Office of Labor-Management Standards, Employment Standards Administration, Department of Labor.
Final rule.
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.
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,
An outline of this information and a note regarding the references to statutory provisions in this document follow:
2. Other Issues Related to Definitions
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
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:
§ 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.
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
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.
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
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
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.
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,
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
The Form LM–30 has remained essentially unchanged since 1963.
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,
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,
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.
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.
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.
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,
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
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.
The improper dealings by the Teamsters officials, to which Senator Kennedy refers, are detailed in the
As explained in the Senate Committee Report, S. Rep. No. 187 (1959) (“
In explaining the purpose of the disclosure rules for union officers and employees, the
• 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.”
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.”
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.
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.
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
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.”
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
[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.
The Department intends by today's rule to better achieve the purposes of the LMRDA, as reflected by its legislative history.
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.
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.
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
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
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.
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
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.
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
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.
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
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.
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
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.
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)
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.
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.
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).
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.”
Upon review of the comments, the Department
The Department received two comments in support of the proposal to eliminate this exception
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
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
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
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
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
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.
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.
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.
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
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.
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
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,
Commenters were divided on the proposal, with most opposed to what
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.
Your local labor organization.
b.
Your national or international labor organization and all of its affiliated intermediate bodies and all of its affiliated local labor organizations.
c.
Your national or international labor organization.
d.
Your intermediate body and all of its affiliated local labor organizations.
e.
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
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,
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
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.
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.
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
As noted, the cited interpretation in the Department's
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.
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);
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
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:
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
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.”
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'
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.”
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,
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
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.
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
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
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.”
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
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
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
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.
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
As noted in the NPRM, the proposed definition, in large part, is based on a statement from the legislative history.
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,
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”
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.
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
One commenter recommended that the Department clarify that payments from employers not to organize an employer,
Section 202(a)(3) requires union officials to report any interests in and payments from, “any business a
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,
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 (
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
The Department rejects the suggestion that the above-quoted section of the
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.
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
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.
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
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.”
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.”
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
A. Loans made to union representatives
B. Loans to employees, who are also union representatives, on terms more favorable than those available to other employees,
C. Loans to labor organizations,
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
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
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.
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.
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.
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
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.
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,”
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,
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 (
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.
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
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;
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.
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:
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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.
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.
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.
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 “
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.
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.”
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
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.”
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
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.”
No comments were received on the proposed definition. This definition is adopted as proposed.
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)).
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Your local labor organization.
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Your national or international labor organization and all of its affiliated intermediate bodies and all of its affiliated local labor organizations.
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Your national or international labor organization.
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Your intermediate body and all of its affiliated local labor organizations.
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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)).
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))
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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
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
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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.
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,
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.
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)).
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 “
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
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.
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.
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.
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
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.
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.
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.
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.
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),
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).
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.
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
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.
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
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.
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.
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.
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.
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.
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
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.
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.”
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.
This statement is prepared in accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 (“PRA”).
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.
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
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.
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.
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,
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.
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
• 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
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 (
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.
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
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 × 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
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
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.
The recordkeeping
The resulting annualized reporting and recordkeeping burden for all Form LM–30 filings is 829,920 minutes (6,916 × 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 × $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
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 × $22.34).
The estimated annualized Federal cost of the Form LM–30 is $1,025,837. This represents estimated operational expenses such as equipment, overhead,
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.
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.”
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.
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.
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
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.
Labor union officer and employees, Recordkeeping and reporting.
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).
The additions and revision read as follows:
(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
(2) A primary purpose of which is to provide benefits for the members of such labor organization or their beneficiaries.
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.
The following appendix will not appear in the Code of Federal Regulations: