Labor Report, No. 192: A-6, E-1 (Oct. 2,
1963). (Emphasis added). Similarly, the LMRDA Manual specifically
identifies payments from insurance companies to union officials as
matters reportable on Form LM-30. As there stated: ``A union officer,
who is an employee of an insurance company from which the union welfare
fund procures insurance, is required to report that money which he
receives as an employee of the insurance company, inasmuch as he
derives income from a business which sells to or otherwise deals with a
labor organization of which he is an officer.'' LMRDA Manual Sec.
246.600.
The commenters cite no authority for their broad claim that the
Department's position is a departure from a longstanding policy, nor do
they provide a well-reasoned argument for how the statute would permit
the Department the discretion to except from reporting payments from
employers and businesses that have such extensive and ongoing
activities with unions and section 3(l) trusts. Given the continuity in
the Department's interpretation, a more accurate characterization might
be the longstanding inattention to reporting such payments received
from trusts and their service providers. Many unions and their section
3(l) trusts manage benefit plans for their members, maintaining close
business relationships with financial service providers such as
insurance companies and investment firms. As discussed in greater
detail herein, contemporary business and financial practices increase
the prospect that union officials may receive payments from or hold
financial interests in these businesses. Given these practices, the
Department believes that disclosure is critical to promoting good union
governance and fostering ethical behavior. Thus, the Department
disagrees, on both legal and policy grounds, with the notion that
payments from service providers or financial institutions should be
excepted from reporting. Such payments carry with them a particular
potential for conflict and as such warrant particular scrutiny by union
members and the public.
The asserted historical grounds for excepting payments by service
providers and financial institutions from reporting are unpersuasive.
The legislative history establishes that Congress intended that union
officials report any gifts or payments from employers seeking to profit
from their relationship with a union or its officials. Congress
understood that the bill that became the LMRDA ``is drawn broadly
enough * * * to require disclosure of any personal gain which an
officer or employee may be securing at the expense of the union
members.'' Senate. Report, at 15, reprinted in 1 Leg. History, at 411.
As stated by Professor Cox, ``the basic theory [underlying the Act's
conflict of interest provisions] is [that all] payments made by
employers to labor organizations or union officials are prima facie
questionable. Some may be justified. The bill does not forbid the
payments. [The bill] simply requires that they be covered by public
reports so that the employees affected and the public may know what has
occurred.'' 1959 Senate Hearings, at 127. The legislative history
illustrates how Congress believed the LMRDA would operate. The
principal focus of the McClellan Committee was on the activities of the
Teamsters Union and the conduct of three of its highest ranking
officials: Dave Beck, Frank
[[Page 36136]]
Brewster, and Jimmy Hoffa. Each official engaged in unlawful activities
that could not have been accomplished without the complicity of banks
and insurance companies. Banks and insurance companies were used by
these officials, often to the mutual benefit of the officials and the
commercial entities, to carry out such activities and to otherwise
provide unlawful gain to the officials. As explained by Senator
Kennedy: ``Mr. Hoffa would be required to disclose all of his business
dealings with insurance agents handling the union's welfare funds, his
private arrangements with employers, his hidden partnerships in
business ventures foisted upon his members, and all other possible
conflicts of interest.'' 105 Cong. Rec. S817 (daily ed. Jan. 20, 1959),
reprinted in 2 Leg. History, at 969.
The AFL-CIO Ethical Practices Codes, which served as the foundation
for the LMRDA conflict of interest reporting provisions, contained a
specific code for union ``health and welfare funds.'' See 105 Cong.
Rec.*16379 (daily ed. Sept. 3, 1959) reprinted in 2 Leg. History, at
1406-07. It expressly stated: ``No union official who already receives
full-time pay from his union shall receive fees or salaries of any kind
from a fund established for the provision of a health, welfare, and
retirement program. Where a salaried union official serves as employee
representative or trustee * * * such service * * *should not [be
considered] an extra function requiring further compensation from the
welfare fund.'' 2 Leg. History, at 1406. Of particular import, it
states: ``No union official, employee, or other person acting as agent
or representative of a union, who exercises responsibilities or
influence in the administration of welfare programs or in the placement
of insurance contracts, should have any compromising personal ties,
direct or indirect, with outside agencies such as insurance carriers,
brokers, or consultants doing business with the welfare plan. Such ties
cannot be reconciled with the duty of a union official to be guided
solely by the best interests of the membership in any transaction with
such agencies. Any agency official found to have such ties to his own
[substantial] personal advantage or to have accepted fees, inducements,
benefits, or favors of any kind from any such outside agency, should be
removed [from office].'' Id. Where Congress, in effect, established a
disclosure regime in section 202 for matters addressed by the AFL-CIO
Ethical Practices Codes, it would make no sense to exclude reports on
activities specifically identified as improper in those codes. Against
this backdrop, the argument that the legislative history supports the
contention that the Department's view of reporting is both novel and
unintended by Congress fails.
While most commenters appeared to recognize the obvious potential
of circumvention and evasion of the Act's reporting requirements if
union officials did not report any payments they received from trusts,
some argued that the relationship between the official's union and the
trust did not allow for that possibility. The commenters appear to
argue that because the relationship between a section 3(l) trust and a
participating union should be symbiotic, there is no conflict of
interest presented by such payments and thus no circumvention or
evasion is possible. This argument overlooks that the focus of section
202 is conflict between a union official's personal financial interests
and the duties he or she owes to the union and its members, one that
exists without regard to the often congruent interests of a trust and
its participating unions. Moreover, this argument overlooks that the
money a participating union pays into a trust, either directly from the
union or indirectly by an employer on the union's behalf, is money that
otherwise would be maintained in the union's own account and, as such,
any proceeds paid to a union official would be disclosed in reports
filed by the union. Without requiring a union official to report
payments he or she receives from a trust, an official would be able to
circumvent and evade the disclosure that would have occurred if the
funds had remained in the union's coffers. By requiring a union
official to report payments from the trust, the Department is simply
``following the money,'' ensuring that disclosure of such payments
cannot be avoided. Further, since the union official's obligation to
submit a Form LM-30 overlaps with the congruent responsibility of a
union to disclose payments received by the official from a section 3(l)
trust if certain conditions are met, the prospect that one party may
report the payment increases the risk that a failure by the other party
to report the payment will be detected. Thus, the reporting obligation
helps check the evasion of reporting under the Act and, in some
instances, may deter the primary conduct that would trigger the
reporting obligation.
As noted above, some financial institutions have argued that
section 203(a)(1) excepts ``payments or loans made by any national or
State bank, credit union, insurance company, savings and loan
association or other credit institution * * *.'' These commenters
assert that all payments received by union officials from banks,
including lunches and dinners to meet with clients, and marketing and
promotional expenses incurred to keep or to secure business, among
other expenses, are excepted from reporting.
The Department disagrees. Section 203(a)(1) cannot be read as a
limitation on a union official's obligation to report interests in or
payments from any particular segment of employers. In both sections 202
and 203, Congress set forth specific, distinct rules including distinct
exceptions to those rules, particular, on the one hand, to union
officials and, on the other hand, to employers. Neither the statute nor
its legislative history evinces an intention to create a completely
uniform system of reports for all filers, union officials and employers
alike, and neither infers that an exception unique to a particular
provision was intended as a general exception to other reporting
requirements. As discussed herein the Department acknowledges that its
interpretation requires union officials to report a loan or payment
made by a financial institution, but that the financial institution is
not required to file a report. Although generally the Act establishes a
reciprocal reporting obligation on union officials and employers--both
the payer and the payee report on a covered payment--in this instance,
the language of the two sections calls for a different result. Although
today's rule does not interpret section 203(a), the Department notes
that Congress may have held the belief that banks would be constrained
to report these payments under laws regulating financial institutions
and wished to avoid redundant reporting. The Department takes no
position in today's rule on the separate question as to whether the
breadth of the exception provided financial institutions from reporting
obligations under section 203 is as expansive as suggested by some
commenters.
The LMRDA Manual specifically identifies payments from financial
institutions to union officials as matters reportable on Form LM-30:
``If a credit union grants loans to a labor union, a report would be
required from an officer of that labor union who is also an employee of
the credit union.'' LMRDA Manual Sec. 246.800. Further, a 1961 ``Guide
for Employer Reporting'' issued by the Department provides the
following examples of reportable payments (italics in original):
[[Page 36137]]
A. Loans made to union representatives not employed by you,
unless made in the regular course of business as a bank or other
credit institution.
B. Loans to employees, who are also union representatives, on
terms more favorable than those available to other employees, unless
made in the regular course of business as a bank or other credit
institution.
C. Loans to labor organizations, unless made in the regular
course of business as a bank or other credit institution.
Although today's rule does not affect any current reporting
obligation of any Form LM-10 filers, the language quoted belies any
suggestion that the Department is imposing a novel reporting obligation
on Form LM-30 filers by requiring them to report the receipt of such
payments.
The LMRDA is a reporting statute directed at unions, union
officials, and employers and businesses whose interests intersect with
each other's interests; as such, it is obviously not intended to
broadly regulate the affairs of financial institutions. The fact that
financial institutions are regulated by government agencies other than
this Department and that these institutions may be required to disclose
information under those laws does not mean that the disclosure purposes
of the LMRDA conflict with those laws or that those laws supersede the
LMRDA's reporting provisions. The purpose of LMRDA reporting is to give
union members information about financial transactions between union
officials and employers. Reporting under securities and other laws
serves other purposes; while some of these purposes may complement the
LMRDA's disclosure provisions, none supplant the purpose of the LMRDA
to provide relevant, readily available information to union members,
the public, and the Department about potential conflicts between the
financial circumstances of a union official, his or her spouse, or
minor child and the official's duty to the union and its members.
As noted, many commenters took the tack that even if the Department
possessed the authority to require union officials to report payments
received from trusts and vendors, it would be bad policy to do so. One
commenter opined that the Form LM-30 reporting requirements will deter
union trustees from attending educational or other conferences that may
be required for the union trustee to properly discharge his or her
duties under ERISA's standard of care and to be informed about the
services available to the trusts from the financial services community.
One commenter points out that ``anything that makes it more difficult
or risky to obtain the knowledge and experience needed to be a
fiduciary * * * is contrary to the interests of union members.''
Several commenters expressed concern that publishing information for
only union officers gives union members the impression they can
influence an employee benefits plan's operation as part of the
governance of union affairs, which is contrary to ERISA's requirement
that a fiduciary act independent of union affairs. Other commenters
stated that it was unfair to single out union officials for disclosing
payments from a trust since management officials associated with the
trust receiving the same payments have no reporting obligation.
In the Department's experience, union members are savvy enough to
ascertain whether a union official's payments from or interests in a
business pose conflicts of interest and to realize that trustees may
need to obtain education and training to properly fulfill their roles
as trustees. Thus, the Department believes that the concerns over
reporting such matters are overstated and that reporting will not
impede trustees in attending educational and training seminars. The
Department believes that union members already understand or will
understand with minimal explanation that an official's role as a
trustee is distinct from his position with the union and requires that
the official act in the best interests of the trust and its
beneficiaries; as such, the official cannot put his personal political
concerns or his union office or employment ahead of his fiduciary
obligation to the trust. At the same time, the disclosure of such
payments to the union official allows the union's members to determine
whether the payments may tempt the official to put his or her own
financial interests above the official's duties to the union, duties
distinct from those owed by the official to the trust. The Department
disagrees that it is unfairly singling out union-appointed trustees for
reporting payments while allowing their management counterparts to
refrain from doing so. Section 202 extends to reports by union
officials, but not to all individuals who have a role in section 3(l)
trusts. Thus, the Department is not able to consider such an extension
to management trustees, whether or not it might have merit. The
Department also believes that union members will understand this
principle and not view the act of reporting by union officials as
evidence of culpable conduct or the absence of reports by management
trustees as proof of conduct beyond reproach. At the same time,
however, by requiring union officials to report such payments, union
members may determine for themselves whether some payments are
excessive or unnecessary or arise in circumstances where the payments
invite scrutiny to determine whether the official's personal benefits
from the arrangement have impeded or may impede the official's duty to
the union.
One commenter argued that firms are concerned that if Form LM-30
filers must report payments and gifts from vendors to a section 3(l)
trust, these filers will demand that the firms assume the burden to
keep records of such payments. The Department acknowledges that this
may create a customer relations challenge to some vendors, but, just as
the decision to make a payment, or accept a payment, is voluntary, so
too is any decision by a vendor to keep ``gift records'' for a union
official. The vendor may freely choose to demur from assuming such a
burden, just as it may choose to change its practice of making gifts to
union officials. The Form LM-30 reporting and recordkeeping obligations
remain squarely on the union official who holds an interest or receives
a payment for which reporting is required.
One commenter suggests that the Department should change its
proposal to include a general exception for reporting payments
associated with an unsuccessful effort to obtain new or further
business. Two commenters would exclude reporting where any payments
were made to both union and management appointed trustees. One
commenter, acknowledging that marketing benefits were provided by all
service providers seeking new business, argues that the Department
should provide guidance as to where to draw the line between routine
matters and payments intended as bribes.
The commenter who would except from reporting any unsuccessful
efforts to garner business by courting a union official acknowledged
that union members have a legitimate interest in knowing whether the
businesses that are buying from or selling to their union are also
engaged in private transactions with union officers or employees. But
in his view, where no transaction actually takes place between the
business and the union, a union member would have no interest in the
payment. In the commenter's view, up until an actual transaction
occurs, the business should not be considered to be ``dealing with''
the labor organization. The logic behind this position is not apparent.
Other comments disagree. A commenter explained that such payments to a
union official should be reportable to
[[Page 36138]]
the extent that the business was ``dealing with'' the union or employer
by attempting to convince the union or employer to enter into
commercial relations with a competitor. This view also has support in
the legislative history. In an analysis of section 202(a), Senator
Goldwater states, ``Briefly, what must be reported are holdings of
interest in or the receipt of economic benefits from employers who deal
or might deal with such union official's union.'' 62 Cong. Rec. 19,759
(1959), reprinted in 1 DOL, Legislative History of the Labor-Management
Reporting and Disclosure Act of 1959 (emphasis added). Furthermore, to
the extent the commenter may be suggesting that many payments would be
picked up if a business relationship is later consummated, the
commenter fails to recognize that unless payments from potential
vendors are reported in the fiscal year in which they occur, a union
officer could avoid disclosure by simply accepting payments in one
fiscal year and awarding the union business to the vendor in a later
year.
One commenter pointed out that the proposed rulemaking has no
examples related to trust funds reimbursing union officers. Such
examples have been added to the instructions.
3. Relationship With Other Statutes
Although the Department notes that it did not receive a comment
stating that any of its Form LM-30 proposals conflicts with an
obligation under ERISA, many commenters oppose reporting on some or all
of the trust-related activities because the same matters are subject to
ERISA and other Federal reporting requirements relating to security and
business taxes. A typical comment was that ERISA already regulates
transactions that would be reported on Form LM-30. This commenter also
argued that the IRS already oversees business expenses under the tax
laws; it similarly argues that the IRS also oversees payments by tax
exempt organizations that are made for improper private benefit. 26
U.S.C. 501(c).
Two commenters submit that the LMRDA was never intended to regulate
multiemployer plans. They asserted that the Welfare and Pension Plans
Disclosure Act (``WPPDA''), P.L. 85-836 (1958), which predated the
LMRDA, was enacted for this purpose. They assert that the WPPDA
implemented reporting and disclosure requirements for pension plans
similar to the LMRDA's requirements for unions. When WPPDA proved
inadequate to regulate trusts, Congress passed ERISA, which exceeded
and expanded WPPDA's requirements.
There is no merit to the implicit claim that ERISA was intended to
supplant the LMRDA insofar as payments to union officials are
concerned. Section 514 of ERISA states: ``Nothing in this subchapter
shall be construed to alter, amend, modify, invalidate, impair, or
supersede any law of the United States [with exceptions not here
pertinent] or any rule or regulation issued under any such law.'' 29
U.S.C. 1144(d). The WPPDA contained a similar provision, undermining
any attempt to use that statute to constrain the Department's authority
under the LMRDA. See Pub. L. 85-836, Sec. 10(b) (1958) (this act does
not exempt any person from any duty under any present or future law
affecting the administration of employee welfare or pension benefit
plans). In the Department's view, the LMRDA and the ERISA serve
complementary purposes, particularly insofar as their disclosure
provisions overlap. There also is an evident similarity between the
duty union officials owe to their union and the duty trust officials
owe to their trust. Today's rule is not intended as an interpretation
of ERISA and it should not be construed as such. It does not alter any
statutory or regulatory obligations that now exist under that statute.
The Department has determined that Form LM-30 reporting and
recordkeeping requirements do not interfere with or unnecessarily
duplicate ERISA financial disclosure requirements. Thus, the Department
is requiring union officials to report certain payments they receive
from trusts, notwithstanding any ERISA reporting requirements that may
apply to trusts. On many occasions, the Department has discovered
during an audit or investigation that a union officer or employee was
engaged in a reportable situation with a trust but had not filed the
required Form LM-30 until the Department became involved. For example,
the spouse of a union officer owned a company that provided cleaning
and maintenance services to the union and its trust. In one year, the
company received over $94,000 from the union and the trust. Although
this information might or might not be reported on a Form 5500,
depending on the surrounding circumstances, this information can be
disseminated more readily to union members on the Form LM-30 than
through the Form 5500 alone. The Form LM-30, since its inception more
than 45 years ago, has been the source for union members to learn of
potential conflicts of interest between union officers and employees
and vendors to their union's trusts.
Contrary to an implicit premise underlying many of the comments
that the ERISA and the LMRDA are co-extensive insofar as union-related
trusts are concerned, ERISA applies to only a subset of the section
3(l) trusts. Some section 3(l) trusts are not covered at all by ERISA.
ERISA covers only pension and ``employee welfare benefit plans.'' 29
U.S.C. 1002. While there is considerable overlap between section 3(l)
trusts and ERISA ``employee welfare benefit plans,'' some funds in
which unions participate fall outside ERISA coverage, including strike
funds, recreation plans, hiring hall arrangements, and unfunded
scholarship programs. 29 CFR 2510.3-1. Other section 3(l) trusts that
are subject to ERISA are not required to file the Form 5500 or file
only abbreviated schedules. See 29 CFR 2520.104-20 welfare (plans with
fewer than 100 participants); 29 CFR 2520.104-26 (unfunded dues
financed welfare plans); 29 CFR 2520.104-27 (unfunded dues financed
pension plans). See also Reporting and Disclosure Guide for Employee
Benefit Plans, U.S. Department of Labor (reprinted 2004), available at
http://www.dol.gov/ebsa/pdf/rdguide.pdf.
The Department received several comments that raise concerns with
asserted duplicative reporting that would exist if union officials had
to report payments received from trusts or vendors and that the burden
to keep track of such payments likely would fall upon the trusts and
vendors. Most of the commenters expressing concerns about these matters
asserted that party-in-interest transactions (which they argue
encompass all potential conflict of interest disclosures that may arise
under the LMRDA), are already covered by ERISA reporting and auditing
requirements. Some commenters submit that because ERISA identified
those transactions which Congress determined were conflicts of
interest, ERISA should be the standard against which all transactions
involving jointly administered plans are judged.
Among the suggestions on this point, the commenters requested the
Department to except union officials from reporting a payment from a
trust if the trust files a Form 5500. The commenters appear to argue
that no payments associated with a union-related trust covered by ERISA
need be reported by Form LM-30 or Form LM-10 filers if the trust files
a Form 5500. Two commenters pointed out that, in a prior rulemaking,
the Department recognized the merit of Form 5500 for
[[Page 36139]]
purposes of trust disclosure. These commenters apparently refer to the
Form T-1 rule that was published in 2003 as part of the ``Form LM-2
rulemaking.'' See 68 FR 58374, 58524-25(Oct. 9, 2003). This same
exception is contained in the Form T-1 final rule published in the
Federal Register, at 71 FR 57716 (Sept. 29, 2006). Several commenters
recommended as an alternative that the Department expand Schedule C on
Form 5500 to list by company all payments, loans, or gratuities from
service providers to trustees and add a schedule that lists all
trustees who served during the year and their expenses, similar to the
Form LM-2.
As noted by many commenters, the Department has previously
recognized the merit of filing a timely and complete Form 5500 in lieu
of a Form T-1. The Form 5500 as a ``surrogate Form T-1,'' however, only
partially overlaps with the Form LM-30, and is therefore not a reliable
substitute for the Form LM-30. The alternative suggested also presents
problems. Expanding the Form 5500 would require all covered entities,
not just those engaged in reportable transactions with labor union
officers and employees to shoulder an LMRDA-driven higher reporting
burden. The LMRDA addresses disclosure for labor organizations and
labor organization officers and employees; it does not impose general
disclosure requirements on the larger ERISA reporting universe. As such
the Department's efforts here in clarifying the Form LM-30 better
fulfill the full reporting mandate of the LMRDA without imposing
additional burden on those entities and persons outside the scope of
the LMRDA.
Practical concerns also could impede the use of the Form 5500 to
capture some of the information subject to today's rule. Form 5500s are
not required to be filed until seven months after the close of a plan's
fiscal year, and extensions are freely available, and there is a
substantial lag time between the submission of a Form 5500 and its
availability for public review. Thus, there now exists no way for a
union member to timely access such information, unless it is obtained
via Form LM-30. By collecting such information pertinent to a section
3(l) trust, including payments by the trust to union officials, and
making it available at a single site, however, union members are
afforded the means to properly oversee their union's operations and
monitor any potential conflicts between an official's personal monetary
interests and the official's duty to the union. Moreover, even if these
problems could be overcome, there would be no disclosure relating to
those section 3(l) trusts that are not subject to ERISA.
As noted, a few commenters suggested that the purposes served by
the reporting requirements for payments made in the routine course of
business are already met by the IRS rules on business expenses. The
Department disagrees. The IRS rules on ``business expenses'' are not
designed to disclose potential conflicts of interest; section 202 is
precisely designed for this purpose. See IRS Publication 535. Many of
the expenditures that qualify as ``business expenses'' for IRS purposes
would potentially create a conflict of interest for union officers and
employees. For instance, entertainment expenses incurred in seeking new
business may be deductible in part under IRS rules. Further, the IRS
considers certain below market loans and transfers of property as
``business expenses.'' Such a loan or property transfer made to a union
officer or employee is exactly the type of payment the LMRDA was
designed to disclose. Moreover, the commenters offer no explanation how
this approach would benefit union members who typically would never
have access to such tax filings or the underlying expense
documentation. Without such access, the prophylactic purposes served by
disclosure cannot be achieved. As such, the Department rejects this
approach.
4. Trusts as Employers and Businesses
As noted above, the NPRM sought comment on whether a section 3(l)
trust may constitute an ``employer'' under section 202(a)(6) or a
``business'' under sections 202(a)(3) and 202(a)(4) so that payments
from such organizations to union officials would be reportable. 70 FR
51182. After considering the comments received on this point, the
Department has concluded that a section 3(l) trust or other not-for-
profit organization with employees must be treated as an ``employer''
under the Act, but that they should not be treated as a ``business''
under the Act.
As noted above, commenters were divided on the question whether a
trust or other not-for-profit entity, including a labor organization,
should be treated as an ``employer'' for reporting purposes. One
commenter argued that trusts should not be regarded as ``employers''
because Congress only intended reporting to ``reach the union officials
who may receive payment from an employer not to organize the
employees,'' citing Senate Report, at 16. According to the commenter,
trust funds in which the union is interested do not fall into this
category. Another commenter argued: ``although some large trust funds
happen to have employees--many do not--the statute was intended to
cover employers whose potential relationship with a union raises the
risk of a conflict of interest in some sense relevant to the union's
function as a collective bargaining representative.'' One commenter
argued that ``while [section 203] is precise in its applicability only
to an employer whose employees are either represented by or a target of
a union, Congress chose to use the additional terms `businesses' and
`trust' rather than ``employer'' in [section 202] dealing with the
reporting obligation of a union official. Nothing in the statute
reflects a Congressional intent to subsume these broader terms within
the subset of employers subject to [section 203].''
Other commenters stated that a trust should not be considered an
employer because any union officials involved with such funds do not
negotiate with such funds or their representatives, but rather serve as
trustees or shared employees in providing benefits or enforcing
collective bargaining agreements. Another commenter agreed, noting that
any improper payment from a trust to a union officer who is acting as a
trustee would be considered a fiduciary breach of the trustee and not a
breach of the officer's responsibilities to the union.
Several commenters argued that treating a trust as an employer adds
further administrative burdens on trust funds, which are already
subject to numerous reporting and regulatory requirements. One
commenter pointed out that some Taft-Hartley trusts are self-
administered, in which case the trust itself may be an employer, while
other trusts employ third-party administrators to administer the trust,
denying employer status to the trust. He implicitly suggests that given
what he characterizes as an artificial distinction between third-party
and self-administered trusts Congress could not have intended that
payments by any trust would be covered. This commenter, like several
others, further contended that trusts are not ``businesses'' for
purposes of the Act.
The LMRDA expressly defines ``employer'' in broad terms. Included
in that definition, at section 3(e) of the Act, are employers that are
``with respect to employees engaged in an industry affecting commerce,
an employer within the meaning of any law of the United States relating
to the employment of any employees or which may deal with any labor
organization concerning grievances, labor disputes, wages, rates of
pay, hours of employment, or
[[Page 36140]]
conditions of work * * *.'' 29 U.S.C. 402(e) (emphasis added). The
statute contains no indication that Congress intended a narrower
application of that term in any of the Act's provisions. Indeed, the
breadth of the term is illustrated not only by the italicized language
of section 3(e) but by the careful parsing of the remaining language in
the provision to except governmental entities from the Act's
application. See 29 U.S.C. 402(e) (the Act's sole exceptions for
entities is for the ``United States or any corporation wholly owned by
the Government of the United States or any State or political
subdivision thereof.'') For these reasons, the Department is persuaded
to give ``employer'' its full and natural construction, thus bringing
within its reach any entity, including any section 3(l) trust and
service providers to such trusts, that is an ``employer.''
Commenters were divided on the question whether trusts and other
not-for-profit entities constitute businesses within the meaning of the
LMRDA. One commenter noted that leaving trusts outside the reporting
requirements would minimize transparency and undermine the intent of
the reforms. This commenter alleged that union officials have long
utilized ``off the books'' accounting procedures for these programs.
Most commenters, however, asserted that trusts do not constitute
``businesses.'' One commenter argued that interpreting a trust in which
a labor organization is interested as a ``business'' is incongruous
with the Department's establishment of a reporting obligation by union
officials who hold interests in or receive payments from ``businesses
that deal with a trust in which the labor organization is interested.''
In this commenter's view, it would make no sense to consider the trust
as a ``business'' at the same time as payments by either the labor
organization or the trust to a union official must be reported by the
official. In effect, the commenter argues that the union and the trust
operate as one for reporting purposes and thus dealings by the trust
with the union cannot be viewed as business dealings for reporting
purposes.
Other commenters argued that since trusts do not operate with a
profit motive, they cannot be considered ``businesses.'' Several
commenters echoed the sentiment that an entity can be a ``business''
only if it is a commercial enterprise carried on for profit; they infer
support for this argument from their understanding of the term as
guided by the language in sections 202(a)(3) and 202(a)(4), which
equates ``business'' with the terms ``buying,'' ``selling,''
``leasing,'' and so forth. They argued that the phrase ``otherwise
dealing with'' takes its meaning from these terms, citing to the Act's
legislative history (Senate Report, at 90, reprinted in 1 Leg. History,
at 486). If Congress had intended to cover entities that have non-
business dealings with a labor organization, they argue, it would have
drafted sections 202(a)(3) and 202(a)(4) to include ``any entity,'' not
simply ``a business.''
The LMRDA does not define ``business,'' leaving the Department to
apply the term's ordinary meaning unless the context in which it is
used indicates that Congress intended a unique or special meaning. See
Brower v. Evans, 257 F.3d 1058, 1065 (9th Cir. 2001). The American
Heritage Dictionary (2000) defines ``business,'' in part, as
``Commercial, industrial, or professional dealings'' and ``Volume or
amount of commercial trade'' and ``commercial dealings.'' Under Black's
Law Dictionary (8th ed. 2004), a ``business'' is generally defined as
``a commercial enterprise carried on for profit.'' Black's illustrates
the term's usage to distinguish between ``commercial enterprises'' and
non-businesses, using academia as an example of the latter. Moreover,
the IRS case law interpreting ``trade or business,'' has consistently
held that a profit motive is a basic criterion of a ``business.''
Nickeson v. Commissioner, 962 F.2d 973 (10th Cir. 1992). Based on these
interpretations, the Department believes it appropriate to treat trusts
and other not-for-profit entities as distinct from entities treated as
businesses for Form LM-30 purposes.
L. When Payments and Other Financial Benefits Received From a Union
Other Than an Official's Own Union Must Be Reported
In the NPRM, the Department asked for comment on the question
whether ``labor organizations'' constitute ``businesses'' under
sections 202(a)(3) and 202(a)(4), or constitute ``employers'' under
section 202(a)(6). The Department received only a few comments on this
question. Today's rule clarifies that a ``labor organization'' that has
employees is an ``employer'' for purposes of Form LM-30. As just
discussed, there is no indication that Congress intended to except any
entities other than government agencies from the application of the
Act's provisions if they occupy the status of ``employer'' under any
law of the United States. The Department reaches this conclusion for
essentially the same reasons as discussed above in connection with the
status of trusts and other not-for-profit entities.
One commenter asserts that Congress intended that businesses would
consist only of entities that are likely organizing targets of a union.
Another commenter states that the Department ``should continue its
current practice of not requiring payments to a union official or
employee from affiliated unions (including multi-trade councils such as
building trades or metal trades councils) to be reported on the LM-
30.''
Two commenters argued that ``labor organizations'' are not
``businesses'' because the latter term refers only to ``commercial
enterprises that engage in commercial transactions with unions or
unionized employers.'' However, they add: ``To the extent a labor
organization has employees who are represented by another union,
payments from the labor organization to officials of the union
representing its employees would be reportable under [sections]
202(a)(1) & (5).'' Each of these sections provides that a union
official should report payments from an employer whose employees the
official's union represents or is actively seeking to represent.
Another asserted that ``[t]he risk of a union official obtaining
special favors from an affiliated labor organization or labor-
management committee in return for his or her not discharging his [or
her] obligations as a union leader is simply not present.''
The Department has decided that for reporting purposes a union may
constitute an ``employer'' under section 202, if the union meets the
statutory definition of the term. 29 U.S.C. 402(c). The Department's
reasoning is basically the same as discussed above in connection with
the ``employer'' question posed with regard to trusts and other not-
for-profit entities. Additionally, the Department rejects the
proposition that ``labor organization'' and ``employer'' are mutually
exclusive terms for all purposes of the Act. This proposition is
inconsistent with the settled view that a ``labor organization'' that
is also an ``employer'' will be held to the same obligation as other
employers unless Congress otherwise provides. As noted, the Act
provides that the term ``employer'' is to be given the same application
for all its purposes. If a ``labor organization'' cannot be an
``employer,'' then the various prohibitions relating to employer
interference in union elections would be unavailable where employees of
a union are themselves represented by an autonomous staff union. There
is no evidence that Congress intended to deny LMRDA rights to these
workers simply because their employer is a labor
[[Page 36141]]
organization. This Department's longstanding position to treat unions
as employers vis-a-vis staff unions is congruent with the similar
treatment accorded such relationships under the Labor Management
Relations Act. See National Education Ass'n, 206 N.L.R.B. 893 (1973).
However, in the rule today, the Department clarifies when a payment
from a labor organization would be reportable under section 202(a)(6).
No reports will be required where the payment is received from a union
that is affiliated with the union which the officer or employee serves
as an officer or employee; i.e., locals, intermediate bodies, and their
parent national or international union. To use a fictitious example, an
officer or employee of Local 1, National Union of Reporters (``NUR''),
would not report a payment received from either the New England
Council, NUR, Local 2, NUR, or the NUR, even if they were employers.
Similarly, no payment from the local to an NUR national officer would
be reported. Any such payment already will be reported on the payer
union's Form LM-2, LM-3, or LM-4, albeit sometimes aggregated with
other payments. Moreover, in instances where the union's payment(s) to
a particular official exceed $5,000, alone or in the aggregate over a
one-year period, the reporting union's payments will specifically
identify the payee official on the Form LM-2. However, a union officer
or employee unaffiliated with the union that makes the payment must
report the payment if the payer-union is an employer. For example, an
officer or employee of a regional council of multi-trade unions that
receives a payment from NUR or one of its locals would have to report
the payment if the NUR entity is an employer.
The Department has created a reporting rule for unions: A union
official will have to report payments from a labor union other than his
or her own if that union (1) Has employees represented by the
official's union; (2) has employees in the same occupation as those
represented by the official's union; (3) claims jurisdiction over work
that is also claimed by the official's union; (4) is a party to or will
be affected by any proceeding in which the official has voting
authority or other ability to influence the outcome of the proceeding;
or (5) has made a payment to the filer for the purpose of influencing
the outcome of an internal union election. This rule, coupled with the
general provisions relating to section 202(a)(6), will capture for
reporting any payments that could reasonably be perceived as presenting
a conflict with the official's duty to their own union and its members.
Readers are cautioned that the obligation to report or not report
payments in the situations described above does not affect the legality
of such payments under the election provisions of the LMRDA or other
laws, such as the Labor Management Relations Act, which may regulate
such matters.
M. How the Proposed Definitions Have Been Clarified To Ease a Filer's
Completion of the Form LM-30
As explained in the NPRM, the old regulations and instructions for
the Form LM-30 failed to define or incompletely defined several terms
whose meaning must be properly understood for a union official to
correctly complete the Form LM-30. The Department therefore proposed
several new or revised definitions. The terms defined included:
Actively seeking to represent, arrangement, benefit with monetary
value, bona fide employee, bona fide investment, dealing, directly or
indirectly, filer/reporting person/you, income, labor organization,
labor organization employee, labor organization officer, legal or
equitable interest, minor child, payer, publicly-traded securities,
substantial part, and trust in which a labor organization is
interested. All of the proposed definitions with the exception of
``publicly-traded securities'' have been adopted, some in revised form,
in today's rule. As discussed earlier in the preamble, the Department
has determined that it is unnecessary to include a definition for
``publicly-traded securities'' or an equivalent term in the rule.
Comments were received on only some of the definitions. To assist
filers, however, all the definitions, as adopted by today's rule, are
set out below in italics. Where comments have been received on a
proposed definition, the comments are summarized and the Department's
responses are discussed below. A number of the terms already have been
discussed in this preamble.
1. Definitions Adopted by Today's Rule
Actively seeking to represent means that a labor organization has
taken steps during the filer's fiscal year to become the bargaining
representative of the employees of an employer, including but not
limited to:
Sending an organizer to an employer's facility;
Placing an individual in a position as an employee of an
employer that is the subject of an organizing drive and paying that
individual subsidies to assist in the union's organizing activities;
Circulating a petition for representation among employees;
Soliciting employees to sign membership cards;
Handing out leaflets;
Picketing; or
Demanding recognition or bargaining rights or obtaining or
requesting an employer to enter into a neutrality agreement (whereby
the employer agrees not to take a position for or against union
representation of its employees), or otherwise committing labor or
financial resources to seek representation of employees working for the
employer.
Where a filer's union has taken any of the foregoing steps, the
filer is required to report a payment or interest received, or
transaction conducted, during that reporting period.
Note: Leafleting or picketing, such as purely ``informational''
or ``area standards'' picketing, that is wholly without the object
of organizing the employees of a targeted employer will not alone
trigger a reporting obligation. For example, if a union pickets a
sporting goods retailer solely for the purpose of alerting the
public that the retailer is selling goods that are made by children
working in oppressive conditions in violation of accepted
international standards, the picketing would not meet the ``actively
seeking to represent'' standard.
As discussed, the definition was modified by the addition of the
note to inform filers that leafleting or picketing wholly without the
object of organizing the employees of a targeted employer will not
trigger a reporting obligation and make plain that a report need only
be filed where a union official receives a payment during the year in
which the official's union takes a concrete step to actively represent
the employees of an employer that transacts business with the union or
other businesses for which reports are required because of their
relationship to such employer.
Arrangement means any agreement or understanding, tacit or express,
or any plan or undertaking, commercial or personal, by which the filer,
spouse, or minor child will obtain a benefit, directly or indirectly,
with an actual or potential monetary value.
Note: The term ``arrangement'' is very broad and covers both
personal and business transactions, including an unwritten
understanding. For example, if during the reporting period an
employer's representative offered a union officer a job with the
employer, the officer must report the offer unless he or she
rejected it. A standing job offer must be reported because it
carries the potential of monetary value to the filer. Another
example of a situation requiring a report is when an employer
provided insider information about a stock or other investment
opportunity, unless the filer rejected the advice and took no steps
to act on it.
[[Page 36142]]
No comments were received on the proposed definition. This
definition is adopted as proposed. As discussed in the NPRM, the term
encompasses both personal and business transactions, including an
unwritten understanding. For example, if an employer's representative
during the reporting period solicits a union officer to accept a job
with the employer, the filer must report the solicitation, unless the
filer rejects the offer. A standing job offer must be reported because
it carries the potential of monetary value to the filer. Another
example of a situation requiring a report would be one in which a
covered employer provides insider information about a stock or other
investment opportunity, unless the filer rejects the advice and takes
no steps to act on it.
Benefit with monetary value means anything of value, tangible or
intangible. It includes any interest in personal or real property,
gift, insurance, retirement, pension, license, copyright, forbearance,
bequest or other form of inheritance, office, options, agreement for
employment or property, or property of any kind. You do not need to
report pension, health, or other benefit payments from a trust to you,
your spouse, or minor child that are provided pursuant to a written
specific agreement covering such payments.
This definition has been revised by adding the new third sentence
in the instructions to clarify that benefits received by a union
official, his or her spouse, or minor child as a participant in a trust
or benefit plan will generally not be reportable on Form LM-30. The
same definition, with only a slight change in the wording of the third
sentence, is adopted as section 404.1(a) of the Department's
regulations (to be codified as 29 CFR 404.1(a)).
A commenter voiced support for the Department's proposed definition
of this term and the related definitions proposed for ``benefit with
monetary value,'' ``income,'' and `` directly or indirectly,'' arguing
that the Department has broadly construed these terms to capture
anything of value received by the filer, his or her spouse, or minor
child, including any payment or benefit held or received by a third
party for their benefit. This commenter noted that the proposed
definition is properly drawn from disclosure rules applicable to
Federal employees. Another commenter criticized the proposal because it
appears to include pension benefits that an officer receives from a
jointly administered trust as a result of prior service for an employer
participating in the trust. The commenter argues that the statute does
not require disclosure of such payments and that an officer's receipt
of such payments does not present a conflict of interest. The commenter
recommends the Department either amend the definition or modify the
instructions to clarify that such payments do not have to be reported
under any of the sections. The Department agrees that benefits received
as an employee of an employer, such as pension benefits, are generally
not reportable. This point is clarified by the new third sentence added
to the definition.
Bona fide employee is an individual who performs work for, and
subject to the control of, the employer.
Note: A payment received as a bona fide employee includes wages
and employment benefits received for work performed for, and subject
to the control of, the employer making the payment, as well as
compensation for work previously performed, such as earned or
accrued wages, payments or benefits received under a bona fide
health, welfare, pension, vacation, training or other benefit plan,
leave for jury duty, and all payments required by law.
Compensation received under a ``union-leave,'' or ``no-docking''
policy is not received as a bona fide employee of the employer
making the payment. Under a union-leave policy, the employer
continues the pay and benefits of an individual who works full time
for a union. Under a no-docking policy, the employer permits
individuals to devote portions of their day or workweek to union
business, such as processing grievances, with no loss of pay. Such
payments are received as an employee of the union and thus, such
payment must be reported by the union officer or employee unless
they (1) totaled 250 or fewer hours during the filer's fiscal year
and (2) were paid pursuant to a bona fide collective bargaining
agreement. If a filer must report payments for union-leave or no-
docking arrangements, the filer must enter the actual amount of
compensation received for each hour of union work. If union-leave/
no-docking payments are received from multiple employers, each
should be considered separately to determine if the 250-hour
threshold has been met. For purposes of Form LM-30, stewards
receiving union-leave/no-docking payments from an employer or lost
time payments from a labor organization are considered employees of
the labor organization.
Any individual working at the control and direction of a labor
organization will be an employee of the organization. A union steward
or union official while acting on behalf of the union is not acting as
a bona fide employee of the employer whose employees are represented by
the steward's union. Of particular import, however, today's rule, as
discussed herein, modifies the proposed instruction to except from
reporting on the Form LM-30 compensation received from an employer for
whom the official works for the time he or she is engaged in certain
union activities provided it is made pursuant to a collective
bargaining agreement and the compensation reflects payment for union
activities of 250 hours or less during the reporting year.
Bona fide investment means personal assets of an individual held to
generate profit not acquired by improper means or as a gift from (1) an
employer, (2) a business that deals with the filer's union or a trust
in which the filer's union is interested, (3) a business a substantial
part of which consists of dealing with an employer whose employees the
filer's union represents or is actively seeking to represent, or (4) a
labor relations consultant to an employer.
No comments were received on this proposal. The primary purpose of
this definition is to alert filers that stock or other securities
received as a gift will not constitute a ``bona fide investment,''
under the provision that exempts from reporting bona fide investments
in securities when the gift is received from specified employers,
businesses, or labor relations consultants. The only changes from the
NPRM are the numbering of the different sources of reportable payments
and the elimination of the cross-reference to the term ``publicly-
traded securities.''
Dealing means to engage in a transaction (bargain, sell, purchase,
agree, contract) or to in any way traffic or trade, including
solicitation for business.
Note: The term ``traffic or trade'' includes not only financial
transactions that have occurred but also the act of soliciting such
business. Thus, for example, potential vendors or service providers
attempting to win business with a union will be considered to be
``dealing'' with the union to the same extent as vendors who are
already doing business with the union. Potential vendors must engage
in the active and direct solicitation of business (other than by
mass mail, telephone bank, or mass media). A business that passively
advertises its services generally and would provide services
consumed by, for example, a union would not meet this test. The
potential vendor must be actively seeking the commercial
relationship. Under certain circumstances, the payment itself will
be evidence of the solicitation of business, such as a potential
vendor who treats a union official to a golf outing and dinner to
discuss the vendor's products.
The definition of this term has been revised slightly from the
proposal by adding the phrase ``including solicitation for business''
and adding the explanatory note to the instructions. The same
definition, but without the note, is adopted as section 404.1(b) of
[[Page 36143]]
the Department's regulations (to be codified as 29 CFR 404.1(b))
Most of the comments on the proposed term have been discussed
already in connection with the meaning to be given the terms
``employer'' and ``business.'' See discussion herein. The new phrase
and note were added to make clear that payments to union officials must
be reported even if they do not lead to a consummated business
transaction. The Department notes, as discussed herein, that some
commentators suggested that the term ``dealing'' should only encompass
payments made to union officials in connection with marketing efforts
that lead to a completed business transaction. For the reasons
discussed herein the Department is not persuaded that there is anything
in the language of section 202 or its legislative history to suggest
that either ``routine marketing expenses'' or the subset of those that
do not lead to a business agreement should be excepted from the
reporting obligation.
The Department believes that the definition it adopts for
``dealing'' is consistent with the intended meaning given it by
Congress. Neither its use in the statute nor the legislative history of
the Act's ``dealing'' provisions suggest that the term should be given
a unique meaning. As defined today, the term accords with the meaning
given the term in the American Heritage Dictionary and Black's Law
Dictionary. In the American Heritage Dictionary ``deal'' is defined, in
part, as ``[t]o sell'' and ``[t]o do business; trade.'' In Black's,
``deal'' is defined as ``an act of buying and selling'' such as ``the
purchase and exchange of something for profit.''
Directly or indirectly means by any course, avenue, or method.
Directly encompasses holdings and transactions in which the filer,
spouse, or minor child receives a payment or other benefit without the
intervention or involvement of another party. Indirectly includes any
payment or benefit which is intended for the filer, spouse, or minor
child or on whose behalf a transaction or arrangement is undertaken,
even though the interest is held by a third party, or was received
through a third party, including instances in which the third party is
acting on the behalf, or at the behest, of an employer or business and
the interest would have to be reported if made directly to the filer,
his or her spouse, or minor child . The following examples show the
difference between ``direct'' and ``indirect'':
You are employed by XYZ Widgets and also serve as the president
of the local union representing XYZ Widgets employees. In a recent
conversation with the XYZ Widgets human resources manager, you
mention that you are placing your 15 year-old daughter in a private
school. XYZ Widgets sends you a check for $1,000 with a note saying
``Good luck with the new school!'' You have received a direct
benefit.
You are employed by XYZ Widgets and also serve as the president
of the local union representing XYZ Widgets employees. In a recent
conversation with the XYZ Widgets human resources manager, you
mention that you are placing your daughter in a private school. You
receive a letter from your daughter's new school stating that she
has received a $1,000 scholarship through a donation by XYZ Widgets.
You have received an indirect benefit.
The definition of this term, as discussed above, has been revised
from the proposal by including two examples. The examples have been
added in response to a comment by a labor educator who suggested that
the Department should include some examples to demonstrate the
difference between ``direct'' and ``indirect.'' As noted in the NPRM,
the purpose of the definition is to clarify that filers must disclose
any benefits received by them (or their spouse or minor child) from a
third party where the third party is acting on the behalf, or at the
behest, of an employer or business where the benefit would have to be
reported if made by the employer or business directly to the filer (or
his or her spouse or minor child). Benefits received from an employee,
agent, or representative of an employer or business, or other entity
acting on behalf of the employer or business should be considered
received from the employer or business. Payments to a third party to be
held for the use or benefit of the filer are also reportable. The
definition is deliberately drawn broadly, consistent with the
legislative history, ``to require disclosure of any personal gain which
an officer or employee may be securing at the expense of union
members.'' As also noted in the NPRM, the legislative history draws
from the AFL-CIO Ethical Practices Code: ``The ethical principles apply
not only where the investments are made by union officials, but also
where third parties are used as blinds or covers to conceal the
financial interests of union officials.''
Filer/Reporting Person/You mean any officer or employee of a labor
organization who is required to file Form LM-30.
Note: These terms are used synonymously and interchangeably
throughout the instructions, and, when referring to reportable
interests, income, or transactions, these terms include interests,
income, or transactions involving the union officer's or employee's
spouse or minor child.
No comments were received on the proposed definition. This
definition is adopted as proposed.
Income means all income from whatever source derived, including,
but not limited to, compensation for services, fees, commissions,
wages, salaries, interest, rents, royalties, copyrights, licenses,
dividends, annuities, honorarium, income and interest from insurance
and endowment contracts, capital gains, discharge of indebtedness,
share of partnership income, bequests or other forms of inheritance,
and gifts, prizes or awards.
The Department adopts the definition of ``income,'' as proposed,
both in the instructions and as section 404.1(e) of the Department's
regulations (to be codified at 29 CFR 404.1(e)).
Labor organization, means the local, intermediate, or national or
international labor organization that employed the filer, or in which
the filer held office, during the reporting period, and, in the case of
a national or international union officer or an intermediate union
officer, any subordinate labor organization of the officer's labor
organization. Item 6 of the Form LM-30 identifies the relationships
between employers and ``your labor organization'' or ``your union''
that trigger a reporting requirement. Item 7 of the Form LM-30
identifies the direct and indirect relationships between a business
(such as a goods vendor or a service provider) and ``your labor
organization'' that trigger a reporting requirement. The terms ``your
labor organization'' and ``your union'' mean:
a. For officers and employees of a local labor organization.
Your local labor organization.
b. For officers of an international or national labor
organization
Your national or international labor organization and all of its
affiliated intermediate bodies and all of its affiliated local labor
organizations.
But note: A national or international union officer does not
have to report payments from or interests in businesses that deal
with employers represented by, or actively being organized by, any
lower level of the officer's labor organization. Such officers are
also not required to report payments and other financial benefits
received by their spouses or minor children as bona fide employees
of a business or employer involved with a lower level of the
officer's labor organization.
c. For employees of a national or international labor
organization.
Your national or international labor organization.
d. For officers of intermediate bodies.
Your intermediate body and all of its affiliated local labor
organizations.
But note: An officer of an intermediate body does not have to
report payments from
[[Page 36144]]
or interests in businesses that deal with employers represented by,
or actively being organized by, any lower level of the officer's
labor organization. Such officers are also not required to report
payments and other financial benefits received by their spouses or
minor children as bona fide employees of a business or employer
involved with a lower level of the officer's labor organization.
e. For employees of an intermediate body.
Your intermediate body.
As discussed at length herein, the definition of ``labor
organization'' for purposes of completing Form LM-30 has been modified
from that proposed, narrowing its scope consistent with the
Department's existing ``top down'' approach and limiting the obligation
of officers of local and intermediate unions. The first sentence of the
quoted material is adopted as section 404.1(f) of the Department's
regulations (to be codified at 29 CFR 404.1(f)).
Labor organization employee means any individual (other than an
individual performing exclusively custodial or clerical services)
employed by a labor organization within the meaning of any law of the
United States relating to the employment of employees.
Note: An individual who is paid by the employer to perform union
work, either under a ``union-leave'' or ``no-docking'' policy, is an
employee of the union for reporting purposes if the individual
performs services for, and under the control of, the union. See
definition of ``bona fide employee.''
For purposes of Form LM-30, stewards receiving union-leave/no-
docking payments from an employer or lost time payments from a labor
organization are considered employees of the labor organization.
Numerous comments were received about the wisdom of requiring union
officials to report payments they received under union-leave or no-
docking policies. As discussed above, in today's rule, the Department
adopts a limited reporting obligation for such payments. Concerns
regarding the reporting burden of labor organization employees under
the ``union-leave'' and ``no-docking requirements'' are addressed
separately in this final rule. In addition to comments on that aspect
of the proposed definition, the Department also received comments
inquiring about the application of the definition to union stewards.
One commenter, a labor educator, stated that his study's
participants found the definition for ``labor organization employee''
to be confusing. He explained that many participants viewed the
proposed definition as a major shift from existing practice as a number
of individuals, including stewards, bargaining committee members, and
volunteer organizers, would now have reportable transactions when doing
union work such as serving on a negotiating committee, serving as an
arbitration witness, or organizing. The commenter identified as a
specific problem the definition's failure to address how a filer should
report the receipt of payments where he or she has multiple employers,
each with a different practice or language with respect to lost wages
and to the payment of benefits to part-time union officers, stewards,
negotiating committee members, and so forth.
In general, where a union steward receives union-leave/no-docking
payments from an employer or lost time payments from the union, the
steward will be regarded as an employee of the labor organization as
the individual has received compensation for performance of services
for the union. The Department recognizes that some stewards and other
representatives have multiple employers, each with a different practice
or language with respect to lost wages and payment of benefits of part-
time union officers, stewards, or negotiating committee members. Thus,
each employer is considered separately for reporting purposes.
Finally, unlike the proposed definition, today's rule does not
outline the factors that distinguish between the status of individuals
working for a union as independent contractors and those working as
employees of the union. As explained in the NPRM, independent
contractors of the union are not required to file a Form LM-30. In the
Department's view, the inclusion of these factors in the definition of
``labor organization employee'' added unnecessary length and possible
confusion to the definition. If needed, the Department will provided
guidance, separate from the instructions, to assist individuals unsure
of their status as employees or independent contractors. The same
definition, but without the note, modifies section 404.1(g) of the
Department's regulations (to be codified at 29 CFR 404.1(g))
Labor organization officer means any constitutional officer, any
person authorized to perform the functions of president, vice
president, secretary, treasurer, or other executive functions of a
labor organization, and any member of its executive board or similar
governing body. An officer is (1) a person identified as an officer by
the constitution and bylaws of the labor organization; (2) any person
authorized to perform the functions of president, vice president,
secretary, or treasurer; (3) any person who in fact has executive or
policy-making authority or responsibility; and (4) a member of a group
identified as an executive board or a body which is vested with
functions normally performed by an executive board.
Note: Under this definition, an officer includes a trustee
appointed by the national or international union to administer a
local union in trusteeship. If you are a trustee elected or
appointed by the local union to audit and/or hold the assets of the
union, you may or may not be a union officer, depending on your
union's constitution and other factors. If you serve in your union
in any capacity and you are unsure if your position is an officer
position, you are likely an officer of a labor organization if any
one of the following applies:
Your union's constitution or bylaws refers to your
position as an officer of the union;
Your union's constitution or bylaws states that your
position has the authority to make executive decisions for the union
or that you are authorized to perform the functions of president,
vice-president, secretary, treasurer, or other constitutionally
designated officer;
Your union's annual Form LM-2 or Form LM-3 lists your
position as an officer of the union;
In your position, you serve on your union's executive
board or similar governing body.
This definition adopted in today's rule has been revised from that
proposed by adding the above note in the instructions. The same
definition, but without the note, is adopted as a modification of the
existing definition at section 404.1(b) of the Department's regulations
(to be codified as redesignated at 29 CFR 404.1(h)). As explained in
the NPRM, the definition, as proposed, tracks the definition of
``officer'' at section 3(n) of the LMRDA, 29 U.S.C. 402(n), and adds a
new second sentence to the old regulation's definition, 29 CFR
404.1(b). The LMRDA Manual applies the definition to trustees appointed
to oversee a labor organization. See LMRDA Manual, 241.200.
One commenter agreed with the Department's view that the group of
union officials subject to section 202's reporting requirements only
partially overlaps with the larger group of individuals subject to the
Act's Title V fiduciary duties. See 29 U.S.C. 501(a) (``officers,
agents, shop stewards, and other representatives''). The commenter
noted that nevertheless the overlap was substantial. A labor educator
stated that participants in his study group found the definition
unclear, adding that the explanatory notes to the definition were
unhelpful. He mentioned that some participants were unsure whether
``trustee'' applied to the positions in some local unions which hold
auditing
[[Page 36145]]
and other responsibilities over the local's assets or to an individual
appointed by the national or international union to administer a
local's affairs, or both. The commenter explained that local union
trustees do not see themselves as union officers and are not de facto
or de jure members of the executive board. The commenter also explained
that participants were unsure whether stewards would be considered
union officers. The Department has concluded that the proposed
definition, along with the addition of the note, clarifies that the
term ``trustee,'' as used in this definition, does not apply to those
with auditing responsibility in the union. This definition also
provides a test for determining whether any individual is a union
officer.
Legal or equitable interest means any property or benefit, tangible
or intangible, that has an actual or potential monetary value for the
filer, spouse, or minor child without regard to whether the filer,
spouse, or minor child holds possession or title to the interest. See
definition of income and benefit with monetary value. For example:
You are an officer of a union. You and your spouse jointly
own an accounting business that provides tax services to a number of
clients, including your union. You hold a legal interest in the company
providing services to your union.
You are an officer of a union. You form a tax preparation
business with two partners and put your share of the business in your
wife's name. The business prepares tax returns and LM reports for your
union. You hold an equitable interest in the business that deals with
your union.
This definition has been modified from that proposed by adding the
examples set forth in the above bullets. This change was suggested by
the labor educator whose study participants had difficulty
understanding the meaning of the term.
Minor child, means a son, daughter, stepson, or stepdaughter less
than 21 years of age.
This definition is adopted as proposed as part of the instructions
and as section 404.1(i) of the Department's regulations (to be codified
at 29 CFR 404.1(i)). As the Department noted in the NPRM, the old
instructions, like the LMRDA, are silent about the age at which a child
reaches his or her majority. As explained in the NPRM, state law
definitions for the legal concept of childhood and age of majority
differ from state to state but also may differ widely from legal
context to legal context within the same state. In the Department's
view, there is a need for a uniform, nationwide meaning of ``minor
child'' under the LMRDA and without such a uniform definition the
objective of the LMRDA will be frustrated. Both filers and union
members who view filed reports require a known and easily applied
single standard regarding when reports are required, and what a
disclosure or its absence represents.
The Department only received a few comments about the proposed
definition of ``minor child.'' One commenter noted that the Department
should exclude from its definition a ``child who has married and moved
away from the parental home.'' Another suggested that 18 should be the
cut off age unless the child is still claimed as a dependent for
Federal income tax purposes. The Department agrees that the commenters
offer valid alternatives to the Department's proposal. Nevertheless,
the Department believes that the proposed definition solely tied to a
child's age offers the advantage of simplicity and ease of application,
particularly because a child's status may remain in a state of flux
during his or her late teens and early twenties. In 1959 when the LMRDA
was enacted, it was well established that at common law the age at
which a person reached his or her majority in the states was twenty-one
years. See, e.g., 5 Samuel Williston and Richard A. Lord, A Treatise on
the Law of Contracts Sec. 9:3 n.15 (4th ed. 1993 & Supp. 1999). As
explained in the NPRM, the Department believes that in 1959 when
Congress used the term ``minor child'' in section 202(a), it intended a
uniform Federal standard to apply and referred to the general common
law meaning at that time, i.e., twenty-one years. The Department also
believes that twenty-one is more suitable than an earlier age to
distinguish between a child's relative dependence upon, and
independence from, the finances of a parent. For these reasons, the
Department adopts the definition of ``minor'' as proposed.
Substantial part means 10% or more. Where a business's receipts
from an employer whose employees the filer's labor organization
represents or is actively seeking to represent constitute 10% or more
of its annual receipts, a substantial part of the business consists of
dealing with this employer.
As discussed herein, this term has been changed by increasing the
reporting threshold from 5% to 10% in order to ease the burden on a
filer to determine the percentage of a vendor's business that consists
of dealing with an employer whose employees the official's union
represents or is actively seeking to represent.
Trust in which a labor organization is interested means a trust or
other fund or organization (1) which was created or established by a
labor organization, or one or more of the trustees or one or more
members of the governing body of which is selected or appointed by a
labor organization, and (2) a primary purpose of which is to provide
benefits for the members of such labor organization or their
beneficiaries. The term ``section 3(l) trust'' is used in the
instructions as a shorthand reference to such trusts.
No comments were received on the Department's proposed definition
of this term. This definition is provided by section 3(l) of the LMRDA.
29 U.S.C. 402(l). The only change is the inclusion of the second
sentence to make plain that the term ``section 3(l) trust `` is a
shorthand reference to ``trust in which a labor organization is
interested.'' The same definition is adopted as section 404.1(j) of the
Department's regulations (to be codified at 29 CFR 404.1(j)).
2. Other Issues Related to Definitions
A commenter suggested the inclusion of a definition for
``transaction,'' another term used in the Form LM-30 instructions. The
Department believes that the term has a plain meaning that applies
across various contexts and therefore its inclusion in the instructions
is unnecessary.
The Department had proposed to use the term ``payer'' to describe
the employer, business, or labor relations consultant that is the
source of a reported payment on the Form LM-30. As explained in the
NPRM, the Department recognized that the term was imperfect, because in
common parlance a business in which a filer holds an interest would not
ordinarily be considered a ``payer'' of the filer. Upon further
consideration, the Department has determined that the use of the term,
defined specifically for Form LM-30 reporting, is unnecessary and
potentially confusing. For these reasons, the Department has withdrawn
the proposed definition. For similar reasons, as discussed above, the
Department has withdrawn the proposed definition of ``publicly-traded
securities.''
N. Details Relating To Proposed and Revised Form and Instructions
As explained in the NPRM, the broad purpose of Form LM-30 is to
disclose payments and other financial interests of a union official
that may pose a conflict between those personal interests and his or
her duty to the
[[Page 36146]]
union and its members. 70 FR 51166. In the NPRM, the Department
identified the difficulty in developing a self-explanatory form to
accomplish this result. While the old Form LM-30 has a deceptively
simple design, it fails to fully capture information that Congress
wanted disclosed. Filers often failed to complete the form and, when
they did file, they seldom provided the detail called for in the
instructions.
1. Comparison of the ``Old'' and Proposed Forms
Items 1-4 of the old Form LM-30 remained on the proposed form with
only minor changes. Item 3 was modified to require an e-mail address of
the filer. Item 4 of the proposed form combined Items 4 and 5 of the
old form and it also required filers to report whether they held their
position in the union at the end of the reporting period. Item 5 on the
proposed form was the signature box, which was otherwise the same as
the old form.
The proposed Form LM-30 included a Payer Detail Page to provide an
itemized list of all payments, by payer. The proposed form included
three schedules, and it organized the reportable matters by tables
instead of the narrative boxes on the old form. The old form also
displays reportable information in a three section format: Part A, Part
B, and Part C. The filer must report payments from employers in Part A,
Items 6, 7a, and 7b; from businesses in Part B, Items 8-12; and from
other employers and labor relations consultants in Part C, Items 13-14.
The proposed form contained various continuation pages for
information supplementing required entries on other pages or otherwise
as overflow space. Some of these pages existed in a different format in
the old form and some were new pages.
The NPRM noted that the diversity of financial transactions made
reportable by section 202 of the Act requires detailed instructions.
The NPRM invited comments as to the layout of the instructions, their
clarity, and suggestions about how to better explain the reporting
obligations. The NPRM also noted that the first heading of the proposed
instructions, ``Why File,'' was largely unchanged from the old form: it
addressed the basic reporting obligations.
2. Comments on Proposed Form
In an attempt to better inform potential filers about the purposes
served by the Form LM-30, the proposed form included an expanded
discussion of the LMRDA, placing the official's reporting obligation in
the context of the other rights and obligations established by the Act.
The proposed form also clarified that no form need be filed unless the
filer, his or her spouse, or minor child held a covered interest,
received a covered payment, or engaged in a covered transaction or
arrangement during the reporting period.
The NPRM also requested comments about the layout and clarity of
the form, including: ``Would the form benefit from adding additional
text and, if so, what additions are recommended? Does the form have an
intuitive feel to it? Does the form request information in logical
progression? How can the form be improved?'' The next paragraph
discusses the general comments received on the proposed form and the
Department's response. The following paragraphs summarize comments
received on particular aspects of the proposed form and the
Department's response to those comments. Comments and responses are
grouped by the numbered items and schedules of the proposed form.
General Comments: Several commenters applauded the inclusion of
definitions and examples; some commenters, however, expressed concern
about some of the definitions and argued that some of the examples were
incorrect. As discussed, the Department has clarified some of the
definitions, modified some of the examples, and added others where
requested. These changes are discussed in other sections of this
document.
One commenter stated that the proposed form is more confusing to
filers and the public than the old form, adding burden but no
compensating benefit. The commenter recommended that the Department
should ``leave well enough alone'' and that instead of revising the
form it should provide guidance that would ``clarify[ ] and simplify[ ]
the reporting requirement itself.'' The Department disagrees with this
recommendation. As noted in the NPRM, flaws in the form itself and the
instructions to the form provided impetus for the proposed rule.
Further, as discussed throughout this document, many of the
modifications to the form correspond to changes/clarifications in the
reporting requirements themselves. Although under the revised form a
filer no longer needs to record the statutory subsection under which a
payment or other financial interest is received, the Department has
nevertheless conformed the form to the reporting requirements of
section 202 and the limited exceptions to such requirements. Finally,
much of the asserted confusion will clear when filers familiarize
themselves with the revised form and instructions and avail themselves
of the compliance assistance readily available from this Department.
A labor educator stated that several of his study participants
found the language in the instructions to be too ``legalistic.'' He
suggested that the Department should wait to see what problems arose in
connection with the historic upsurge in Form LM-30 filings,
particularly in light of his observation that the biggest problem may
actually be ``false positives'' and not ``false negatives'' (i.e.,
individuals who have nothing to report are nonetheless filing reports).
The commenter's point about the old form is valid. However, the revised
form and instructions will resolve this problem.
Item 2--Period Covered: One individual suggested that the
instructions should make clear that the filer's fiscal year should be
the fiscal year used by his union in filing its Form LM-2, and another
expressed confusion about whether reports should be based on the
official's fiscal year or his union's fiscal year. The Department
cannot dictate to a filer his or her fiscal year. The language of the
statute states: ``[the filer] shall file with the Secretary a signed
report listing and describing for his preceding fiscal year * * *.'' 29
U.S.C. 432(a). The instructions as proposed appear to leave some
ambiguity as to what fiscal year should be utilized by the filer. As
such, the Department has added language to Part IX of the revised
instructions indicating that the fiscal year is that of the filer,
which may differ from the fiscal year utilized by the filer's union for
filing its annual financial report, Form LM-2, LM-3, or LM-4.
Item 3(I)--Contact Information of Reporting Person: E-mail Address:
One commenter expressed support for the added contact information
required by Item 3. Other commenters voiced opposition to the addition
of the filer's e-mail address. The concern over e-mail addresses was
that they are private and that their disclosure may lead to harassing
e-mail, spam, unwanted solicitation, and viruses. Further, the
commenters argued that the reporting of a filer's office telephone
number eliminates the need for the e-mail address.
Although several commenters voiced concerns over the required
inclusion of a filer's e-mail address, none explained how this would
violate the Privacy Act. No violation of such Act is apparent; there
does not appear to be any greater privacy interest in a personal e-mail
address than in a personal mailing address or phone number and such
[[Page 36147]]
information has long been required by Form LM-30 filers without any
challenge on privacy grounds. The old Form LM-30 requires the address
of the filer and the telephone number where the filer conducts official
business, although a private, unlisted telephone number is not required
to be reported.
At the same time, the Department is sensitive to a filer's concerns
that by disclosing his or her e-mail address, the official may become
the target of unsolicited e-mails or otherwise impeded in the use and
enjoyment of his or her e-mail account. For this reason, the Department
has decided that the filer has the option to disclose or not disclose
his or her e-mail address.
Summary: The Department received one comment supporting the
addition of a summary schedule to Form LM-30. Other commenters opposed
this schedule, asserting that the summary adds unnecessary burden,
without adding any ``significant value,'' and creates confusion due to
the lack of a readily apparent relationship between the payer and
employer/union on the summary. One commenter noted that summarizing all
payments in this manner leads to the conclusion that the total value is
a ``payment'' when not all of the interests, such as share holdings,
can be characterized as such.
This summary enables viewers to quickly ascertain the payments and
interests held in employers and businesses that may constitute a
potential conflict of interest. This function is the essence of Form
LM-30, and thus the summary is a significant improvement over the old
form. The comments express concern over the confusion that would ensue
from aggregating different types of interests and payments, and the
Department has addressed this concern with the creation of the
categories of ``income or other payments'' and ``assets'' on the
summary section of the form.
Part B--Schedule 1: Employer or Business Identifying Information:
One commenter voiced general support for the new schedules and
applauded the new contact information. Other commenters expressed
opposition to the changes, in particular the business ID number and
incorporation information. One commenter argued that the new payer
identifying information was ``unduly burdensome,'' requiring filers to
conduct extensive research to compile such information, and with little
value to the members and other viewers. Another stated that only the
payer telephone number was justified, along with the payer name and
address and the transactional information. Further, a union commented
that it will be extremely difficult for a filer to locate payer
information such as the state of incorporation/registration and state
business ID number.
This schedule will no longer combine data from all ``payers''
regardless of its classification as an employer, labor relations
consultant, or business. The latter terms appear in the Act, unlike
``payer,'' and the Department has restructured Part II of the
instructions to detail the reporting requirements with these
distinctions in mind.
The Department has also eliminated Items K and L (State of
Incorporation/Registration and State Business ID number) of Schedule 1,
as proposed. The commenters' assertions that the inclusion of the
business ID number and incorporation information will add significant
burden to the reporting requirements appear valid. A filer must report
all transactions in an accurate and clear manner, as well as provide
basic contact and reference information; the filer should not also be
required to perform research on the employer or business for
information beyond what is needed to meet the statutory requirements.
Further, viewers of these forms may be able to acquire such information
on their own initiative if it is of interest to them; they will have
the employer's or business' name and contact information to assist them
in obtaining any desired additional information.
Part B--Schedule 2: A labor educator presented some specific
suggestions for this Schedule. He suggested that the form spell out the
coding ``O/E/S/C'' under Item B, Schedule 2, i.e., ``officer,''
``employee,'' ``spouse,'' and ``[minor] child.'' Two other commenters
expressed a similar concern. The Department has modified the form to
meet these concerns.
This commenter also suggested that the Department could use the
Itemization Sheets and Schedules 15-19 in the Form LM-2, with a
standardized itemization sheet for all reportable transactions that
roll-up into a single-summary sheet. The itemization sheets for
Schedules 15-19 of the Form LM-2 are not appropriate or necessary for
purposes of the Form LM-30. A filer using the electronic Form LM-30
will be able to create as many copies of Schedules 2 and 4 and of the
additional information schedule as needed to complete the form.
Instructions--Categories A1-A6: The most critical comments
concerned the subsection-by-subsection layout of the proposed form. One
commenter described it in hyperbolic terms, as ``requiring an
encyclopedic knowledge of the Act.'' Others simply suggested it was
more difficult than necessary. The Department believed that the
subsection-by-subsection approach had the value of showing the filer,
by reference to the statutory language, exactly what he or she must
report. While the Department continues to believe that this approach
has value and may have been preferable for use by some filers, the
Department is persuaded that this approach may lead to the perception
that the Form LM-30 is unnecessarily difficult to complete.
Two commenters asserted that the proposed form, unlike the old
form, ``fail[s] to collect interests and transactions into coherent
categories. The proposed format, dependent on a complicated coding
system, adds unnecessary complexity for filers.'' Another commenter, a
labor educator, generally opposed the use of the ``codes'' A1-A6,
because in his view it is possible to have more than one code for a
payment. He also stated that he had found that potential filers had
difficulty synchronizing the sections of the form with the
instructions. For example, he stated that filers had to continually
``flip back and forth'' from the instructions to the form. He believes
that this diminishes the effectiveness of the instructions.
The Department has carefully considered the concerns expressed
about the subsection-by-subsection approach of the proposed form. In
place of this approach, the Department has decided instead to organize
the form in a way that requests each filer to identify by employer and
business the reportable interest, payment, loan, or transaction, and to
identify whether it was held by or involved the filer, his or her
spouse, or minor child. This approach, similar to the approach used in
the old form, adopts the targeted approach used by Congress to identify
the types of relationships from which a conflict between a filer's
personal interests and his or her duty to the union arises. Moreover,
the classification of each payer as an employer, labor consultant, or
business provides necessary context for a member or other viewer to
properly analyze the potential conflict. Except for this change, the
revised definitions and examples, the addition of some new examples,
and the enlarged exception for reporting insubstantial payments, there
have been no significant changes to the proposed form or instructions.
The Department has also reduced the necessity to ``flip back and
forth'' from the instructions to the form by putting more instructions
and examples on the form itself (following the example of SF-278
required of Federal employees),
[[Page 36148]]
and by providing cross references, by page number of the instructions,
for the definition of any terms needed to complete a particular section
of the form. Also, to help alleviate this problem, the revised form
utilizes Items 6 and 7 to add clarity for both the filer and the
reviewer of the form by listing the conditions under which
arrangements, transactions, income or other payments, interests, and
loans must be reported. These items help the filer, in particular, by
focusing him or her on the pertinent provision in the instructions.
Instructions Part II--Who must file and what must be reported: One
commenter suggested that the ``Do I have to file the LM-30'' section of
the instructions should be revised to allow an individual to more
easily identify himself or herself as a Form LM-30 filer. The
Department has addressed this concern by removing the A1-A6 categories,
restructuring Part II of the instructions around the reporting
requirements, exceptions, and examples of payments from employers and
businesses; by revising some of the definitions, and by adding page
citations to the cross-references. Another commenter acknowledged that
the proposed form assisted potential filers by highlighting that no
union official needs to file unless there has been reportable activity.
The revised form contains the same statement.
A commenter noted that the definition of ``substantial'' should
include the word ``employer'' and not ``labor organization'' at the end
of the second sentence of the definition. The Department has corrected
this error by indicating that the end of the second sentence of that
definition should read ``employer'' and not ``labor organization,'' as
``substantial part'' is found in the language of 202(a)(3) (a business
that deals with the employer) and not in 202(a)(4) (a business that
deals with a labor organization).
Instructions--Examples and Definitions: A commenter opposed some of
the examples, suggesting that they are unreal ``lawyer'' hypotheticals,
better used to establish the bounds of the Department's authority than
to provide practical assistance to filers. Another commenter stated
that fewer, better examples should be developed. He provided
information to support his view that the definitions were confusing. He
also suggested that the form should be redesigned to eliminate the need
for filers to refer to different places in the instructions in order to
complete the form, and that the instructions should include a section
that brings together all the transaction criteria in each of the six
subsection categories. Another commenter characterized the revised
instructions as an improvement over the old ones, describing the
examples as ``particularly useful.''
Many of the specific comments directed at examples have already
been addressed in other sections of the preamble. The Department
believes that these examples address typical reporting scenarios that
will guide filers in their effort to comply with the reporting
requirements. Nevertheless, the Department has carefully reviewed all
the examples, and in several cases has added or modified language in an
effort to clarify or simplify the guidance presented in them. Other
examples, although reflecting a correct statement of a filer's
obligations (with the exception of example 1, at 70 FR 51217, which
omitted a key fact), have been eliminated as redundant.
Commenters expressed concern about the absence of examples
involving transactions between, on the one hand, union officials and on
the other section 3(l) trusts or service providers to such trusts. The
Department has added Example 3 under ``(2) Payments of Money or Other
Thing of Value from Certain Other Employers or a Labor Relations
Consultant to Such an Employer'' in Part II of the instructions, which
relates to payments to a union official from a trust in which that
official's union is interested. Further, Part II of the instructions,
``Reportable Payments and Interests from Businesses,'' contains
Examples 15 and 17, which each deals with payments to a union official
from service providers to trusts.
Instructions--General Stylistic Comments: An individual offered
several specific recommendations in regard to the instructions. He
proposed that the Department utilize a single column rather than the
double columns in the proposed form; the ``Note on Definitions'' should
be indented below each definition; and the examples should be placed
within graphic text boxes. He also suggested that the Department should
either include a discussion of the Act's legislative history in the
instructions or separately publish such information to assist filers in
understanding what is to be reported on the form.
The Department has made several minor changes that add some clarity
to the instructions. As to changing the two-column format, the
Department disagrees. All the old Form LM instructions utilize two
columns, and no other commenter expressed concern over this format. The
Department believes that it is easier for readers to process
information in a two-column format than by alternative presentation.
The examples already stand out as they are numbered in bold type,
so boxes around them are not needed. The Department has also
consolidated many of the examples, based on its departure from the A1-
A6 format in the proposed form. The Department has indented the ``Note
on the Definitions'' sections to aid the filer; created a new part of
the instructions for definitions (Part III); numbered the definitions;
and cited them with page number references in Part II of the
instructions.
The Department disagrees with the suggestion that the instructions
should include a discussion of the Act's legislative history. The
instructions are intended to be straightforward and directed solely at
the completion of the form. A discussion of legislative history, the
language of the statute, and legal and policy questions would add
additional, unnecessary length to the instructions. A filer desiring
additional background information of this nature can easily obtain it
by reviewing this preamble, the preamble to the proposed rule as
published in the Federal Register, or through the Department's own Web
site and other governmental and publicly-accessible electronic
information portals.
The Department acknowledges that the revised form, like the
proposed form, may ``feel less intuitive'' than the old form; however,
it believes that the revised form will better meet the goals of the
LMRDA than the old form. Moreover, to address the concerns of the
commenters, the Department has made several changes to the form to
facilitate its completion and use by union members and the general
public.
3. Completion of the Revised Form
The first seven items on the revised Form LM-30, as published in
today's rule, provide basic information about the filer and his or her
labor union; the number of employers and labor relations consultants
and the number of businesses with which the filer engaged in reportable
activity; and the total reported income and the total reported assets
of the filer involving those employers, labor relations consultants,
and/or businesses. Item 8 is for the signature, date, and telephone
number of the filer. Items 1-8 have been designated as Part A of Form
LM-30 for ease of reference.
Both the proposed and revised forms provide a plain notice to
filers that they should carefully review the instructions to the form
before completing it. The revised form contains the notice on the
[[Page 36149]]
first page: ``You are not required to file this report unless you * * *
have received a payment, engaged in any transactions or arrangements,
or held an interest of the types described in * * * the instructions.''
The revised instructions include, on the second page, a discussion of
the reporting exception for insubstantial payments and gifts to enable
potential filers to more quickly determine whether they have a
reporting obligation. To simplify the form's completion, the
instructions identify particular terms that must be understood for
completing particular items. Page references are provided for these
terms, which are now defined near the end of the instructions. By
relocating the terms, a filer is able to more quickly start completing
the form and focus only on those terms that affect the filer's
circumstances.
The remainder of the form consists of Schedules 1 through 4 and is
designated as Part B. The filer must complete a separate Part B in
accordance with the instructions for each of the employers, labor
relations consultants, or businesses with which the filer engaged in
reportable activity.
Item 1--File Number: No changes were proposed for this item, which
is included in the old and revised forms.
Item 2--Period Covered: No changes were proposed for this item,
which is included in the old and revised forms.
Item 3--Contact Information of Reporting Person: The addition of
the filer's e-mail address was proposed. However, the Department has
decided to allow filers the option to disclose or not disclose his or
her e-mail address.
Item 4--Labor Organization Identifying Information: Both the
proposed form and today's form combine two items of the old form. Items
4F, 4G, and 4H on the revised form ask for information about the
filer's position in the union, whether it is an officer or employee
position, and whether the filer held this position at the end of the
reporting period. As noted in the NPRM, it is important as an
enforcement matter to know whether the filer can still be reached at
the union, and whether the filer may need to file Form LM-30 the
following year.
Item 5--Summary: The revised form adopted the concept of a summary
schedule of reported payments and interests contained in the proposed
form, but the proposed summary has been simplified in response to
comments. The revised summary (now Item 5) shows total reported income
or other payments and total reported assets. The summary no longer
requires the filer to list each individual payer (employers,
businesses, and labor relations consultants) and give a total value of
all dealings with that payer as had been proposed. As discussed herein
in greater detail, the aggregation of all types of dealings such as
payments, share holdings, loans, and so forth was determined to be
confusing. Instead, the filer now totals the amounts in Schedule 2,
Item F, Column (1) (value of income or other payments) of all the Part
Bs and enters the total in Item 5A. The filer likewise totals the
amounts in Schedule 2, Item F, Column (2) (value of asset) of all the
Part Bs and enters the total in Item 5B.
Items 6 and 7--Employer Relationships and Business Relationships:
To simplify reporting, Item 6 on the revised form identifies the
relationships between, on the one hand, a filer's union and, on the
other hand, an employer or a labor relations consultant to an employer
that will trigger a reporting requirement. Its counterpart, Item 7,
identifies the types of relationships, direct and indirect, between a
business and the filer's union that will trigger a reporting
requirement. These relationships are culled from the provisions of
sections 202(a)(1) through 202(a)(5), supplemented by particular
relationships that trigger a report under section 202(a)(6). Filers no
longer have to extract these relationships from the statutory language.
If the filer has received a payment from or held an interest in such an
employer or business, the language on the form directs the filer to
review Part II of the instructions to determine whether or not any of
the exemptions apply to the filer's situation. Items 6(a) and 7(a) each
contain a box for the filer to indicate whether or not he or she had
any of the listed relationships. If the filer answers ``Yes'' to Item
6(a) or 7(a), Items 6(b) and 7(b) ask for the number of employers (and
consultants) or the number of businesses with which the filer had a
listed relationship. Items 6 and 7 clarify for both the filer and the
reviewer of the form the entities from which payments and interests
must be reported.
Item 8--Signature: The signature box has been renumbered as Item 8,
but it has not otherwise changed from the old or proposed forms.
Part B: The ``Payer Detail Page'' from the proposed form is now
called Part B and has four schedules. Schedules 1 and 2 will be
completed for both employers and businesses. Schedule 3 will be
completed for employers only and Schedule 4 will be completed for
businesses only, so only three schedules will be completed on each Part
B, just as in the NPRM. Instructions and examples have been added to
the schedules on the form to enable the filer to more easily complete
the form. A separate Part B must be completed for each employer,
business, or labor relations consultant from which the filer received a
reportable payment or in which he or she had a reportable interest.
Part B--Schedule 1: Employer or Business Identifying Information:
All filers must complete this schedule. The schedule's title has been
changed from the proposed form's ``Payer Identifying Information.'' The
proposed form combined three items on the old form (Items 6, 8, and 13)
that helped identify the source of a payment or the specific interest
held by the filer, his or her spouse, or minor child. The proposed form
also required the filer to provide contact information for each
``payer,'' including the telephone number, Web site address, state of
incorporation or registration, and state business identification
number. As noted in the NPRM, the additional contact information would
make it easier for a person reviewing the report to identify the payer.
The filer also would have to indicate whether he or she was associated
with the payer at the end of the reporting period, information that
would be helpful to the Department in determining whether the filer may
be required to file a report the following year, thereby allowing the
Department to conduct effective compliance assistance. The revised form
no longer requests the filer to provide for each payer the state of
incorporation/registration or state business identification number. The
Department has determined that filers may not have this information at
hand and that asking them to obtain such information would impose an
unnecessary burden. The Department has retained new items such as the
entity's telephone number (Item I) and Web site address (Item J). The
schedule also requires the information that would be found in the old
form. The Department has also preserved the proposed form's requirement
for the filers to indicate whether the union official (or spouse or
minor child) had a continuing relationship with the employer, business,
or labor relations consultant at the end of the reporting period.
Part B--Schedule 2: Interests in, Payments From, Loans to or From,
and Transactions or Arrangements with Employer or Business and Payments
from a Labor Relations Consultant: All filers must complete this
schedule. This schedule replaces and renames Schedule 2 on the ``Payer
Detail Page'' of the proposed form. The term ``payer,'' as noted in the
NPRM, was an awkward phrase; it is no longer needed in the
[[Page 36150]]
revised form. The proposed form required filers to identify reportable
interests, payments, loans, transactions, and arrangements by the
specific provisions of section 202 of the LMRDA.
As in the proposed form, the revised Schedule 2 requires the
reporting of the date of each reportable payment and interest and
whether it was received or held by the filer, his or her spouse, or his
or her minor child; this information was not always reported on the old
form. Language on this schedule clarifies the information that must be
reported, the format in which the information must be reported, and
references the instructions for further review of filing criteria. The
layout of the schedule itself remains largely unchanged from the
proposal, which in turn is derived from Items 7, 12, and 14 of the old
form. The most significant change in the revised form's Schedule 2 is
the deletion of Item C of the proposed form, which required the filer
to indicate the subsection of section 202 of the LMRDA (A1-A6) that
required the disclosure of each reported payment or interest. As
explained in greater detail elsewhere in this preamble, this
requirement was deleted in response to comments. Item C ``Description
of Interest, Payment, Loan, Transaction, or Arrangement'' on the
revised form is identical to Item D on the proposed form. Item D,
``Value'' on the revised form (Item E on the proposed form), has been
divided to include separate columns for ``Value of Income or Other
Payments'' and ``Value of Asset.'' The instructions for this item in
Part IX clarify what must be reported in each column of Item D. The
filer must add the data in the income column and in the asset column,
and record these totals in Item F.
Part B--Schedule 3: Employer's Relationship with Your Labor
Organization: This schedule must be completed only by filers who are
completing Part B for payments from, or interests in, an employer (or a
labor relations consultant to an employer). It replaces Schedule 3 from
the proposed form, ``Payer's Dealings with Union(s), Trust(s), or
Employer(s)'' with respect to employers. This schedule, unlike the old
or proposed forms, provides a checklist of relationships between the
filer's union and employers and businesses that will trigger a
reportable interest. The relationships are culled from the language of
sections 202(a)(1) through (a)(5) and from the Department's
interpretation of section 202(a)(6).
In Item A the filer will check the appropriate box(s) describing
the relationship between the employer and the filer's labor
organization. This will clarify the exact nature of the relationship
for both the filer and the reviewer of the form. Item B of the schedule
asks for a detailed description of the dealings between the two
entities. Item B(1) requests a dollar value of the transactions between
the entities. If the employer's relationship with the filer's labor
organization is based on the labor organization's representation of the
employer's employees or actively seeking to represent the employees or
if the relationship cannot otherwise be readily assigned a monetary
value, the filer should enter ``N/A.'' The need for this schedule
derives from the changes in the Department's interpretation and
implementation of section 202(a)(6) as discussed elsewhere in this
preamble.
Together with Schedule 4 that compiles similar information for
reportable interests that arise from business relationships with a
filer's union, this schedule, like the proposed Schedule 2, combines
and simplifies information that is now collected in multiple items of
the old form. Both the proposed form and the revision in today's rule
asks filers to provide for each reportable matter the source of the
payment or the specific interest, its recipient or holder (filer,
spouse, or minor child), a description of the reportable matter, and
its value. The schedule, as revised, also includes examples of
reportable items, which should assist filers in determining the manner
and detail in which reportable items should be identified and
described.
Part B--Schedule 4: Business's Dealings with Union(s), Trust(s), or
Employer(s): This schedule must be completed only by filers who are
completing Part B for payments from, or interests in, a business that
deals with the filer's labor organization, a trust in which the filer's
labor organization is interested, or an employer whose employees the
filer's labor organization represents or is actively seeking to
represent. This schedule replaces the proposed Schedule 3, ``Payer's
Dealings with Unions(s), Trusts(s), or Employer(s),'' with respect to
businesses. The new Schedule 4 largely resembles its predecessor
Schedule 3 in the proposed form, which combined and simplified
information reported in Items 9, 10, and 11 of the old form. Item B now
reads ``Union/Trust/Employer,'' rather than ``U/T/E.'' Filers are no
longer required to compute and enter a total on the form for the value
reported.
As noted above, this schedule, combined with Schedule 3 that
compiles similar information for reportable interests and payments from
employers, asks filers to identify for each reportable matter the
source of the payment or the specific interest, its recipient or holder
(filer, spouse, or minor child), a description of the reportable
matter, and its value. Although the proposed form asked the filer to
designate for each reportable matter the subsection under which the
report was triggered, the revised form does not ask for such
information. The schedule, as revised, also includes examples of
reportable items, which should assist filers in determining the manner
and detail in which reportable items should be identified and
described.
Labor Organizations in Which the Reporting Person is an Officer or
Employee--Continuation Page: This page is a continuation of, and is
identical to, Item 4 on the revised Form LM-30. It is for use by a
filer who is an officer or employee of more than one labor
organization.
Additional Information Schedule: This schedule is identical in both
the proposed and revised forms. It allows filers to provide additional
information or explanations about other items in the form. This is
similar to additional information items found on other OLMS forms, but
the old Form LM-30 does not contain such an item.
Summary Schedule Continuation Page: The Department has eliminated
this continuation page that was part of the proposed form, as the
revisions to Item 5, the Summary, have removed the necessity for it.
Schedule 2 Continuation Page: The Department has retained a
continuation page for the new Schedule 2.
Schedule 4 Continuation Page: The Department has added a
continuation page for the new Schedule 4.
Instructions Part I, Why File: This part of the instructions is
largely unchanged from the old and proposed forms.
Instructions Part II, Who Must File and What Must Be Reported and
Part III, Definitions: Part II of the instructions has been amended in
several significant ways from the proposed form. The Department has
abandoned the layout of the instructions in the ``A1-A6'' format, and
it has adopted an arrangement in which the instructions guide the filer
according to the reporting requirements for payments from and interests
in employers (and labor relations consultants) and businesses. Further,
the Department has removed the definitions from Part II of the
instructions, numbered them, and placed them in a new Part III. The
reporting requirements in Part II cite the number and page of each of
the definitions in Part III. Finally, the
[[Page 36151]]
Department has modified some of the definitions as earlier discussed in
the preamble.
Instructions Part IV, When to File: This part has been renumbered
from the old form, but no substantive changes have been made.
Instructions Part V, Where to File: This part has been renumbered
from the old form, but no substantive changes have been made.
Instructions Part VI, Public Disclosure: This part has been
renumbered from the old form and updated information, including the
Internet Public Disclosure Room, has been added.
Instructions Part VII, Officer or Employee Responsibilities and
Penalties: This part has been renumbered from the old form, but it is
identical to the proposed form.
Instructions Part VIII, Recordkeeping: This part has been
renumbered from the old form and a reference has been added to
retaining electronic documents. A similarly worded statement is adopted
as section 404.7 of the Department's regulations (to be codified at 29
CFR 404.7)). This represents a clarification of existing recordkeeping
requirements, and is not intended as any change in the law governing
the maintenance and retention of records.
Instructions Part IX, Completing Form LM-30: The Department has
modified this part of the instructions, the former Part VIII of the
proposed instructions, to correspond to the changes made to the revised
Form LM-30.
III. Regulatory Procedures
A. Executive Order 12866
This final rule has been drafted and reviewed in accordance with
Executive Order 12866. The Department has determined that this rule is
not an ``economically significant'' regulatory action under section
3(f)(1) of Executive Order 12866. Because compliance with the rule can
be achieved at a reasonable cost to covered union officers and
employees, the rule is not likely to meet the 3(f)(1) definition of
having an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or state, local or tribal governments or communities.
As a result, the Department has concluded that a full economic impact
and cost/benefit analysis is not required for the rule under Section
6(a)(3) of the Order. However, the Department determined because of its
importance to the public that this final rule is a significant
regulatory action under the Executive Order and therefore, it was
reviewed by the Office of Management and Budget.
The burden imposed by the revision of the Form LM-30 is addressed
in the Paperwork Reduction Act section, below.
The Department believes that increased transparency for union
officers and employees will provide substantial benefits to union
members and the union itself, as well as to outside academic
researchers, members of the public, and other stakeholders.
Transparency promotes the unions' own interests as democratic
institutions. By these improvements, union members will obtain a more
accurate picture of the personal financial interests of their union's
officers and employees, as those interests may bear upon their actions
on behalf of the union and its members. With this information, union
members will be better able to understand any financial incentives or
disincentives faced by their union's officers and employees and to make
more informed choices about the leadership of their union and its
management of its affairs. Through these actions, the Department
effectuates the reporting obligation established by section 202 of the
LMRDA and advances the Act's declared purpose ``that labor
organizations, employers, and their officials adhere to the highest
standards of responsibility and ethical conduct in administering the
affairs of their organizations.'' Section 2(a) of the LMRDA, 29 U.S.C.
401.
B. Small Business Regulatory Enforcement Fairness Act
For similar reasons as those discussed in section A, the Department
has concluded that this final rule is not a ``major'' rule under the
Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C.
801 et seq.). It will not likely result in (1) An annual effect on the
economy of $100 million or more; (2) a major increase in costs or
prices for consumers, individual industries, Federal, State or local
government agencies, or geographic regions; or (3) significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic or export markets.
C. Unfunded Mandates Reform
For purposes of the Unfunded Mandates Reform Act of 1995, this rule
does not include a Federal mandate that might result in increased
expenditures by State, local, and tribal governments, or increased
expenditures by the private sector of more than $100 million (adjusted
for inflation) in any one year.
D. Executive Order 13132 (Federalism)
The Department has reviewed this rule in accordance with Executive
Order 13132 regarding federalism and has determined that the rule does
not have ``federalism implications.'' The economic effects of the rule
are not substantial and the rule does not have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
E. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, requires
agencies to prepare regulatory flexibility analyses, and to develop
alternatives wherever possible, in drafting regulations that will have
a significant impact on a substantial number of small entities,
including ``small businesses,'' ``small organizations,'' and ``small
governmental jurisdictions.'' Today's rule revises the reporting
obligations of union officers and employees, who, as individuals, do
not constitute small business entities. Accordingly, the final rule
will not have a significant economic impact on a substantial number of
small business entities. Therefore, under the Regulatory Flexibility
Act, 5 U.S.C. 605(b), a regulatory flexibility analysis is not
required.
F. Paperwork Reduction Act
This statement is prepared in accordance with the Paperwork
Reduction Act of 1995, 44 U.S.C. 3501 (``PRA''). See 5 CFR 1320.9. As
discussed in the preamble to this final rule and the analysis that
follows below, the rule implements an information collection that meets
the requirements of the PRA in that: (1) The information collection has
practical utility to labor organizations, their members, other members
of the public, and the Department; (2) the rule does not require the
collection of information that is duplicative of other reasonably
accessible information to the extent practicable; (3) the provisions
reduce to the extent practicable and appropriate the burden on union
officials who must provide the information; (4) the form, instructions,
and explanatory information in the eamble are written in plain language
that will be understandable by reporting officials; (5) the disclosure
requirements are implemented in ways consistent and
[[Page 36152]]
compatible, to the maximum extent practicable, with the existing
reporting and recordkeeping practices of union officials who must
comply with them; (6) the preamble and the instructions to the Form LM-
30 inform union officials of the reasons that the information will be
collected, the way in which it will be used, the Department's estimate
of the average burden of compliance, which is mandatory for officials
with reportable interests, the fact that all information collected will
be made public, and the fact that officials need not respond unless the
form displays a currently valid OMB control number; (7) the Department
has explained its plans for the efficient and effective management and
use of the information to be collected, to enhance its utility to the
Department and the public; (8) the Department has explained why the
method of collecting information is ``appropriate to the purpose for
which the information is to be collected''; and (9) the changes
implemented by this rule make extensive, appropriate use of information
technology ``to reduce burden and improve data quality, agency
efficiency and responsiveness to the public.'' See 5 CFR 1320.9; 44
U.S.C. 3506(c).
As discussed throughout the preamble, today's rule provides various
benefits to unions, union members, this Department, and the public. The
information has obvious utility for these groups, among other reasons,
by ensuring more complete compliance by labor union officials with the
LMRDA's reporting obligations. The rule provides for the collection of
information in a way that is compatible with electronic reporting and
the dissemination of this information to the interested community of
users. In so doing, it better achieves the public disclosure purposes
served by the Act's reporting provisions than the existing rule.
Although the effectiveness of today's rule depends, in large part,
on a set of instructions for the Form LM-30 that is longer than the
instructions for the old form, the additional length is largely the
result of the inclusion of numerous definitions and examples, designed
to assist filers in understanding their reporting obligations. The
absence of this information in the instructions to the old form was a
significant impediment to compliance by filers and the utility of
reported data. The inclusion of this information in today's rule
benefits filers and the public; any additional time required to read
the instructions is a small burden in comparison to the knowledge
provided filers and the predicted gains in the numbers and completeness
of the forms submitted to the Department.
The final rule more closely resembles the format of the old form
than the form proposed by the Department. Unlike the proposed form, the
form embodied in today's rule may be completed without need for the
filer to identify the statutory provision that triggers a reportable
interest. This change eliminates a concern by many commenters that the
proposed form imposed unnecessary burdens on filers. Various other
changes have been made to the form that was proposed and its
accompanying instructions. The Department has achieved its goal of
designing a rule that meets the disclosure purposes intended by
Congress--the complete and meaningful reporting of information about
actual or potential conflicts of interest between a union official's
personal financial interests and the official's duty to his or her
union and its members. Moreover, this goal has been achieved without
imposing any unnecessary burden on union officials. While the
Department believes that the form and instructions provide ready
answers to typical questions that may rise in completing the form, the
Department has a robust compliance assistance program in place to
assist filers in timely and correctly fulfilling their reporting
obligations.
Most of the information collected by the form is unavailable in any
other public document; to the extent there may be some overlap with
reports required by fiduciaries under other laws, the duplication,
albeit minimal, is unavoidable. The rule's recordkeeping requirements
are identical to the old rule with the exception of the requirement
that filers preserve any electronic information used to complete the
form. This requirement is consistent with contemporary recordkeeping
standards and elicited no unfavorable comment.
The Department's NPRM in this rulemaking contained initial
Regulatory Flexibility Act and PRA analyses, which were submitted to
and reviewed by OMB. Based upon careful consideration of the comments
and the changes made to the Department's proposal in this final rule,
the Department has made significant adjustments to its burden
estimates. The costs to the Department for administering the reporting
requirements of the LMRDA also were adjusted.
Pursuant to the PRA, the information collection requirements
contained in this final rule have been submitted to OMB for approval.
Within 30 days of the date of publication of this final rule, you may
direct comments by fax (202-395-6974) to: Desk Officer for the
Department of Labor/ESA, Office of Management and Budget.
Summary: This final rule modifies the public financial disclosure
reports that section 202 of the LMRDA requires to be filed by labor
union officers and employees for any fiscal year in which they have
certain holdings, receive certain payments or income, or engage in
certain financial transactions or arrangements. The revised paperwork
requirements are necessary to reduce the errors and deficiencies in the
reports, raise the number of union officials that comply with the
reporting requirements, and increase the transparency of the financial
practices of such officials. More accurate reports and increased
transparency will allow union members to view the information needed by
them to monitor their union's affairs and to make informed choices
about the leadership of their union and its direction. Such
improvements promote the unions' own interests as democratic
institutions and the interests of the public and the government.
Financial disclosure deters fraud and self-dealing, and facilitates the
discovery of such misconduct when it does occur. Increased compliance
will be achieved by clarifying the form and instructions, offering
numerous examples to guide filers, deleting or limiting exceptions that
allowed some financial matters that posed conflicts of interest to go
unreported, and organizing the information in a more useful format. For
a more detailed discussion of the purposes served, and benefits
achieved, by the changes to the Form LM-30, its instructions, and
related Department regulations, see the discussion above at Section
I.C.1.
The revised Form LM-30 and instructions that will implement the new
reporting requirements are published as an appendix to today's final
rule. The electronic versions of the revised Form LM-30 and
instructions are now available on the OLMS Web site at http://www.olms.dol.gov
.
Background: The Form LM-30 is used by officials of labor unions to
comply with the Act's requirement that such a union official annually
disclose specified payments or other financial benefits received by the
official, his or her spouse, or minor children from employers and
businesses where such payments or other financial benefits pose actual
or potential conflicts between an official's personal financial
interests and the interests of the official's union and its members.
Subject to specified exceptions, the interests, incomes, transactions,
and arrangements subject to reporting
[[Page 36153]]
comprise: (1) Payments or benefits from, or interests in, an employer
whose employees the filer's union represents or is actively seeking to
represent; (2) transactions involving interests in, or loans to or
from, an employer whose employees the filer's union represents or is
actively seeking to represent; (3) interests in, income from, or
transactions with a business a substantial part of which consists of
dealing with an employer whose employees the filer's union represents
or is actively seeking to represent; (4) interests in, income from, or
transactions with a business that deals with the filer's union or a
trust in which the filer's union is interested; (5) transactions or
arrangements with an employer whose employees the filer's union
represents or is actively seeking to represent; and (6) payments from
an employer or labor relations consultant. See section 202(a)(1)-(6).
Overview of Changes to Form LM-30 and Summary of the Need for the
Rule: The revised Form LM-30 and instructions define terms used in the
form, provide examples to assist the filer in identifying reportable
financial events, and remove or limit certain exceptions that allowed
financial matters of interest to union members to go unreported under
the current reporting scheme. A detailed discussion of the proposed and
revised forms and instructions is set forth at Section II.N. herein.
Estimated Universe of Filers: The Department initially estimated
that it would receive 2,046 Form LM-30 reports per year as a result of
the final rule. This figure was based on the then current estimated
filing rate of 0.03% of all union officers and employees plus an
expected increase in the Form LM-30 filing rate to 1% as a result of
the proposal. See 70 FR 51199. For the final rule, a revised estimate,
based on the public comment and the number of Form LM-30s filed with
the Department during fiscal year 2006 has been used. During fiscal
year 2006, the Department received 4,348 Form LM-30 reports, 882 of
which did not contain information on any transaction or interest, i.e.,
blank reports, resulting in a total of 3,466 valid Form LM-30 reports
filed during fiscal year 2006.\1\ As explained in the following
paragraphs, the Department considered key aspects of the final rule and
assessed the impact of the revised reporting provisions by estimating
the relative frequency that such provisions would result in filings. In
making these estimates, the Department relied upon information it has
previously used in determining paperwork estimates: the number of
unions filing annual financial reports (21,792) and the number of
officials (204,634) serving these unions.\2\ See 70 FR 51171. Applying
this methodology as discussed below, the Department estimates that
under today's rule, it will receive 3,450 additional Form LM-30
reports. Thus, the Department estimates that a total of 6,916 revised
Form LM-30 reports will be filed annually.
---------------------------------------------------------------------------
\1\ Through increased compliance assistance efforts explaining
that a report need only be filed to report certain transactions and
that filing blank forms is unnecessary, the Department intends to
eliminate or minimize the filing of blank reports.
\2\ Both figures have been obtained from the Department's
Electronic Labor Organization Reporting System database (``eLORS''),
which stores and automatically culls certain information, such as
union officer and employee salaries, from annual reports submitted
by labor organizations. The total number of labor organizations has
been used in the Department's submission to OMB for continuing PRA
approval of OLMS forms. This information is based on FY 2005 data.
The number of union officials was based on a query of applicable
data in the eLORS system. This same figure was used in the NPRM's
PRA analysis. See 70 FR 51199.
---------------------------------------------------------------------------
In the NPRM, the Department estimated that the clarification of the
Form LM-30, the defined terms, the addition of examples that illustrate
reportable and nonreportable transactions, and the removal of
administrative filing exemptions would increase the number of
individuals who file the Form LM-30. See 70 FR 51199. Using the best
data available, the Department estimated that there are 204,634 union
officers and employees. Further, based on the Department's receipt of
approximately 61 reports annually (the annual average for fiscal years
2001-2005), the Department estimated a current filing rate of 0.03%
(61/204,634 x 100 = 0.03%). Due to the proposed reforms, as well as
increased compliance assistance and enforcement initiatives, the
Department estimated that the filing rate would increase to
approximately 1%, or 2,046 reports filed annually. The NPRM estimate
was based on the opinion of some stakeholders that relatively few union
officers and employees would be engaged in covered transactions. Id.
The Department acknowledged the considerable uncertainty in this
estimate and requested comment on the number of reports that should be
filed under the old requirements and that may be filed as a result of
the new requirements. Id. The comments received on the proposed rule
have proven only marginally helpful in predicting how today's rule will
affect the future number of Forms LM-30 filed annually.
Review of Public Comments on the Estimated Universe of Filers and
Resulting Changes:
One commenter questioned the Department's estimate of the proposed
universe of filers, arguing that the Department does not have relevant
historic data on which to base its estimates, but is rather basing its
expectations on the limited study discussed in the NPRM. Both for the
proposed rule and today's rule, the Department has forecast the number
of expected filers as accurately as possible based on available data.
The Department has revised its initial estimates of the number of
expected filers by using data on the number of reports filed with OLMS
during fiscal year 2006. During that time, the Department received
4,348 Form LM-30 reports, 882 of which were blank. As demonstrated
below, the Department has adjusted its estimated universe of filers
based on this figure and input received from commenters.
A number of commenters argued that the proposed universe of filers
and the corresponding reporting and recordkeeping burdens, as discussed
in the NPRM, were too low given that the proposed de minimis exception,
i.e., the threshold below which a payment would not be reportable, was
limited to payments of $25 or less. Commenters suggested that a de
minimis level set at that amount would lead to a much higher incidence
of filings than anticipated by the Department. One commenter pointed
out that a $250 de minimis level, especially with a two-tiered
approach, would result in a reduced compliance burden. In response to
comments received on this point, the Department has replaced the
proposed $25 de minimis test with a two-tiered approach. Under this
approach, a filer must report aggregated payments or other financial
benefits received from a single source that exceed $250. Payments of
$20 or less are excluded from this computation. Further, union
officials will not have to report hospitality benefits received while
attending certain widely attended gatherings. As noted herein at
Section II.C of the preamble, after the comment period for this rule
closed, the Department issued guidance alerting filers, in effect, that
they need report only payments that exceeded $250. This guidance was
posted on the OLMS Web site on November 7, 2005 and disseminated
through the OLMS e-mail listserv. Consequently, the Department has had
a full year to gauge the impact of a $250 filing threshold. Not
surprisingly, as a result of the implementation of the $250 de minimis
[[Page 36154]]
approach, there have been fewer filers reporting payments between $25
and $250. Thus, contrary to the suggestion of some commenters, no
upward adjustment to the recordkeeping and reporting burden need be
made for reasons associated with the de minimis level, as proposed.
Moreover, the $250 threshold and the exclusion of payments of $20 or
less from this threshold will lead to fewer filings than expected by
commenters.
In the NPRM, the Department proposed that union officials must
report all payments received from any employer or vendor with a
relationship with any level of his or her union or with any trust in
which any level of his or her union is interested. This would require,
for example, that a local union president report payments received from
a vendor that does business with the official's parent or intermediate
union. The rule proposed to achieve this result by defining the term
``labor organization'' broadly. Several commenters submitted that the
ramifications of implementing the proposed definition of ``labor
organization'' could lead to requiring filers to account for
transactions vastly exceeding the estimated burden in the NPRM. One of
these commenters presented a hypothetical scenario that would result in
a union official having to account for possible transactions with over
10,000 employers or businesses for not only himself or herself, but for
a spouse and minor children as well.
This comment appeared to be premised on the belief that all
businesses and employers associated with any entity within a union's
hierarchy will need to be tracked by the officer or employee. This is
not the case. The union official does not need to research and maintain
records with all involved businesses or employers, but only those with
which he or she is in a reportable relationship or from which he or she
has received a reportable payment. The maximum burden on an officer or
employee, in this regard, is to check the identity of these employers
and businesses. Further, some commenters submitted that compliance
burdens would be substantially lessened by modifying the proposed
definition of ``labor organization'' to eliminate the language ``and
any parent or subordinate labor organization of the filer's labor
organization.'' In response to comments received on this issue, the
final rule has reduced the reporting obligations from that proposed.
The rule requires that a local union official track and report payments
from only businesses that deal with their local union, trusts of their
local union, and employers represented by, or actively being organized
by, their local union. This tracks the reporting obligations under the
old rule, and does not increase the reporting burden based on a broader
definition of ``labor organization.'' See discussion at Section II.F of
the preamble.
Officers of international unions and intermediate unions (but not
employees) will also have to report any payments they receive from (1)
An employer whose employees any subordinate labor union represents or
is actively seeking to represent; (2) a business that buys from, sells
to, or otherwise deals with any subordinate labor union; and (3) a
business that buys from, sells to, or otherwise deals with a trust in
which any subordinate labor union is interested, such as a pension or
welfare plan or training fund. Employees of national, international,
and intermediate labor unions do not have to track and report payments
resulting from actions involving subordinate levels of the union.
As for the reporting impact of this provision, the Department
estimates a slight increase in the number of reports. The largest
portion of this increase is most likely to come from officers of
intermediate labor unions. For these officers, the rule is new. Since
1962 international officers have been required to report on Form LM-30
income from businesses dealing with subordinate unions of that
international. Therefore, increased filing under this provision by
officers of international unions will be attributable to increased
compliance assistance and enforcement efforts, and not to the final
rule.
Many of the same commenters asserted that the NPRM did not address
compliance costs and time for businesses to enact internal controls,
which could entail substantial costs. Employers, including service
providers, have been under the same reporting requirements since 1963
and no changes are being made to these requirements. Employer reporting
requirements are governed by section 203 of the LMRDA. This rulemaking
adjusts union officer and employee reporting under section 202 of the
LMRDA. Therefore, not only is there no need to raise PRA estimates for
employer recordkeeping, such estimates are not within the scope of this
rulemaking.
One commenter submits that compliance burdens will be substantially
lessened by determining that trusts are not ``businesses'' or
``employers.'' As explained in the preamble, trusts with employees are
considered to be employers. The Department's views on whether the LMRDA
requires disclosure of payments from trusts to union officials have
evolved over time. In correspondence issued in 1967, a high ranking
Department official responded to an inquiry concerning whether
reporting is required of officers of labor unions who receive payments
from union and employer established pension and welfare plans. The
letter concluded that no report was required. On June 27, 2005, OLMS
placed on its Web site a document titled ``Trusts and Form LM-30 and
Form LM-10.'' In this guidance, OLMS indicated that payments from
trusts to union officers and employees are reportable on Form LM-30 if
the trust is an employer or business. As part of this rulemaking, the
Department sought comments on whether a trust is, or can constitute, an
``employer'' or a ``business,'' making such payments reportable on the
Form LM-30. These comments, and the determination that a trust or
similar entity with employees is an employer for purposes of the Act,
are addressed in depth in the preamble at section II.K.
No commenters provided estimates for the number of trusts that
constitute ``employers'' and make reportable payments. Although the
comments provided some anecdotal information particular to some unions,
no information was provided that would allow the Department to estimate
the total number of trusts that would be employers and none that would
allow an estimate of the numbers of union officials now receiving
payments from such entities. For example, one international union
stated that there are ``380 Local or Council * * * Pension, Annuity,
Health and Welfare, and training trusts in the U.S.'' Another commenter
identified four trusts it co-sponsored. Another international union
indicated that ``although some large trust funds happen to have
employees, many do not.'' Finally, yet another international union
explained that it and its affiliated district councils and local unions
participate in ``numerous benefit funds.'' There is no basis to believe
that other unions have trusts in the same proportion as theses unions.
Moreover, no information was received that would enable an estimate as
to what fraction of these trusts have employees or the number of union
officials to whom reportable payments are made.
Payments received by an officer or employee of a labor union from
the employer of the union's members for work performed by the union
officer or union employee for the union will now be reportable unless
they are made pursuant to a collective bargaining
[[Page 36155]]
agreement and total 250 hours or less per year. For the proposition
that such provisions are common, a federation of labor organizations
submitted a study, Major Collective Bargaining Agreements: Employer Pay
and Leave for Union Business, U.S. Dept. of Labor, Bureau of Labor
Statistics (October 1980) (``BLS Study''). Notwithstanding the
significant period of time that has passed since the study's
publication, it represents the most recent compilation of data on the
union-leave/no-docking question. Furthermore, more recent papers on
this issue focus on public sector unions, which, as previously noted,
are generally not subject to the LMRDA, and thus such information is
not readily transferable to the particular circumstances addressed by
today's rule. The BLS Study (at pages indicated in parentheses)
provides the following information:
Of 1,765 agreements reviewed, 803, or 45 percent, granted
pay for grievance time (6)
Of 430 sample agreements examined in detail, 206
established pay for at least some grievance work (6)
Of 206 sample clauses, 188 limited pay to either specific
union representatives or to a fixed number of representatives (7)
A substantial number of the 206 sample pay clauses limited
the amount of paid time available for grievance activity by type of
activity or eligible personnel (7) or by the amount of time one could
spend on union work (7-9)
Of the 1,765 agreements in the study, arbitration
provisions appeared in 95 percent, but pay to union representatives for
time spent appeared in only 3% (11)
Of 1,765 agreements, 139 established time off with pay for
union negotiators (7.8%) (12)
Of 618 safety and health committee provisions reviewed,
281 referred to paid time for the activity (45%) (13)
Of 1,765 agreements, 93 referred to training related to
union business; half of these provide company pay (93/2 = 46.5) (46.5/
1,765 = 2.6%) (17)
While it is clear from the BLS Study that the collective bargaining
agreements under review contained a high number of union-leave/no-
docking provisions, neither the study nor the comments provide a basis
for estimating how many of these agreements will result in the filing
of a Form LM-30.
The study demonstrates that 45% of these collective bargaining
agreements grant union leave in at least one category (as outlined, 45%
of provisions provided union leave for grievances and health and
safety). However, a substantial but unspecified number of the clauses
reviewed in 1980 by BLS limited the amount of paid time available (Id.,
at 7-9). The BLS Study, however, does not discuss provisions
representative of such limitations or otherwise indicate typical limits
on the amount of time allowed for these purposes. As there was no
information in the study or from commenters pertaining to the average
amount of time that an individual would be engaged in union-leave or
no-docking activity, the Department has no benchmark to gauge the
number of filers that will submit reports under today's rule, i.e.,
those who receive employer compensation for more than 250 hours of
union activity under a collective bargaining agreement or who receive
compensation, in any amount, for such activity, where it is not
authorized by such agreement. It is the Department's belief that with
this reporting threshold only a small fraction of union officials
receiving such payments will have to file reports. Such officials
likely will be serving in local or intermediate union positions; again,
however, the Department lacks data to predict a percentage of such
officials that receive such compensation or the smaller number that
will receive compensation in excess of 250 hours.
Similarly, as discussed in the preamble, union members who receive
payments from an employer for work performed on behalf of the union
will now be considered union employees for Form LM-30 reporting
purposes. A federation of labor organizations submitted that 100,000
union stewards out of 5.5 million members belonging to affiliated
unions currently receive union-leave or no-docking payments. This
comment appears to have overstated the number of affected stewards as
it included unions representing state and local government employees
that are not subject to the LMRDA. Another federation of labor
organizations, while not directly commenting on the potential universe
of filers, stated that this provision could result in ``tens of
thousands'' of reports. Further, while both federations submit that
there are many stewards who receive payments for union activity, the
Department is unable to deduce from these comments how many stewards
would already be subject to Form LM-30 reporting requirements because
they currently meet the definition of union officer or employee.
Therefore, the Department is unable to use information provided in
these comments to derive an estimate of the number of individuals who
will now be union employees because they receive union-leave or no-
docking payments, much less how many of these payments are made outside
of a collective bargaining agreement or total more than 250 hours per
year.
As discussed in the preamble, certain exceptions are no longer
applicable to all provisions of the revised Form LM-30; specifically,
the ``bona fide employee'' exception for reports due under section
202(a)(2) and the ``employee discount-regular course of business''
exception for reports due under sections 202(a)(1) and (2). Based on
the low number of comments received on the removal of these exceptions,
which are addressed above, and the absence of any comments estimating
the number of reports this change would result in, the Department does
not foresee a substantial increase resulting from the removal of these
exceptions. As explained in the preamble, sales and purchases of
ownership interest in the employer, in particular, are unlikely to
constitute payments received as a bona fide employee and thus the
exception in the current form for reports filed under section 202(a)(1)
is all but superfluous in the context of ownership interests. See
Section II. D.2. Bona fide employees typically do not routinely engage
in transactions involving holdings or loans that could be characterized
as a payment or benefit received as a bona fide employee of the
employer, and, as a result, the filing burden will not be onerous. The
lack of comments objecting to this change seems to support these
points.
Similarly, only three comments were received on the proposed
removal of the ``employee discount-regular course of business''
exception, for reports due under sections 202(a)(1) and (2), one of
which was supportive of the removal. As discussed earlier in the
preamble, section 202(a)(5) of the LMRDA requires union officers and
employees to report any ``business transaction or arrangement'' with an
employer whose employees the union represents or is actively seeking to
represent. This section exempts from reporting two categories of
transactions and arrangements: (1) Payments and benefits received as a
bona fide employee of an employer whose employees are represented by
the official's union or the union actively seeks to represent; and (2)
``purchases and sales of goods or services in the regular course of
business at prices generally available to any employee of such
employer.'' The current instructions apply this ``employee discount--
regular course of business'' exception to the requirement that union
officers and employees report (1) Holdings, (2) transactions in
holdings, (3) loans, and (4) income or
[[Page 36156]]
any other benefit with monetary value (including reimbursed expenses).
In so doing, the instructions exempt from reporting certain matters
that otherwise would be reported under section 202(a)(1) or 202(a)(2).
These sections do not contain this ``regular course of business''
exception, but the prior instructions made it applicable. Again, given
the lack of comments regarding these changes, the Department
anticipates only a slight increase in the number of reports received as
a result of this revision.
In summary, as discussed previously, in the NPRM the Department
estimated a then current filing rate of .03% based on the receipt of 61
Form LM-30 reports (the average for fiscal years 2001 to 2004) per
204,634 union officers and employees. Due to the proposed reforms as
well as increased compliance assistance and enforcement initiatives,
the Department estimated that the filing rate would increase to
approximately 1%, or 2,046 reports filed annually. Subsequent to the
NPRM, the Department engaged in increased compliance assistance and
enforcement, and the number of valid reports received in fiscal year
2006 reached 3,466. This results in an estimated current filing rate of
1.69% (3,466 / 204,634 x 100 = 1.69%).
Taking the concerns of commenters into account in regard to the
implementation of substantive reporting requirements which were not
previously applicable, specifically union-leave/no-docking, expanded
obligations for intermediate officers, removal of the two
administrative exceptions, reporting by union stewards paid by
employers for union work, and considering trusts, labor organizations,
and other groups as employers in certain circumstances, the Department
estimates that the Form LM-30 filing rate will increase to as much as
3.38%, or 6,916 reports filed annually, double the current filing rate.
It is worth noting that the implementation of the $20 tiered de minimis
threshold, under which no transaction, including aggregated
transactions (subject only to the exception for a tacit or express
agreement for the transfer of money, as discussed in section II.C of
the preamble), militates against an even higher estimated number of
overall filers.
Review of Public Comments Regarding the Hour and Cost Burden
Estimates for the Revised Form and Resulting Changes:
In the NPRM, the Department proposed five minutes as the estimated
amount of time for filers to report the employer's or business's name,
address, name of contact at the employer or business, telephone number,
Web site address, State of incorporation or registration, State
business ID number, and whether the filer had an association with the
business, employer, or labor relations consultant at the end of the
reporting period. A number of commenters submitted that it would be
especially burdensome, and possibly needless, to obtain the State of
incorporation and State employer identification number. As such, these
commenters suggested that the time allotted to gather the required
information on an employer or business was insufficient. One commenter
submitted that providing a telephone number and Web site address would
not add any substantial reporting burden. Based on comments received on
this issue, the Department has removed the requirement that filers
report an employer's or business's State of incorporation and State
employer identification number. With these items removed, there is no
need to provide for corresponding additional recordkeeping and
reporting time.
One commenter submitted that 90 minutes for completion of the Form
LM-30 is not an accurate estimate. Another submitted that allowing 45
minutes for reading the instructions is insufficient time as the filer
must refer back to earlier provisions in the instructions and the
instructions have increased from 9 pages to 17. While this commenter
argued that the proposed burden hour estimates were too low for the
proposed requirements, no alternative burden hour estimates were
submitted for any area of the rulemaking. The Department has changed
the Form LM-30 from the NPRM proposal to add more instructions to the
form itself. Because the form itself will be clearer, the amount of
time a filer must spend studying the separate instructions will be
reduced. Prior to this final rule, Form LM-30 was estimated to take
filers roughly 30 minutes while the proposed revised form was estimated
to require 90 minutes for completion, which is a 300% increase in the
allotted time.
One commenter submitted that expanding the form to provide for six
categories instead of three would add compliance burdens that are not
accounted for in the NPRM. The Department has not implemented this
proposed change; the six categories have been eliminated from the form
itself. Rather, the Form LM-30 will utilize one schedule, Schedule 2,
to detail ``interests in, payments from, loans to or from, and
transactions or arrangements with an employer or business and payments
from a labor relations consultant.'' No new information is required as
a result of the format change; instead of reporting information in one
of three categories, filers will report the same information in one
schedule, but with greater clarity as to the nature of the transaction.
Therefore, there is no corresponding additional burden.
It is also worth noting the implementation of the $20 tiered de
minimis threshold, under which records need not be maintained for
holdings or transactions, including aggregated transactions, of $20 and
under. While this provision did not appear in the NPRM, commenters, as
discussed above, nearly universally suggested that a tiered de minimis
threshold would reduce the recordkeeping burden, or alternatively,
prevent the need for increased recordkeeping estimates. The Department
agrees with the latter opinion.
The following table describes the information sought by the revised
form and instructions and the amount of time estimated for completion
of each item of information. The time estimates include the additional
time burdens associated with the Department's curtailment of
administrative exceptions, and the implementation of the revised
definitions.\3\
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\3\ These figures assume that a filer will choose to use an
electronic form, which provides greater efficiency than completion
by hand. The Department estimates that a filer who chooses to file
by hand will need about ten additional minutes to complete the form.
[[Page 36157]]
------------------------------------------------------------------------
Burden description Time
------------------------------------------------------------------------
Maintaining and gathering records......... 20 minutes.
Reading the instructions to determine 15 minutes.\4\
whether filer must complete the form.
Additional reading of the instructions to 40 minutes.\5\
determine how to complete the form.
Reporting filer's file number in Item 1... 30 seconds.
Reporting filer's fiscal year in Item 2... 30 seconds.
Reporting filer's name, address, and 2 minutes.
contact information in Item 3 (A-I).
Reporting name, file number, and address 2 minutes.
of filer's union or unions as well as
filer's current position in the union in
Item 4 (A-H).
Adding the total value of all assets and 2 minutes.
the value of all income or other payments
in all Schedules 2 (as described below)
and reporting the two totals in Item 5,
Summary.
Indicating whether there was a reportable 2 minutes.
involvement with an employer or labor
relations consultant during the fiscal
year, and if so, recording the number of
employer(s) and consultant(s), in Item 6.
Indicating whether there was a reportable 2 minutes.
involvement with a business during the
fiscal year, and if so, recording the
number of businesses in Item 7.
Reporting name and address of the employer 5 minutes.
or business which the filer received a
payment from or held an interest in,
providing the contact name, telephone
number, Web site address, and whether
filer has an association with the
business, employer, or labor relations
consultant at the end of the reporting
period in Schedule 1.
Reporting the nature and value of 5 minutes.
interests in, payments from, loans to or
from, and transactions with an employer
or business and payments from a labor
relations consultant (includes date,
whether the party to the transaction is a
union officer or employee or spouse or
minor child thereof, and a description
and value of the interest or payment) in
Schedule 2.
Completing either Schedule 3 if an 8 minutes.
employer or labor relations consultant is
reported in Schedule 1, providing details
of the employer's relationship with the
filer's labor union; or Schedule 4 if a
business is reported in Schedule 1,
providing details regarding the entity
the business dealt with (union, trust, or
employer) and a description of those
dealings.
Filer's signature, date and telephone 1 minute.
number in Item 8.
Checking responses........................ 5 minutes.
Total Burden Hour Estimate Per Filer...... 120 minutes.
------------------------------------------------------------------------
The recordkeeping estimate of 20 minutes reflects that the majority
of financial books and records required to complete the report are
those that filers would maintain in the normal course of conducting
business, personal, and union affairs, and thus should only take five
minutes to maintain and gather. The other 15 minutes have been
estimated to be necessary to maintain and gather the books and records
that would not ordinarily be maintained, including those concerning the
dealings between a business and the filer's union, a trust in which the
filer's union is interested, or an employer whose employees the union
represents or is actively seeking to represent. The estimated times are
for the average filer: the Department assumes that an individual who
partially owns or receives income from a company will know that
company's Web address. Where a filer does not have a web address
immediately accessible, the Department estimates that a filer will need
to obtain this information either by telephone or Internet search;
however if a union officer receives a gift like sporting event tickets,
the gift is likely an effort to obtain business, therefore, the giver
will likely make his or her business known to the recipient through a
business card, e-mail, etc.
---------------------------------------------------------------------------
\4\ This estimate is for all filers, including first time filers
and subsequent filers. While the Department considered reducing this
estimate by about one-third for filers submitting reports in
subsequent years following a first-time filing, the nature of Form
LM-30 reporting militated against such a decision. Where the
Department has previously made reductions for subsequent year
filings, it generally applied to organizational reporting and not
individual reporting. LMRDA organizational reporting, such as the
Form LM-2 or Form LM-3, is a required annual event whereas an
individual may not necessarily engage in Form LM-30 reportable
transactions on an annual basis. Where an organization files
required annual reports, a certain amount of ``institutional
memory'' is present which may not be applicable to a filer who is
only required to file a report when certain criteria are met.
\5\ See preceding note 4.
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The resulting annualized reporting and recordkeeping burden for all
Form LM-30 filings is 829,920 minutes (6,916 x 120) or 13,832 hours
(829,920/60).
While annual salary information for labor union officers and
employees is available on annual financial reports filed with the
Department (Forms LM-2, LM-3, and LM-4), hourly rates are not reported.
Further, officers and employees receiving less than $10,000 do not
appear on every form; therefore, only the roughest estimates could be
made using these forms to determine the average hourly rate for covered
officers and employees. Instead, the Department used the $22.34 mean
hourly earnings of those engaged in white collar occupations as defined
and published in the National Compensation Survey: Occupational Wages
in the United States (July 2004, Bureau of Labor Statistics, U.S.
Department of Labor, August 2005). Using this figure, the Department
estimates that the annual reporting and recordkeeping cost burden for
all filers will be $309,007 (10,374 x $22.34), or $44.68 per filer
(309,007/6,916).
In addition, the Department estimates that all union officers and
employees will spend 15 minutes reading the revised form and
instructions to determine whether they are required to file a report
and 25 minutes reviewing any applicable receipts and determining that
aggregated payments from an employer or business did not exceed the
$250 de minimis threshold. By deducting the 6,916 estimated filers
whose preliminary review of the form has already been counted from the
estimated 204,634 union officers and employees, 197,718 officers and
employees remain who will review the form and their records but
determine that they are not required to file a report. The annual
reporting and recordkeeping hour burden for these officers and
employees will be 5,931,540 minutes (30 x 197,718) or 98,859 hours
(5,931,540/60). Using the $22.34 hourly wage, the Department estimates
that the annual reporting and recordkeeping cost burden for non-filing
union officers and employees will be $2,208,510 (98,859 x $22.34), or
$11.17 per non-filing union officer or employee ($2,208,510/197,718).
The resulting total annual reporting and recordkeeping hour burden
for both filers and those who review the form and determine that a
report need not be filed will be 112,691 hours (13,832 (hours for
filers) + 98,859 (hours for non-filers)). The total annual reporting
and recordkeeping cost burden will be $2,517,517 (112.69 x $22.34).
Federal Costs Associated with the Rule:
The estimated annualized Federal cost of the Form LM-30 is
$1,025,837. This represents estimated operational expenses such as
equipment, overhead,
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and printing as well as salaries and benefits for the OLMS staff in the
National Office and field offices who are involved with reporting and
disclosure activities. These estimates include time devoted to: (a)
Receipt and processing of reports; (b) disclosing reports to the
public; (c) obtaining delinquent reports; (d) obtaining amended reports
if reports are determined to be deficient; (e) auditing reports; and
(f) providing compliance assistance training on recordkeeping and
reporting requirements.
G. Executive Order 13045 (Protection of Children From Environmental
Health Risks and Safety Risks)
In accordance with Executive Order 13045, the Department has
evaluated the environmental safety and health effects of the final rule
on children. The Department has determined that the final rule will
have no effect on children.
H. Executive Order 13175 (Consultation and Coordination With Indian
Tribal Governments)
The Department has reviewed this final rule in accordance with
Executive Order 13175, and has determined that it does not have
``tribal implications.'' The rule does not ``have substantial direct
effects on one or more Indian tribes, on the relationship between the
Federal government and Indian tribes, or on the distribution of power
and responsibilities between the Federal government and Indian
tribes.''
I. Executive Order 12630 (Governmental Actions and Interference With
Constitutionally Protected Property Rights)
This final rule is not subject to Executive Order 12630,
Governmental Actions and Interference with Constitutionally Protected
Property Rights, because it does not involve implementation of a policy
with takings implications.
J. Executive Order 12988 (Civil Justice Reform)
This regulation has been drafted and reviewed in accordance with
Executive Order 12988, Civil Justice Reform, and will not unduly burden
the Federal court system. The regulation has been written so as to
minimize litigation and provide a clear legal standard for affected
conduct, and has been reviewed carefully to eliminate drafting errors
and ambiguities.
K. Environmental Impact Assessment
The Department has reviewed the final rule in accordance with the
requirements of the National Environmental Policy Act (``NEPA'') of
1969 (42 U.S.C. 4321 et seq.), the regulations of the Council on
Environmental Quality (40 U.S.C. part 1500), and the Department's NEPA
procedures (29 CFR part 11). The final rule will not have a significant
impact on the quality of the human environment, and, thus, the
Department has not conducted an environmental assessment or an
environmental impact statement.
L. Executive Order 13211 (Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use)
This final rule is not subject to Executive Order 13211, because it
will not have a significant adverse effect on the supply, distribution,
or use of energy.
List of Subjects in 29 CFR Part 404
Labor union officer and employees, Recordkeeping and reporting.
IV. Text of Final Rule
0
In consideration of the foregoing, the Office of Labor-Management
Standards, Employment Standards Administration, Department of Labor
hereby amends part 404 of title 29 of the Code of Federal Regulations
as set forth below.
PART 404--LABOR ORGANIZATION OFFICER AND EMPLOYEE REPORTS
0
1. The authority citation for part 404 is revised to read as follows:
Authority: Secs. 202, 207, 208, 73 Stat. 525, 529 (29 U.S.C.
432, 437, 438); Secretary's Order No. 4-2001, 66 FR 29656 (May 31,
2001).
Sec. 404.1 [Amended]
0
2. Section 404.1 is amended by:
0
a. Redesignating existing paragraph (b) as new paragraph (h) and adding
the phrase ``An officer is:'' at the end thereof;
0
b. Adding new paragraphs (h)(1) through (h)(4) to read as set forth
below;
0
c. Adding a new paragraph (b) to read as set forth below;
0
d. Redesignating existing paragraph (c) as new paragraph (g) and adding
the phrase ``within the meaning of any law of the United States
relating to the employment of employees'' to the end of newly
designated paragraph (g);
0
e. Redesignating existing paragraph (d) as new paragraph (c);
0
f. Redesignating existing paragraph (a) as new paragraph (d);
0
g. Adding a new paragraph (a) to read as set forth below;
0
h. Adding new paragraphs (e), (f), (i) and (j) to read as set forth
below.
The additions and revision read as follows:
Sec. 404.1 Definitions.
(a) Benefit with monetary value means anything of value, tangible
or intangible, including any interest in personal or real property,
gift, insurance, retirement, pension, license, copyright, forbearance,
bequest or other form of inheritance, office, options, agreement for
employment or property, or property of any kind. For reporting
purposes, the following are excepted: pension, health, or other benefit
payments from a trust that are provided pursuant to a written specific
agreement covering such payments.
(b) Dealing means to engage in a transaction (bargain, sell,
purchase, agree, contract) or to in any way traffic or trade, including
solicitation of business.
* * * * *
(e) Income means all income from whatever source derived,
including, but not limited to, compensation for services, fees,
commissions, wages, salaries, interest, rents, royalties, copyrights,
licenses, dividends, annuities, honorarium, income and interest from
insurance and endowment contracts, capital gains, discharge of
indebtedness, share of partnership income, bequests or other forms of
inheritance, and gifts, prizes or awards.
(f) Labor organization means the local, intermediate, or national
or international labor organization that employed the filer of the Form
LM-30, or in which the filer held office, during the reporting period,
and, in the case of a national or international union officer or an
intermediate union officer, any subordinate labor organization of the
officer's labor organization.
* * * * *
(h) * * *
(1) A person identified as an officer by the constitution and
bylaws of the labor organization;
(2) Any person authorized to perform the functions of president,
vice president, secretary, or treasurer;
(3) Any person who in fact has executive or policy-making authority
or responsibility; and
(4) A member of a group identified as an executive board or a body
which is vested with functions normally performed by an executive
board.
(i) Minor child means a son, daughter, stepson, or stepdaughter
under 21 years of age.
(j) Trust in which a labor organization is interested means a trust
or other fund or organization:
(1) Which was created or established by a labor organization, or
one or more
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of the trustees or one or more members of the governing body of which
is selected or appointed by a labor organization, and
(2) A primary purpose of which is to provide benefits for the
members of such labor organization or their beneficiaries.
Sec. 404.4 [Removed and reserved]
0
3. Section 404.4 is removed and reserved.
Sec. 404.7 [Amended]
0
4. Section 404.7 is revised to read as follows:
Sec. 404.7 Maintenance and retention of records.
Every person required to file any report under this part shall
maintain records on the matters required to be reported which will
provide in sufficient detail the necessary basic information and data
from which the documents filed with the Office of Labor-Management
Standards may be verified, explained or clarified, and checked for
accuracy and completeness, and shall include vouchers, worksheets,
receipts, financial and investment statements, contracts,
correspondence, and applicable resolutions, in their original
electronic and paper formats, and any electronic programs by which they
are maintained, available for examination for a period of not less than
five years after the filing of the documents based on the information
which they contain.
Signed at Washington, DC, this 22nd day of June, 2007.
Victoria A. Lipnic,
Assistant Secretary for Employment Standards.
Signed at Washington, DC, this 22nd day of June, 2007.
Don Todd,
Deputy Assistant Secretary for Labor-Management Programs.
Note: The following appendix will not appear in the Code of
Federal Regulations:
Appendix--Form LM-30 and Instructions
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[FR Doc. 07-3155 Filed 6-29-07; 8:45 am]
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