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Secretary of Labor Hilda L. Solis
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ESA Final Rules

Labor Organization Annual Financial Reports   [4/21/2009]
[PDF]
FR Doc E9-9182
[Federal Register: April 21, 2009 (Volume 74, Number 75)]
[Rules and Regulations]               
[Page 18132-18134]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ap09-9]                         

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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Parts 403 and 408

RIN 1215-AB62

 
Labor Organization Annual Financial Reports

AGENCY: Office of Labor-Management Standards, Employment Standards 
Administration, Department of Labor.

ACTION: Final rule; delay of effective date and applicability date.

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SUMMARY: This final rule delays the effective date and applicability 
date of regulations pertaining to the filing by labor organizations of 
annual financial reports required by the Labor-Management Reporting and 
Disclosure Act of 1959, as amended (LMRDA) that were published in the 
Federal Register on January 21, 2009. They revised Labor Organization 
Annual Report Form LM-2 and established a procedure whereby the 
Department may revoke, when warranted, a labor organization's 
authorization to file the simplified Labor Organization Annual Report 
Form LM-3. These regulations were to have gone into effect on February 
20, 2009, but were delayed until April 21, 2009, by a final rule 
published on February 20, 2009 (74 FR 7814). This final rule postpones 
the effective date of the regulations from April 21, 2009, until 
October 19, 2009, and the applicability date of the regulations from 
July 1, 2009, until January 1, 2010. This will allow additional time 
for the agency and the public to consider a proposal to withdraw the 
January 21 regulations and, meanwhile, to permit unions to delay costly 
development and implementation of any necessary new accounting and 
recordkeeping systems and procedures, pending this further 
consideration. At the same time, the Department has published a Notice 
of Proposed Rulemaking elsewhere in this issue of the Federal Register, 
seeking public comment on its proposal to withdraw the regulations.

DATES: The effective date of the rule amending 29 CFR Parts 403 and 
408, published January 21, 2009, at 74 FR 3678, is delayed until 
October 19, 2009, and its applicability date is delayed until January 
1, 2010.

FOR FURTHER INFORMATION CONTACT: Denise M. Boucher, Director, Office of 
Policy Reports and Disclosure, Office of Labor-Management Standards, 
Employment Standards Administration, U.S. Department of Labor, 200

[[Page 18133]]

Constitution Avenue, NW., room N-5609, Washington, DC 20210, (202) 693-
1185. This is not a toll-free number.

SUPPLEMENTARY INFORMATION: 

I. Background and Overview

    Section 201(b) of the Labor-Management Reporting and Disclosure Act 
of 1959, as amended (LMRDA) (Pub. L. 86-257, 73 Stat. 519), requires 
each covered labor organization to file annually with the Secretary of 
Labor a financial report, signed by its president and treasurer or 
corresponding principal officers, containing information in the detail 
necessary to disclose accurately its financial condition and operations 
for the preceding fiscal year. The Secretary of Labor has delegated the 
Secretary's authority under the LMRDA to the Assistant Secretary for 
Employment Standards.
    The requirements of LMRDA section 201 apply to all labor 
organizations in the private sector including those representing 
employees under the provisions of the National Labor Relations Act, as 
amended, and the Railway Labor Act, as amended. Section 1209(b) of the 
Postal Reorganization Act made the LMRDA applicable to labor 
organizations representing employees of the U.S. Postal Service. 
Section 701 of the Civil Service Reform Act of 1978 (CSRA) and section 
1017 of the Foreign Service Act of 1980 (FSA), as implemented by 
Department of Labor regulations at 29 CFR parts 457-459, extended the 
LMRDA reporting requirements to labor organizations representing 
certain employees of the Federal government.
    Section 208 of the LMRDA authorizes the Secretary to issue rules 
prescribing the form and publication of the annual financial reports 
required by section 201, and to provide a simplified report for labor 
organizations for which the Secretary finds that by virtue of their 
size a detailed report would be unduly burdensome. Under regulations 
issued pursuant to section 208, the Secretary has prescribed Form LM-2 
for labor organizations with total annual receipts of $250,000 or more, 
and the simplified Form LM-3 for labor organizations with total annual 
receipts of $10,000 or more, but less than $250,000.
    On January 21, 2009, the Department of Labor's Office of Labor-
Management Standards (OLMS) published in the Federal Register (74 FR 
3677) regulations making revisions to the Form LM-2 (used by the 
largest labor organizations to file their annual financial reports). 
The regulations, when effective, will require labor unions to report 
additional information on Schedules 3 (Sale of Investments and Fixed 
Assets), 4 (Purchase of Investments and Fixed Assets), 11 (All Officers 
and Disbursements to Officers) and 12 (Disbursement to Employees). The 
regulations also would add itemization schedules corresponding to 
categories of receipts, and establish a procedure and standards by 
which the Secretary of Labor may revoke a particular labor 
organization's authorization to file the simplified annual report, Form 
LM-3, where appropriate, after investigation, due notice, and 
opportunity for a hearing.
    Consistent with the memorandum of January 20, 2009, from the 
Assistant to the President and Chief of Staff, entitled ``Regulatory 
Review'' and the memorandum of January 21, 2009, from the Director of 
the Office of Management and Budget (OMB), entitled ``Implementation of 
Memorandum Concerning Regulatory Review,'' on February 3, 2009, OLMS 
published in the Federal Register a notice seeking comment on a 
proposed 60-day extension of the effective date and requesting comment 
on legal and policy questions relating to the regulations, including on 
the merits of rescinding or retaining the regulations. The notice was 
available for public inspection at the Federal Register on January 29, 
2009 and was published on February 3, 2009 (74 FR 5899).
    Public comment on the proposed extension was invited, with the 
comment period ending on February 13, 2009. The Department received 24 
comments on the proposal to extend the effective date for 60 days. 
Public comment was also invited generally on the regulations, including 
the merits of rescinding or retaining them, with this comment period 
ending on March 5, 2009. The Department published a final rule on 
February 20, 2009, which postponed for 60 days the effective date of 
the regulations published on January 21, 2009 until April 21, 2009, for 
additional public comment and agency review of questions of law and 
policy (74 FR 7814).
    On March 19, 2009, OLMS published a notice seeking public comment 
on a proposal to delay for an additional 180 days the April 21, 2009, 
effective date of the regulations published on January 21, 2009. This 
notice proposed to further delay the effective date until October 19, 
2009. Additionally, this notice proposed to delay the applicability 
date of the regulations (establishing the start of the fiscal year for 
which the new reporting requirements would apply) set for July 1, 2009, 
until January 1, 2010. As discussed in that notice, the Department 
indicated that it would not able to complete its final review of the 
issues raised by the January 21 rule before April 21, 2009, the current 
effective date of the rule. Since that time, however, the Department 
has determined that the January 21 rule was promulgated without 
adequate review of experience under the Department's 2003 Form LM-2 
rule, including the burden of reporting requirements and whether the 
requirements reflect a proper balance of the need for transparency and 
union autonomy. Thus, in a separate document published in this issue of 
the Federal Register, the Department is now proposing to withdraw the 
January 21 rule. Without further extension of the effective and 
applicability dates of the rule, those unions with fiscal years 
beginning on or after July 1, 2009, would have to begin immediate 
preparations to comply with the rule, preparations that may entail 
significant burden and expense, but which may prove unnecessary. 
Furthermore, the Department itself would have to expend substantial 
financial and compliance resources to prepare for the rule, resources 
that could be directed to other purposes if the rule is subsequently 
withdrawn. Therefore, the Department has decided to postpone, for 180 
days, the effective date of the regulations published on January 21, 
2009, until October 19, 2009, and delay the applicability date from 
July 1, 2009, until January 1, 2010, in order to review the comments on 
the proposal to withdraw the regulations and, meanwhile, to permit 
unions to delay costly development and implementation of any necessary 
new accounting and recordkeeping systems and procedures pending this 
further consideration.

II. Comments on the Proposal and the Department's Responses and 
Decision

    The Department received comments from 27 individuals or 
associations on its proposal to postpone the effective date and 
applicability date of the new Form LM-2/LM-3 regulations. Five union 
commenters supported the extension as appropriate, arguing that it 
would enable effective review of the rule while avoiding the 
unnecessary burden on union resources in the event that the Department 
does rescind the regulations. One international union also offered 
additional comments on the merits of the regulations, and urged their 
rescission. Five commenters expressed general support for union 
transparency and the January 21 regulations, and they opposed any delay 
in their effective or applicability dates. Additionally, 17 commenters 
submitted form letters generally supporting the greater public 
disclosure of pay and

[[Page 18134]]

benefits to union officers and employees afforded under the January 21 
regulations and urging implementation of the new reporting requirements 
without further delay.
    Two Congressmen expressed concern that continued delay suggests 
political favoritism to a select constituency rather than regulatory 
integrity. They noted, as did two other commenters, that President 
Obama has emphasized the importance of public disclosure and financial 
accountability and that such accountability is no less needed for labor 
organizations than for the business sector.
    The Department rejects the contention that a delay of the effective 
and applicability dates of the regulations suggests ``political 
favoritism.'' Rather, the Department proposed the initial 60 day delay 
of the effective date of the regulations and commenced a review of 
their merits in consideration of guidance from the Assistant to the 
President and Chief of Staff and the Office of Management and Budget 
(OMB) that was directed to all Executive branch agencies, without 
regard to particular agencies or program areas, to determine whether it 
might be appropriate to delay the effective date of regulations to 
permit their review for matters of law and policy before taking effect. 
Most commenters opposing the extension recognized that the Department's 
actions were triggered by this OMB guidance, and one association 
acknowledged that this review was necessary to provide the new 
Administration an opportunity to review rules issued during the waning 
days of the Bush Administration in order to prevent agencies from 
publishing rules that fail to meet the regulatory standards that OMB 
articulated in its guidance. The proposal to withdraw the regulations, 
and the decision made in this rulemaking to extend the effective and 
applicability dates derive from this review of the merits of the 
regulations, consistent with the OMB guidance. The Department has 
engaged in this process in a fully transparent manner, and the instant 
rulemaking has been, and will continue to be, undertaken in full 
compliance with the requirements of the Administrative Procedure Act.
    One public policy organization argued that there is no 
justification for the extensions that outweigh the benefits to union 
members from the disclosure provided by the January 21 rule and 
asserted that a delay would ``immediately'' allow unions to avoid 
increased disclosure. However, even if the reporting revisions 
published on January 21, 2009, had not been postponed, there would have 
been no immediate changes in how unions report their finances. Rather, 
the initial applicability date for the regulations was July 1, 2009, 
and the first reports would not have been due until September 30, 2010. 
Notwithstanding the postponement of the effective date of the January 
21 rule, an existing and effective labor organization reporting regime 
remains in place.
    The Department reiterates the justification it offered in the 
notice proposing to extend the effective and applicability dates, 
namely that this additional time will enable the Department to complete 
a review of the issues raised by the January 21 rule, which the 
Department now proposes to withdraw, without exposing affected unions 
to undue burdens. Without the further extension, those unions with 
fiscal years beginning on or after July 1, 2009, would have to begin 
immediate preparations to comply with the rule, preparations that may 
entail significant burden and expense, but which may prove unnecessary. 
Further, since a decision has been made to propose withdrawal of the 
regulations, and if such proposal ultimately is effectuated, these 
expenses will have been incurred unnecessarily. While the Department 
strongly supports the need for union financial transparency, it also 
believes that preventing unions and the Department from incurring 
potentially unnecessary expenses and burdens outweighs any benefit 
gained from implementing the regulations a few months sooner.
    A trade association defended union transparency and the January 21 
regulations, and it argued against any delay or rescission of them by 
stressing the Administration's support of transparency, citing evidence 
that some individuals continue to abuse their union office by 
misappropriating and misusing members' money, and presenting an 
argument in support of the reporting of union payments made towards job 
targeting. The commenter also asserted that the Department's proposed 
extension upholds its prediction that the initial 60 day delay would be 
used by the regulations' opponents to justify an even further delay as 
a result of added administrative burdens required to implement the 
mandated changes, and it contended that an additional delay would only 
enable the labor community to have additional time to submit comments 
favorable to rescission. Additionally, the trade association stated its 
belief that, while the initial extension was understandable in light of 
the Administration directives, no further delay was warranted.
    The Department disagrees with these contentions. As noted above, 
the Department has now proposed withdrawal of the January 21 rule. 
Delaying the implementation of the January 21 rule enables the 
Department to review comments on its proposal, while simultaneously 
preventing unions and the Department from incurring unnecessary costs 
and burdens in the event the regulations are withdrawn. Moreover, the 
proposed rescission is based on reasons that are consistent with the 
OMB guidance regarding regulatory review, in that the final rule did 
not reflect proper consideration of all relevant facts and was not 
based on reasonable judgment about the legally relevant policy 
considerations. As stated in the Department's proposal, the withdrawal 
of the January 21 rule is warranted because:

* * * the rule was issued without an adequate review of the 
Department's experience under the relatively recent revisions to 
Form LM-2 in 2003 and because the comments indicate that Department 
may have underestimated the increased burden that would be placed on 
reporting labor organizations by the January 21 rule. Finally, the 
Department has concluded, based on the comments received, that the 
provisions related to the revocation of a small union's 
authorization to file a simpler form because it has been delinquent 
or deficient in filing that form are not based upon realistic 
assessments of such a union's ability to file the more complex form 
and are unlikely to achieve the intended goals of greater 
transparency and disclosure.

In light of the Department's decision to propose the withdrawal of the 
January 21 rule and the additional reasons stated above, the Department 
has decided to postpone, for 180 days, the effective date of the 
January 21, 2009, rule, until October 19, 2009, and delay the 
applicability date from July 1, 2009, until January 1, 2010.

    Signed in Washington, DC, this 16th day of April 2009,
Shelby Hallmark,
Acting Assistant Secretary for Employment Standards.
Andrew D. Auerbach,
Deputy Director, Office of Labor-Management Standards.
[FR Doc. E9-9182 Filed 4-20-09; 8:45 am]

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