[Federal Register: April 21, 2009 (Volume 74, Number 75)]
[Rules and Regulations]
[Page 18132-18134]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ap09-9]
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DEPARTMENT OF LABOR
Office of Labor-Management Standards
29 CFR Parts 403 and 408
RIN 1215-AB62
Labor Organization Annual Financial Reports
AGENCY: Office of Labor-Management Standards, Employment Standards
Administration, Department of Labor.
ACTION: Final rule; delay of effective date and applicability date.
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SUMMARY: This final rule delays the effective date and applicability
date of regulations pertaining to the filing by labor organizations of
annual financial reports required by the Labor-Management Reporting and
Disclosure Act of 1959, as amended (LMRDA) that were published in the
Federal Register on January 21, 2009. They revised Labor Organization
Annual Report Form LM-2 and established a procedure whereby the
Department may revoke, when warranted, a labor organization's
authorization to file the simplified Labor Organization Annual Report
Form LM-3. These regulations were to have gone into effect on February
20, 2009, but were delayed until April 21, 2009, by a final rule
published on February 20, 2009 (74 FR 7814). This final rule postpones
the effective date of the regulations from April 21, 2009, until
October 19, 2009, and the applicability date of the regulations from
July 1, 2009, until January 1, 2010. This will allow additional time
for the agency and the public to consider a proposal to withdraw the
January 21 regulations and, meanwhile, to permit unions to delay costly
development and implementation of any necessary new accounting and
recordkeeping systems and procedures, pending this further
consideration. At the same time, the Department has published a Notice
of Proposed Rulemaking elsewhere in this issue of the Federal Register,
seeking public comment on its proposal to withdraw the regulations.
DATES: The effective date of the rule amending 29 CFR Parts 403 and
408, published January 21, 2009, at 74 FR 3678, is delayed until
October 19, 2009, and its applicability date is delayed until January
1, 2010.
FOR FURTHER INFORMATION CONTACT: Denise M. Boucher, Director, Office of
Policy Reports and Disclosure, Office of Labor-Management Standards,
Employment Standards Administration, U.S. Department of Labor, 200
[[Page 18133]]
Constitution Avenue, NW., room N-5609, Washington, DC 20210, (202) 693-
1185. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
I. Background and Overview
Section 201(b) of the Labor-Management Reporting and Disclosure Act
of 1959, as amended (LMRDA) (Pub. L. 86-257, 73 Stat. 519), requires
each covered labor organization to file annually with the Secretary of
Labor a financial report, signed by its president and treasurer or
corresponding principal officers, containing information in the detail
necessary to disclose accurately its financial condition and operations
for the preceding fiscal year. The Secretary of Labor has delegated the
Secretary's authority under the LMRDA to the Assistant Secretary for
Employment Standards.
The requirements of LMRDA section 201 apply to all labor
organizations in the private sector including those representing
employees under the provisions of the National Labor Relations Act, as
amended, and the Railway Labor Act, as amended. Section 1209(b) of the
Postal Reorganization Act made the LMRDA applicable to labor
organizations representing employees of the U.S. Postal Service.
Section 701 of the Civil Service Reform Act of 1978 (CSRA) and section
1017 of the Foreign Service Act of 1980 (FSA), as implemented by
Department of Labor regulations at 29 CFR parts 457-459, extended the
LMRDA reporting requirements to labor organizations representing
certain employees of the Federal government.
Section 208 of the LMRDA authorizes the Secretary to issue rules
prescribing the form and publication of the annual financial reports
required by section 201, and to provide a simplified report for labor
organizations for which the Secretary finds that by virtue of their
size a detailed report would be unduly burdensome. Under regulations
issued pursuant to section 208, the Secretary has prescribed Form LM-2
for labor organizations with total annual receipts of $250,000 or more,
and the simplified Form LM-3 for labor organizations with total annual
receipts of $10,000 or more, but less than $250,000.
On January 21, 2009, the Department of Labor's Office of Labor-
Management Standards (OLMS) published in the Federal Register (74 FR
3677) regulations making revisions to the Form LM-2 (used by the
largest labor organizations to file their annual financial reports).
The regulations, when effective, will require labor unions to report
additional information on Schedules 3 (Sale of Investments and Fixed
Assets), 4 (Purchase of Investments and Fixed Assets), 11 (All Officers
and Disbursements to Officers) and 12 (Disbursement to Employees). The
regulations also would add itemization schedules corresponding to
categories of receipts, and establish a procedure and standards by
which the Secretary of Labor may revoke a particular labor
organization's authorization to file the simplified annual report, Form
LM-3, where appropriate, after investigation, due notice, and
opportunity for a hearing.
Consistent with the memorandum of January 20, 2009, from the
Assistant to the President and Chief of Staff, entitled ``Regulatory
Review'' and the memorandum of January 21, 2009, from the Director of
the Office of Management and Budget (OMB), entitled ``Implementation of
Memorandum Concerning Regulatory Review,'' on February 3, 2009, OLMS
published in the Federal Register a notice seeking comment on a
proposed 60-day extension of the effective date and requesting comment
on legal and policy questions relating to the regulations, including on
the merits of rescinding or retaining the regulations. The notice was
available for public inspection at the Federal Register on January 29,
2009 and was published on February 3, 2009 (74 FR 5899).
Public comment on the proposed extension was invited, with the
comment period ending on February 13, 2009. The Department received 24
comments on the proposal to extend the effective date for 60 days.
Public comment was also invited generally on the regulations, including
the merits of rescinding or retaining them, with this comment period
ending on March 5, 2009. The Department published a final rule on
February 20, 2009, which postponed for 60 days the effective date of
the regulations published on January 21, 2009 until April 21, 2009, for
additional public comment and agency review of questions of law and
policy (74 FR 7814).
On March 19, 2009, OLMS published a notice seeking public comment
on a proposal to delay for an additional 180 days the April 21, 2009,
effective date of the regulations published on January 21, 2009. This
notice proposed to further delay the effective date until October 19,
2009. Additionally, this notice proposed to delay the applicability
date of the regulations (establishing the start of the fiscal year for
which the new reporting requirements would apply) set for July 1, 2009,
until January 1, 2010. As discussed in that notice, the Department
indicated that it would not able to complete its final review of the
issues raised by the January 21 rule before April 21, 2009, the current
effective date of the rule. Since that time, however, the Department
has determined that the January 21 rule was promulgated without
adequate review of experience under the Department's 2003 Form LM-2
rule, including the burden of reporting requirements and whether the
requirements reflect a proper balance of the need for transparency and
union autonomy. Thus, in a separate document published in this issue of
the Federal Register, the Department is now proposing to withdraw the
January 21 rule. Without further extension of the effective and
applicability dates of the rule, those unions with fiscal years
beginning on or after July 1, 2009, would have to begin immediate
preparations to comply with the rule, preparations that may entail
significant burden and expense, but which may prove unnecessary.
Furthermore, the Department itself would have to expend substantial
financial and compliance resources to prepare for the rule, resources
that could be directed to other purposes if the rule is subsequently
withdrawn. Therefore, the Department has decided to postpone, for 180
days, the effective date of the regulations published on January 21,
2009, until October 19, 2009, and delay the applicability date from
July 1, 2009, until January 1, 2010, in order to review the comments on
the proposal to withdraw the regulations and, meanwhile, to permit
unions to delay costly development and implementation of any necessary
new accounting and recordkeeping systems and procedures pending this
further consideration.
II. Comments on the Proposal and the Department's Responses and
Decision
The Department received comments from 27 individuals or
associations on its proposal to postpone the effective date and
applicability date of the new Form LM-2/LM-3 regulations. Five union
commenters supported the extension as appropriate, arguing that it
would enable effective review of the rule while avoiding the
unnecessary burden on union resources in the event that the Department
does rescind the regulations. One international union also offered
additional comments on the merits of the regulations, and urged their
rescission. Five commenters expressed general support for union
transparency and the January 21 regulations, and they opposed any delay
in their effective or applicability dates. Additionally, 17 commenters
submitted form letters generally supporting the greater public
disclosure of pay and
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benefits to union officers and employees afforded under the January 21
regulations and urging implementation of the new reporting requirements
without further delay.
Two Congressmen expressed concern that continued delay suggests
political favoritism to a select constituency rather than regulatory
integrity. They noted, as did two other commenters, that President
Obama has emphasized the importance of public disclosure and financial
accountability and that such accountability is no less needed for labor
organizations than for the business sector.
The Department rejects the contention that a delay of the effective
and applicability dates of the regulations suggests ``political
favoritism.'' Rather, the Department proposed the initial 60 day delay
of the effective date of the regulations and commenced a review of
their merits in consideration of guidance from the Assistant to the
President and Chief of Staff and the Office of Management and Budget
(OMB) that was directed to all Executive branch agencies, without
regard to particular agencies or program areas, to determine whether it
might be appropriate to delay the effective date of regulations to
permit their review for matters of law and policy before taking effect.
Most commenters opposing the extension recognized that the Department's
actions were triggered by this OMB guidance, and one association
acknowledged that this review was necessary to provide the new
Administration an opportunity to review rules issued during the waning
days of the Bush Administration in order to prevent agencies from
publishing rules that fail to meet the regulatory standards that OMB
articulated in its guidance. The proposal to withdraw the regulations,
and the decision made in this rulemaking to extend the effective and
applicability dates derive from this review of the merits of the
regulations, consistent with the OMB guidance. The Department has
engaged in this process in a fully transparent manner, and the instant
rulemaking has been, and will continue to be, undertaken in full
compliance with the requirements of the Administrative Procedure Act.
One public policy organization argued that there is no
justification for the extensions that outweigh the benefits to union
members from the disclosure provided by the January 21 rule and
asserted that a delay would ``immediately'' allow unions to avoid
increased disclosure. However, even if the reporting revisions
published on January 21, 2009, had not been postponed, there would have
been no immediate changes in how unions report their finances. Rather,
the initial applicability date for the regulations was July 1, 2009,
and the first reports would not have been due until September 30, 2010.
Notwithstanding the postponement of the effective date of the January
21 rule, an existing and effective labor organization reporting regime
remains in place.
The Department reiterates the justification it offered in the
notice proposing to extend the effective and applicability dates,
namely that this additional time will enable the Department to complete
a review of the issues raised by the January 21 rule, which the
Department now proposes to withdraw, without exposing affected unions
to undue burdens. Without the further extension, those unions with
fiscal years beginning on or after July 1, 2009, would have to begin
immediate preparations to comply with the rule, preparations that may
entail significant burden and expense, but which may prove unnecessary.
Further, since a decision has been made to propose withdrawal of the
regulations, and if such proposal ultimately is effectuated, these
expenses will have been incurred unnecessarily. While the Department
strongly supports the need for union financial transparency, it also
believes that preventing unions and the Department from incurring
potentially unnecessary expenses and burdens outweighs any benefit
gained from implementing the regulations a few months sooner.
A trade association defended union transparency and the January 21
regulations, and it argued against any delay or rescission of them by
stressing the Administration's support of transparency, citing evidence
that some individuals continue to abuse their union office by
misappropriating and misusing members' money, and presenting an
argument in support of the reporting of union payments made towards job
targeting. The commenter also asserted that the Department's proposed
extension upholds its prediction that the initial 60 day delay would be
used by the regulations' opponents to justify an even further delay as
a result of added administrative burdens required to implement the
mandated changes, and it contended that an additional delay would only
enable the labor community to have additional time to submit comments
favorable to rescission. Additionally, the trade association stated its
belief that, while the initial extension was understandable in light of
the Administration directives, no further delay was warranted.
The Department disagrees with these contentions. As noted above,
the Department has now proposed withdrawal of the January 21 rule.
Delaying the implementation of the January 21 rule enables the
Department to review comments on its proposal, while simultaneously
preventing unions and the Department from incurring unnecessary costs
and burdens in the event the regulations are withdrawn. Moreover, the
proposed rescission is based on reasons that are consistent with the
OMB guidance regarding regulatory review, in that the final rule did
not reflect proper consideration of all relevant facts and was not
based on reasonable judgment about the legally relevant policy
considerations. As stated in the Department's proposal, the withdrawal
of the January 21 rule is warranted because:
* * * the rule was issued without an adequate review of the
Department's experience under the relatively recent revisions to
Form LM-2 in 2003 and because the comments indicate that Department
may have underestimated the increased burden that would be placed on
reporting labor organizations by the January 21 rule. Finally, the
Department has concluded, based on the comments received, that the
provisions related to the revocation of a small union's
authorization to file a simpler form because it has been delinquent
or deficient in filing that form are not based upon realistic
assessments of such a union's ability to file the more complex form
and are unlikely to achieve the intended goals of greater
transparency and disclosure.
In light of the Department's decision to propose the withdrawal of the
January 21 rule and the additional reasons stated above, the Department
has decided to postpone, for 180 days, the effective date of the
January 21, 2009, rule, until October 19, 2009, and delay the
applicability date from July 1, 2009, until January 1, 2010.
Signed in Washington, DC, this 16th day of April 2009,
Shelby Hallmark,
Acting Assistant Secretary for Employment Standards.
Andrew D. Auerbach,
Deputy Director, Office of Labor-Management Standards.
[FR Doc. E9-9182 Filed 4-20-09; 8:45 am]
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