OLMS
Final Rules
Labor Organization Officer and Employee Reports
[ 10/26/2011]
[ PDF]
Federal Register, Volume 76 Issue 207 (Wednesday, October 26, 2011)
[Federal Register Volume 76, Number 207 (Wednesday, October 26, 2011)]
[Rules and Regulations]
[Pages 66442-66504]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26816]
[[Page 66441]]
Vol. 76
Wednesday,
No. 207
October 26, 2011
Part III
Department of Labor
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Office of Labor-Management Standards
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29 CFR 404
Labor Organization Officer and Employee Reports; Final Rule
Federal Register / Vol. 76 , No. 207 / Wednesday, October 26, 2011 /
Rules and Regulations
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DEPARTMENT OF LABOR
Office of Labor-Management Standards
29 CFR Part 404
RIN 1215-AB74
RIN 1245-AA01
Labor Organization Officer and Employee Reports
AGENCY: Office of Labor-Management Standards, Department of Labor.
ACTION: Final rule.
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SUMMARY: The Office of Labor-Management Standards of the Department of
Labor (Department) is revising the Form LM-30 Labor Organization
Officer and Employee Report and its instructions upon review of the
comments received in response to its August 10, 2010 Notice of Proposed
Rulemaking (NRPM). The Form LM-30 implements section 202 of the Labor-
Management Reporting and Disclosure Act of 1959 (LMRDA or Act), the
purpose of which is to require officers and employees of labor
organizations (unions) to publicly disclose possible conflicts between
their personal financial interests and their duty to the labor union
and its members. The rule revises the Form LM-30 and its instructions,
based on an examination of the policy and legal justifications for, and
utility of, changes enacted in the Form LM-30 Final Rule (2007 rule),
published on July 2, 2007. The principal revisions are: Union leave and
no docking payments are not required to be reported on the Form LM-30;
union stewards and others representing the union in similar positions
are not covered by the Form LM-30 reporting requirements; the
requirement to report certain bona fide loans is limited, as is
reporting of payments from certain trusts, unions, and employers in
competition with employers whose employees are represented by an
official's union; and the scope of reporting required of officers and
employees of international, national, and intermediate body unions is
revised. This rule also establishes a new form and instructions, as
well as regulatory text concerning certain reporting obligations. This
rule largely implements the Department's proposal in the NPRM, with
modifications of several minor aspects of the layout of the form and
instructions.
DATES: This rule is effective on November 25, 2011, and it is
applicable to Form LM-30 filers with fiscal years beginning on or after
January 1, 2012. For filers with fiscal years beginning prior to
January 1, 2012, the Department will accept either the Revised Form LM-
30 published with this rule, the pre-2007 Form LM-30, or the 2007 Form
LM-30.
FOR FURTHER INFORMATION CONTACT: Andrew R. Davis, Chief of the Division
of Interpretations and Standards, Office of Labor-Management Standards,
U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5609,
Washington, DC 20210, olms-public@dol.gov, (202) 693-0123 (this is not
a toll-free number), (800) 877-8339 (TTY/TDD).
SUPPLEMENTARY INFORMATION: The Regulatory Information Number (RIN)
identified for this rulemaking changed with publication of the Spring
2010 Regulatory Agenda due to an organizational restructuring. The old
RIN (1215-AB74) was assigned to the Employment Standards
Administration, which no longer exists; a new RIN (1245-AA01) has been
assigned to the Office of Labor-Management Standards.
I. Background
A. Introduction
This final rule, which revises the Form LM-30 and its instructions,
is part of the Department's ongoing effort to effectively administer
the reporting requirements of the LMRDA. The Form LM-30 Labor
Organization Officer and Employee Report is designed to provide for the
disclosure of payments to, and interests held by, union officers and
employees, when such payments and interests pose an actual or potential
conflict of interest. In developing the proposed rule and considering
and responding to the comments submitted on the proposal, the
Department has kept in mind that a fair and transparent reporting
system for union officers and employees must consider the interests of
unions, their members, and the public, and must balance the benefits
served by disclosure with the burden placed on reporting individuals
and labor organizations.
The Form LM-30 implements section 202 of the LMRDA, 29 U.S.C. 432.
Under section 202,\1\ union officers and employees (collectively, union
officials) are required to file reports if they, or their spouses or
minor children, engage in certain transactions or have financial
holdings that may constitute a conflict of interest with their union
responsibilities. The Act requires public disclosure of certain
financial interests held, transactions engaged in, and income received.
Subject to certain exclusions, these interests, transactions, and
incomes include:
1. Payments or benefits with monetary value from, or interests in,
an employer whose employees the filer's union represents or is actively
seeking to represent;
2. Transactions involving any stock, bond, security, or loan to or
from, or other interest in, an employer whose employees the filer's
union represents or is actively seeking to represent;
3. Income or any other benefit with monetary value from, or other
interest in, a business a substantial part of which consists of buying
from, selling or leasing to, or otherwise dealing with an employer
whose employees the filer's union represents or is actively seeking to
represent;
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\1\ Unless otherwise stated all references to statutory
provisions, e.g., ``section 202,'' are to provisions in the LMRDA.
29 U.S.C. 401-531.
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4. Income or any other benefit with monetary value from, or other
interest in, a business any part of which consists of buying from, or
selling or leasing directly or indirectly to, or otherwise dealing with
the filer's union or a trust in which the filer's union is interested;
\2\
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\2\ These trusts are defined by section 3(l) of the Act as:
a trust or other fund or organization (1) Which was created or
established by a labor organization, or one or more of the trustees
or one or more members of the governing body of which is selected or
appointed by a labor organization, and (2) a primary purpose of
which is to provide benefits for the members of such labor
organization or their beneficiaries.
Unless otherwise specified, references to ``trust'' in this
preamble are to these statutorily defined trusts, which are
sometimes referred to as ``section 3(l) trusts.''
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5. Business transactions or arrangements with an employer whose
employees the filer's union represents or is actively seeking to
represent; and
6. Payment of money or any other thing of value from any employer
not covered under the above categories, or payment of money or other
thing of value from a person who acts as a labor relations consultant
to an employer.
The Form LM-30 had remained essentially unchanged from 1963 until
2007. In 2005, the Department published a Notice of Proposed Rulemaking
that proposed far-reaching changes to the form. 70 FR 51165 (Aug. 29,
2005). After a notice and comment period, the Department issued the
2007 final rule. 72 FR 36105 (July 2, 2007). The 2007 rule brought
significant changes to the LM-30 and its instructions and represented,
in some instances, a sharp departure from the Department's previous
interpretations of section 202. The rule completely revised the layout
and overall structure of the Form LM-30, lengthening the form from two
to nine pages with the creation of
[[Page 66443]]
five schedules, continuation pages, and various sections consisting of
instructions and examples. (The 2007 form and instructions are
available at http://www.dol.gov/olms.)
Upon review of the 2007 rule, and input from the regulated
community, the Department issued its proposed revisions to that rule on
August 10, 2010, stating its view that many of the objectives sought to
be met by the 2007 rule--including simplification of the reporting
requirements and adherence to the reporting scheme intended by
Congress--had not been accomplished. See 75 FR 48416. The Department,
at 75 FR 48417, explained that the 2007 rule left unresolved
fundamental questions about the reporting obligations of union
officials and raised policy and legal issues warranting reexamination
by the Department. These fundamental questions regarding the Form LM-30
reporting requirements included--the coverage of stewards and other
union representatives serving in similar positions; the reporting of
certain loans and union leave and no docking payments; the reporting of
payments from certain trusts and unions; the reporting of payments from
businesses that compete with an employer whose employees are
represented by an official's union or whose employees the union is
actively seeking to represent; and reporting by higher level union
officials about relationships with businesses and employers that pose
conflicts concerning subordinate affiliates of their union. In
addition, the Department identified questions concerning the layout of
the 2007 Form LM-30 and instructions and whether they provided useful
and adequate assistance to filers.
Prompted by these uncertainties about the 2007 rule, the
Department, on March 19, 2009, issued a non-enforcement policy
regarding the 2007 Form LM-30 reporting requirements, allowing filers
to use either the pre-2007 or 2007 Form LM-30 report.\3\ Further, the
Department held a stakeholder meeting on July 21, 2009 to solicit
comments regarding the 2007 rule and potential revisions to the Form
LM-30. In the NPRM, the Department invited comment on the proposed
changes with respect to their benefits, the ease or difficulty with
which union officers and employees would be able to comply with these
changes, and whether the changes would better implement the LMRDA. The
Department invited general and specific comments on any aspect of this
proposal; it also invited comment on specific points, as noted
throughout the text of the notice.
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\3\ The Department modifies this non-enforcement policy with the
publication of today's rule. For filers with reportable payments or
interests in fiscal years beginning prior to January 1, 2012, the
Department will accept either the Revised Form LM-30 published with
this rule, the 2007 Form LM-30, or the pre-2007 Form LM-30. For
filers with reportable payments or interests in fiscal years
beginning on or after January 1, 2012, the Department will accept
only the Revised Form LM-30.
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B. History of the LMRDA's Reporting Requirements
In enacting the LMRDA in 1959, a bipartisan Congress expressed the
conclusion that in the labor and management fields ``there have been a
number of instances of breach of trust, corruption, disregard of the
rights of individual employees, and other failures to observe high
standards of responsibility and ethical conduct which require further
and supplementary legislation that will afford necessary protection of
the rights and interests of employees and the public generally as they
relate to the activities of labor organizations, employers, labor
relations consultants, and their officers and representatives.''
Section 2(b), 29 U.S.C. 401(b).
The LMRDA 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. The
LMRDA addressed various ills through a set of integrated provisions
aimed at labor-management relations governance and management. These
provisions include financial reporting and disclosure requirements for
labor organizations, their officers and employees, employers, labor
relations consultants, and surety companies. See 29 U.S.C. 431-36, 441.
To highlight the potential conflicts of interest to which union
officers and employees could be susceptible, the Senate Committee
Report explained:
[This section] requires a union officer or employee to disclose
any securities or other interest which he has in a business whose
employees his labor union represents or ``seeks to represent'' in
collective bargaining. When a prominent union official has an
interest in the business with which the union is bargaining, he sits
on both sides of the table. He is under temptation to negotiate a
soft contract or to refrain from enforcing working rules so as to
increase the company's profits. This is unfair to both union members
and competing businesses.
Senate Report No. 187 (1959) (Senate Report) at 15, reprinted in
NLRB Legislative History of the Labor-Management Reporting and
Disclosure Act of 1959 (2 volumes) (Leg. History), 1 Leg. History, at
411.
The Senate Report presented ``three reasons for relying upon the
milder sanction of reporting and disclosure [relative to establishing
criminal penalties] to eliminate improper conflicts of interest,''
which can be summarized as follows:
Disclosure discourages questionable practices. ``The searchlight
of publicity is a strong deterrent.'' Disclosure rules should be
tried before more severe methods are employed.
Disclosure aids union governance. Reporting and publication will
enable unions ``to better regulate their own affairs. The members
may vote out of office any individual whose personal financial
interests conflict with his duties to the members,'' and reporting
and disclosure would facilitate legal action by members against
``officers who violate their duty of loyalty to the members.''
Disclosure creates a record. The reports will furnish a ``sound
factual basis for further action in the event that other legislation
is required.''
Senate Report, at 16, reprinted in 1 Leg. History, at 412.
The Report further stated:
The committee bill attacks the problem [of conflicts of
interest] by requiring union officers and employees to file reports
with the Secretary of Labor disclosing to union members and the
general public any investments or transactions in which their
personal financial interests may conflict with their duties to the
members. The bill requires only the disclosure of conflicts of
interest as defined therein. The other investments of union
officials and their other sources of income are left private because
they are not matters of public concern. No union officer or employee
is obliged to file a report unless he holds a questionable interest
in or has engaged in a questionable transaction. The bill is drawn
broadly enough, however, to require disclosure of any personal gain
which an officer or employee may be securing at the expense of the
union members.
Senate Report, at 14-15, reprinted in 1 Leg. History, at 410-11.
Both the Senate and House Reports recognized that a reportable
interest was not necessarily an illegal practice. As the House Report
stated:
In some instances matters to be reported are not illegal and may
not be improper but may serve to disclose conflicts of interest.
Even in such instances disclosure will enable the persons whose
rights are affected, the public, and the Government, to determine
whether the arrangements or activities are justifiable, ethical, and
legal.
House Report No. 741 (House Report), at 4, reprinted in 1 Leg.
History, at 762. See Senate Report, at 38, reprinted in 1 Leg. History,
at 434 (``By requiring reports * * *, the committee is not to be
construed as necessarily condemning the matters to be reported if they
are not specifically declared to be improper or
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made illegal under other provisions of the bill or other laws'').
Conflict-of-interest standards, including disclosure obligations of
individuals and entities occupying positions of trust, are firmly
established in U.S. law. As stated in the House Report, repeating
almost verbatim the same point in the Senate Report:
For centuries the law of fiduciaries has forbidden any person in
a position of trust subject to such law to hold interests or enter
into transactions in which self-interest may conflict with complete
loyalty to those whom he serves. * * * The same principle * * *
should be equally applicable to union officers and employees
[quoting the AFL-CIO's ethical practices code]: ``[A] basic ethical
principle in the conduct of union affairs is that no responsible
trade union official should have a personal financial interest which
conflicts with the full performance of his fiduciary duties as a
worker's representative.''
House Report, at 10-11, reprinted at 1 Leg. History, at 768-69.
Senate Report, at 14, reprinted in 1 Leg. History, at 410. See
generally Restatement (Second) of Trusts (1959) Sec. Sec. 170, 173;
Restatement (Second) of Agency (1958) Sec. Sec. 381, 387-98.
The reporting provisions of the Act represent, in part, an effort
to codify various requirements contained in an extensive code of ethics
voluntarily adopted by the AFL-CIO in 1957 and applied to its
affiliated unions and officials. See Senate Report, at 12-16, reprinted
in 1 Leg. History, at 408-12; House Report, at 9-12, reprinted in 1
Leg. History, at 767-70. See also Archibald Cox, Internal Affairs of
Labor Unions Under the Labor Reform Act of 1959, 58 Mich. L. Rev. 819,
824-29 (1960). The following excerpts from this code demonstrate the
similarities between a union official's fiduciary duty and the
disclosure requirements of section 202.
[A] basic ethical principle in the conduct of union affairs is
that no responsible trade union official should have a personal
financial interest which conflicts with the full performance of his
fiduciary duties as a workers' representative.
[U]nion officers and agents should not be prohibited from
investing their personal funds in their own way in the American free
enterprise system so long as they are scrupulously careful to avoid
any actual or potential conflict of interest.
In a sense, a trade union official holds a position comparable
to that of a public servant. Like a public servant, he has a high
fiduciary duty not only to serve the members of his union honestly
and faithfully, but also to avoid personal economic interest which
may conflict or appear to conflict with the full performance of his
responsibility to those whom he serves.
There is nothing in the essential ethical principles of the
trade union movement which should prevent a trade union official, at
any level, from investing personal funds in the publicly traded
securities of corporate enterprises unrelated to the industry or
area in which the official has a particular trade union
responsibility.
[These principles] apply not only where the investments are made
by union officials, but also where third persons are used as blinds
or covers to conceal the financial interests of union officials.
Ethical Practices Code IV: Investments and Business Interests of
Union, 105 Cong. Rec.*16379 (daily ed. Sept. 3, 1959), reprinted in 2
Leg. History, at 1407-08. See also Ethical Practices Code II: Health
and Welfare Funds, Id., 2 Leg. History, at 1406-07.
The Act was crafted with particular regard for the unique function
and status of labor unions. Then Senator John F. Kennedy, who was the
chief sponsor of the Senate bill, S. 505, which served as the
foundation for the LMRDA, stated that the legislation was ``designed to
permit responsible unionism to operate without being undermined by
either racketeering tactics or bureaucratic controls. It is designed to
strike a balance between the dangers of to [sic] much and too little
legislation in this field.'' 105 Cong. Rec. S816 (daily ed. Jan. 20,
1959), reprinted in 1 Leg. History, at 969.
As noted by Senator Kennedy, a balance of these interests was
central to the enactment of the LMRDA. Congress sought to address
legitimate concerns about illegal and undemocratic behaviors without
permitting that concern to be used as an excuse for undermining
organized labor. Further, Congress sought to address the importance of
balancing necessary disclosure and regulation with undue intrusion on
union operations and the protection of union officers' privacy
interests. As stated in the Senate Report, ``[t]he committee recognized
the desirability of minimum interference by Government in the internal
affairs of any private organization * * * in establishing and enforcing
statutory standards great care should be taken not to undermine union
self-government or weaken unions in their role as collective-bargaining
agents.'' Senate Report, at p. 7, reprinted in 2 Leg. History, at 403.
Professor Archibald Cox played a pivotal role in drafting the
legislation that ultimately became the LMRDA. His testimony before the
Senate subcommittee that was considering this legislation presaged the
language in the Senate Report, describing the reporting obligation as a
limited one. He testified: ``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.'' Hearings on S. 505 before the Subcommittee on Labor
of the Senate Committee on Labor and Public Welfare (1959) (Senate
Hearings), at 123; see Senate Report, at 15, reprinted in 1 Leg.
History, at 411. Professor Cox additionally noted that because the
reporting requirements were based, in part, upon the Ethical Practices
Code formulated by the AFL-CIO, union officials who adhered to this
code would have ``virtually nothing to disclose in his report to the
public.'' Senate Hearings, at 123.
C. Statutory Language
Section 202 provides in its entirety:
SEC. 202. (a) Every officer of a labor organization and every
employee of a labor organization (other than an employee performing
exclusively clerical or custodial services) shall file with the
Secretary a signed report listing and describing for his preceding
fiscal year--
(1) Any stock, bond, security, or other interest, legal or
equitable, which he or his spouse or minor child directly or
indirectly held in, and any income or any other benefit with
monetary value (including reimbursed expenses) which he or his
spouse or minor child derived directly or indirectly from, an
employer whose employees such labor organization represents or is
actively seeking to represent, except payments and other benefits
received as a bona fide employee of such employer;
(2) Any transaction in which he or his spouse or minor child
engaged, directly or indirectly, involving any stock, bond,
security, or loan to or from, or other legal or equitable interest
in the business of an employer whose employees such labor
organization represents or is actively seeking to represent;
(3) Any stock, bond, security, or other interest, legal or
equitable, which he or his spouse or minor child directly or
indirectly held in, and any income or any other benefit with
monetary value (including reimbursed expenses) which he or his
spouse or minor child directly or indirectly derived from, any
business a substantial part of which consists of buying from,
selling or leasing to, or otherwise dealing with, the business of an
employer whose employees such labor organization represents or is
actively seeking to represent;
(4) Any stock, bond, security, or other interest, legal or
equitable, which he or his spouse or minor child directly or
indirectly held in, and any income or any other benefit with
monetary value (including reimbursed expenses) which he or his
spouse or minor child directly or indirectly derived from, a
business any part of which consists of buying from, or selling or
leasing directly or indirectly to, or otherwise dealing with such
labor organization;
[[Page 66445]]
(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. 29
U.S.C. 432.
D. Rationale for Rulemaking on Form LM-30
The Department is modifying the Form LM-30 for the following
reasons, which the Department identified in the NPRM as the bases for
its proposed changes:
(1) The 2007 Form LM-30 rule created uncertainty for the regulated
community, presented unresolved questions regarding the rule's
reporting requirements, engendered strong objections to key aspects of
the rule, such as the reporting of certain loans, including mortgages
and student loans; the reporting of union leave and no docking
payments; and the extension of the Form LM-30 reporting requirement to
individuals serving as union stewards or in similar positions
representing the union.
(2) The revisions adopted in this rule better balance the
disclosure of information and the burden imposed on union officials.
(3) The revisions in this rule better clarify the form and
instructions and organize the information in a useful format.
As explained in the NPRM, the Department fully recognizes the
importance of union officer and employee reporting and the disclosure
of pertinent financial information to union members and the public.
This rule effectuates these purposes and reflects a proper balancing of
transparency with the need to maintain union autonomy and to avoid
overburdening unions and their officials with unnecessary reporting
requirements. Because the 2007 rule did not adequately consider this
balance, it did not succeed in properly implementing the LMRDA. The
Department has carefully considered the comments received from the
regulated community and the public about the 2007 rule and the changes
proposed by the Department. Generally, the Department has included in
the final rule the changes proposed. Unless otherwise stated herein,
the Department has made these changes for the reasons stated in the
NPRM. Rather than restate in full the reasons set out at length in the
NPRM, the Department has attempted to limit repetition to those
instances where a more detailed discussion is needed to provide context
to comments received on the proposed rule and the Department's response
to those comments.
E. Review of General Comments Received in Response to NPRM
The Department received 62 unique comments to the NPRM, from 286
commenters.\4\ Of the 62 unique comments received, 39 expressed
opposition to the Department's proposal to revise Form LM-30, 22
supported the proposal, and an additional comment, from a labor
organization, expressed neither support nor opposition to the proposal,
but requested an industry-specific exemption to the LM-30 reporting
requirement.\5\
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\4\ One of the unique comments was a form letter submitted by
225 individuals. Additionally, one commenter submitted two versions
of the same comment.
\5\ The labor organization suggested that the Form LM -30
reporting obligation should not apply to union officials who receive
free admission to performances for union-related purposes, or for
purposes of voting for industry awards. The union offered clarifying
language that would exempt these examples of free admission from
Form LM-30 reporting. The issue will be addressed in section III.E.
of the preamble.
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Comments that expressed, in whole or in part, general support or
opposition to the NPRM will be discussed in this section of the rule.
Comments on specific changes and revisions to Form LM-30 will be
addressed in subsequent sections, which are organized by topic.
Review of General Comments in Support of NPRM
Comments submitted by 17 national/international unions, two
federations of labor organizations, one local union, one law firm (on
behalf of various clients, including unions, insurance companies, and
service providers to unions and benefit plans), and one public policy
organization generally expressed strong support for the Department's
proposed revisions to Form LM-30.
Multiple union commenters, a public policy organization, and a law
firm generally supported the Department's NPRM, but expressed concerns
about certain aspects of the proposal or suggested certain
modifications. These issues and proposed modifications will be
discussed later in this rule, in the relevant sections to which each
topic applies.
Review of General Comments in Opposition to NPRM
The comments submitted in opposition to the NPRM include the above-
referenced form letter, 36 additional comments submitted by
individuals, and two comments submitted by public policy organizations.
A third public policy organization opposed some aspects of the
proposal.
Most of the opposing comments, apart from those submitted by the
public policy organizations, were general in nature and did not
directly, if at all, address the Form LM-30 or the Department's
proposed revisions. The above-referenced form letter stated that the
proposed Form LM-30 regulations should be rejected because they would
undermine efforts regarding recent changes made to unions' reporting
and disclosure requirements, which were designed to increase
transparency. The letter also stated that union members have relied on
the LMRDA to ``discourage and expose'' corruption.
Two individuals that identified themselves as union members
asserted that conflict-of-interest reporting requirements should not be
lessened, and voiced their support of transparency. While some private
citizens limited their comments to expressing general dissatisfaction
with the current political administration, other commenters expressed
general anti-union sentiment, and did not refer to the proposed
revisions to Form LM-
[[Page 66446]]
30 or any aspect of LMRDA reporting requirements. Additional commenters
made general statements that unions should be held accountable for
potential conflicts of interest, and generally should not be exempt
from reporting requirements. Apparently misunderstanding the
Department's proposal, multiple commenters erroneously characterized
the NPRM as an effort to eliminate conflict-of-interest reporting
altogether.
In response to these comments, the Department notes that its
proposal and this final rule have been drafted with the purpose of best
effectuating the disclosure requirements of the LMRDA. The goal has
been to revise the 2007 rule in a way that achieves that purpose.
Contrary to the suggestions by several commenters, the Department's
proposals are not designed to achieve arbitrary goals or political
objectives. Indeed, many commenters appear to have overlooked that most
aspects of the 2007 rule were left unchanged by the Department's
proposal and this final rule. As a matter of policy and statutory
interpretation, the Department believes that the approach adopted in
this rule reflects an improvement over those aspects of the 2007 rule
that have been revised.
One public policy organization disputed the Department's statement
that the 2007 rule raised ``significant policy and law questions.''
Rather, in the commenter's view, the objections to the 2007 rule are
``political'' in nature, deriving from the ``regulated community.'' The
commenter stated that the NPRM should be immediately withdrawn ``due to
the Department's inconsistent application of the term ``employer'' to
different parts of the LMRDA'' (discussed below in section III, part D,
of this preamble). The commenter explained its view that the 2007
changes were necessary additions to ensure needed transparency, and
urged the Department to enforce the 2007 rule. The Department disagrees
with these general comments. In the Department's view, it is evident
from a cursory review of the 2007 rule, the compliance issues it
presented, the history surrounding the Form LM-30 and its enforcement,
and the comments received at the July 21, 2009 stakeholder meeting,
that the 2007 rule presented fundamental policy and legal questions
deserving of the Department's scrutiny. As a result of its review of
the 2007 rule, the Department has developed an approach that more
effectively targets actual or potential conflict-of-interest payments
and balances the need for transparency with the legitimate interests of
union officials and transparent labor-management relations.
Another public policy organization voiced strong opposition to the
NPRM, and stated that the NPRM ``provides no evidence that is
consistent with LMRDA language'' to justify its proposed revisions to
Form LM-30. The commenter stated that ``[s]ince 1959, the Department
has essentially ignored Form LM-30 reporting and disclosures.'' The
commenter argued that the NPRM proposes to ``hide [union-employer]
collusions,'' and ``essentially abandons individual workers in its
analysis.'' For the reasons mentioned above in response to a similar
comment, the Department disagrees with the assertions. The interest of
workers, union members, and the public in labor-management transparency
is a significant goal of the statute, and has been a primary
consideration in this rulemaking. The importance of balancing the
benefits of disclosure against the burdens that recordkeeping and
reporting imposed on the legitimate activities of unions and their
officials likewise undergirds the proposal and the final rule. The
Department fully explains in the sections that follow in this preamble
the rationale for the changes made by this final rule and how they
comport with the LMRDA's disclosure provisions.
One public policy organization challenged the Secretary's authority
to make the proposed revisions under section 208 of the LMRDA, and
suggested that the proposed rule, therefore, is inval Id. Section 208
of the LMRDA, 29 U.S.C. 438, authorizes the Secretary of Labor to
issue, amend, and rescind rules and regulations to implement the
LMRDA's reporting provisions. The commenter reads section 208 as a
``one-way ratcheting mechanism'' that only permits the Secretary to add
additional reporting requirements, not revise existing requirements. In
its view, the changes proposed by the Department could be effectuated
only if Congress amends the Act.
The Department disagrees with the commenter's distinctive view of
section 208. Section 208 grants the Secretary 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.'' The verbs ``amend'' and ``rescind'' do not constrain this
authority; they allow the Secretary to make changes, but do not compel
any particular modification. Further, the words themselves do not
connote that amendments and rescissions must add to (rather than
subtract from) the reporting requirements. The verb ``rescind,'' for
example, suggests removal or abrogation in general, and is equally
applicable to both reporting requirements and reporting exemptions.
The Department fully understands that its ``rules and regulations
prescribing the form and publication of reports required to be filed''
must conform to the statute. As explained throughout this preamble, the
proposed changes, as adopted in this final rule, are entirely
consistent with the language and purpose of the LMRDA. By revising the
Form LM-30 to feature a simplified format and more concise, clear
instructions, the final rule will facilitate filers' compliance with
Form LM-30 reporting requirements and increase the form's utility to
the public.
The same commenter suggests that the Department has disregarded the
intent of Congress and conferred upon itself the authority to create
administrative exemptions in derogation of the statutory requirements.
The Department disagrees, noting, as discussed throughout this
preamble, that the changes are based upon the Department's reasoned
interpretation of the Act. The Department additionally notes that while
the term ``administrative exemption'' has long been used to describe
certain exceptions from a general reporting obligation (as the term was
also used in the 2007 rule), they have always been based on a
reasonable interpretation of the statute. The commenter overlooks that
the Department retains discretion under the statute in crafting rules,
and that how this discretion is exercised is appropriately based on
policy considerations.
The commenter added that the Secretary may limit disclosure by
utilizing de minimis thresholds, but argued that union officials must
still adhere to record retention requirements in LMRDA section 206.
While the intent of the comment is not clear, such recordkeeping
requirements apply to records needed to verify required reports and the
detail required to be included on the reports. They do not apply to
information not required to be reported.
Finally, the commenter suggested that a statement used in the 2010
NPRM demonstrates the Department's intention to undermine congressional
intent. The NPRM, at 75 FR 48416, states that the LMRDA reporting
provisions ``are designed to empower labor organizations, their
members, and the public.'' The commenter reads the statement as proof
that ``DOL embraces a view that part of the LMRDA's purpose is to
`empower labor unions'
[[Page 66447]]
when, in fact, its purpose is to shield union members and the public
from corrupt union officials.'' In response, the Department in no way
intended to intimate that the LMRDA was designed to ``empower labor
organizations,'' as distinct from their membership. As the commenter
also recognizes, the LMRDA's disclosure provisions provide information
that empowers union members and the public by promoting union self-
governance and financial integrity. At the same time, and as recognized
in the NPRM, the Department cannot disregard the burden that reporting
places on unions and union officials. As stated in the 1959 Senate
Committee Report and repeated in the NPRM: ``The committee recognized
the desirability of minimum interference by Government in the internal
affairs of any private organization * * * in establishing and enforcing
statutory standards great care should be taken not to undermine union
self-government or weaken unions in their role as collective-bargaining
agents.'' Senate Report No. 187, at p. 7, reprinted in 2 Leg. History,
at 403, quoted at 75 FR 48418. Thus, in regard to its impact upon
unions, the intent of the LMRDA is not to intrude on the legitimate
role of unions in labor-management relations, but, rather, to advance
the interests of employees by furthering union and workplace democracy
and reducing or eliminating labor-management financial corruption.
Comments on Reporting Burden Created by 2007 Rule
Most union commenters asserted that the 2007 changes to the Form
LM-30 reporting requirements are not justified in light of the burden
they impose, and voiced support for the rescission of some of these
requirements, which one commenter described as ``extremely burdensome
to filers, and confusing and misleading to the public.'' Another
international union commented that the 2007 revisions to Form LM-30
``impose[d] a severe burden on union filers with no corresponding
benefit to union members or the public and raised fundamental legal and
policy questions with which OLMS is still struggling.''
A federation of labor organizations stated that in challenging the
2007 rule it had argued that the 2007 ``changes in the universe of
potential Form LM-30 filers and in the scope of interests and receipts
subject to reporting exceeded the Department's statutory authority.''
The commenter concurs with the NPRM that the 2007 changes to the Form
LM-30, had they gone into effect, would have been unduly burdensome and
could have deterred people from running for union office. One commenter
concurred with the comments submitted by the federation, and stated
that ``the prior regulatory scheme * * * was unduly burdensome and far
beyond the original intent of the law.'' Another commenter stated that
the 2007 LM-30 reporting requirements ``create a trap for even the most
scrupulous and detail-oriented union official,'' adding that [``b]y
setting [a]standard that in some respects is impossible to meet, the
current rules discourage involvement in union activities.''
Echoing the burden theme, one international union commenter stated
that the Form LM-30 reporting requirements outlined in the 2007 rule
require ``unnecessary reporting of many financial transactions and
arrangements that pose no threat of a conflict of interest,'' and
create a ``crushing burden on [its] officers and employees.'' It added
that these new requirements ``discourage[ ] involvement in union
activities to the detriment of both the union and its employer
partners.'' Yet another commenter supported the Department's proposal,
as it targeted the ``unnecessary over-complication, confusion, and
burden caused by its 2007 rule.''
One union commenter challenged the 2007 rule as claiming to enhance
``transparency,'' but rather imposed ``expensive and time-consuming''
requirements, to the detriment of the members. Noting the increased
volume of information required to be reported on the 2007 Form LM-30,
another international union questioned whether such additional
information would effectively reveal actual or potential conflicts of
interest.
Comment on 2007 Rule's Impact on Compliance Assistance Efforts
One local union commenter cited the intensive, multi-faceted
training and compliance assistance efforts undertaken by the
commenter's union when the 2007 rule was adopted, and supports the
proposed changes, as they would reduce the ``complication associated
with compliance.'' The commenter stated that its union ``would much
rather devote these human resources to matters that have more
widespread and direct benefits for our members,'' such as negotiating
contracts, processing grievances, and organizing unrepresented workers
to protect the wages and fringe benefits of its membership.
Comments on Striking a Fair Balance Between the Conflict-of-Interest
Disclosure Requirement and Union Officials' Legitimate Privacy
Interests
Numerous commenters supported the Department's proposal in its
effort to balance the legitimate needs and interests of unions and
their officials with the need for conflict-of-interest reporting that
advances labor-management relations, union democracy, and union
financial integrity. For example, one commenter stated, ``The goal of
the proposed Rule, to restore a fair balance between the interests of
unions, their members and the public, is appropriate and necessary.''
Following this theme, another commenter stated that the Department's
proposal better balances union officials' privacy interests with the
need for members to have information concerning conflicts of interest
that could undermine the union's ability to represent the employees.
Another commenter, a federation of labor organizations, stated that it
supported the Department's proposal ``because, in the main, the
proposal accomplishes the Department's statutory purpose of striking
the proper `balance' between `the interests of labor organizations,
their members, and the public, including the benefits served by
disclosure, the burden placed on reporting entities, and preserving the
independence of unions and their officials from unnecessary government
regulation.'' 75 FR at 48416. An international union commenter offered
support for the proposed changes, stating that they are well grounded,
consistent with congressional purpose in drafting the Act, and
successful in striking an appropriate balance between the goals of
greater conflict-of-interest transparency while not establishing
unnecessary burden for union officials.
II. Authority
A. Legal Authority
The legal authority for this rule is set forth in sections 202 and
208 of the LMRDA, 29 U.S.C. 432, 438. Section 208 of the LMRDA provides
that the Secretary of Labor shall have 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. 29 U.S.C.
438.
B. Departmental Authorization
Secretary's Order 08-2009, issued November 6, 2009, contains the
[[Page 66448]]
delegation of authority and assignment of responsibility for the
Secretary's functions under the LMRDA to the Director of the Office of
Labor-Management Standards and permits re-delegation of such authority.
See 74 FR 58835 (Nov. 13, 2009).
III. Revisions to the 2007 Form LM-30 Reporting Requirements
This rule implements five changes to the Form LM-30 reporting
requirements, as proposed in the NPRM: (1) The elimination of reporting
of union leave and no docking payments, and, more broadly, a revised
interpretation of the bona fide employee exception; (2) the removal
from coverage of individuals serving as union stewards or in similar
positions representing the union, such as a member of a safety
committee or a bargaining committee; (3) the elimination of reporting
for certain bona fide loans and other financial transactions on Parts A
and B of the form; (4) the limitation on reporting of payments from
employers competitive to the represented employer, certain trusts, and
unions; and (5) a revision of the reporting required of national,
international, and intermediate union officers and employees.
First, this rule returns to the historical practice whereby union
officers and employees were not required to report compensation they
received under union leave and no docking policies established under
collective bargaining agreements or pursuant to a custom and practice
under such collective bargaining agreements. These payments are made by
a represented employer to its employees who are serving on behalf of
the union on labor-management relations matters. Under a union leave
policy, the employer continues the pay and benefits of an individual
who often works full time on such matters. Under a no docking policy,
the employer permits individuals to devote portions of their work day
or work week to labor-management relations business, such as processing
grievances, with no loss of pay. The requirement in the 2007 rule that
union officials must report union leave and no docking payments has
been strongly criticized as unduly burdensome. The Department agrees
that this reporting requirement imposes undue burden and may impede
individuals from running for union office and otherwise serving in
important union roles. The 2007 rule was based on the premise that such
payments are for work performed on the union's behalf, rather than the
employer's, and are thus not payments made under the ``bona fide
employee'' exception of section 202 of the LMRDA. Upon reconsideration,
the Department has determined that the term ``bona fide employee,'' as
used in that section, is most naturally read to distinguish between, on
the one hand, payments that are made to a union official by virtue of
his or her employment by the company making the payment, and, on the
other hand, payments that are made to union officials without regard to
such employment. This interpretation better accords with the purposes
of the statute than the interpretation embodied in the 2007 rule that
focuses on whether the union or the employer making the payment
exercises primary control over an individual's discrete, temporal
activities as a union official.
Second, this rule returns to the historical practice of excluding
union stewards and similar union representatives from Form LM-30
reporting. The Department believes that this practice comports with the
language of section 202 and better effectuates labor-management
relations than the interpretation embodied in the 2007 rule.
Third, this rule establishes administrative exemptions for Parts A
and B of the form, whereby union officials generally need only report
loans from bona fide credit institutions if such loans are on terms
more favorable than those available to the public. The 2007 rule
required more extensive reporting and made confusing and complex
distinctions among various relationships and credit institutions. This
rule also incorporates the clarification, as set forth in 2007 Form LM-
30 Frequently Asked Question (FAQ) 70, that union officials as a
general rule are not required to report on savings accounts,
certificates of deposit (CD), credit cards, etc. where such instruments
contain the same terms offered to other customers without regard to an
individual's status as a union official.\6\
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\6\ See the 2007 Form LM-30 FAQs at http://www.dol.gov/olms/regs/compliance/RevisedLM30_FAQ.htm.
---------------------------------------------------------------------------
Fourth, this rule limits the reporting obligation with respect to
interests in and payments from employers that compete with employers
represented by the official's union or that the union actively seeks to
represent. Disclosure of such payments is important, but only where an
official is involved with the organizing, collective bargaining, or
contract administration activities related to a particular represented
employer, or possesses significant authority or influence over such
activities. Establishing such limitation on disclosure ensures that
meaningful information will be provided to union members without
imposing undue burden on officials who do not occupy positions of
influence over the union's organizing, collective bargaining, or
contract administration activities related to the represented employer.
Similarly, this rule modifies the scope of reporting insofar as
payments from certain trusts and unions are concerned. The Department
returns to its historical practice of not requiring officials to report
on payments they receive from trusts or, as a general rule, from
unions. Officials of a staff union are, however, still required to
report on Part A any payments they receive from the union-employer
whose employees the staff union represents.
Finally, this rule revises and clarifies the scope of ``top-down''
reporting for officials of international, national, and intermediate
unions. This rule effectuates the Department's proposal in the NPRM
that officers and certain employees of these higher level unions must
look at payments they receive from employers and businesses with
relationships with lower levels of their unions (e.g., a local or other
subordinate body), as well as with their own level of the union, when
applying the Form LM-30 reporting requirements. However, based on a
review of the comments, the Department has determined to adopt a
modification of its proposed expansion of the scope of top-down
reporting for union employees of national, international, and
intermediate body labor organizations. All higher-level union employees
that have significant authority or influence with respect to affiliates
will also need to report these matters in relation to subordinate
affiliates. Higher-level union employees without such significant
authority or influence over affiliates or officials of affiliates will
not be subject to these top-down reporting obligations.
The 2007 rule also established confusing exceptions to the ``top-
down'' reporting obligations. Payments from businesses that dealt with
represented employers were exempt, while the instructions did not
specify the reportability of payments from businesses that dealt with
lower level unions. Further, these officials were not required to
report any payments or other financial benefits received by their
spouses and minor children from employers and businesses involved with
a lower level union. This rule effectuates the Department's proposal to
remove these exceptions.
In developing this rule, the Department has reviewed the reporting
[[Page 66449]]
examples utilized in the 2007 rule and the substantial guidance issued
after the rule's publication as answers to FAQs in order to identify
the extent to which, if at all, reporting will be changed under this
rule. This rule supersedes any inconsistent interpretation or other
guidance. The Department identifies in the margin those instances where
the rule does not change the reporting obligations under the examples
and FAQs.\7\ As discussed later in the text, examples will generally
not be included in the revised instructions.
---------------------------------------------------------------------------
\7\ Most of the examples in the 2007 instructions continue to
accurately reflect reporting requirements as articulated in this
rule. Thus, the following continue to accurately reflect reporting
requirements: Examples 2-15, at pp. 3-4 of the instructions;
examples 1-2, 4-5, at p. 6 of the instructions; examples 1 and 2, at
p. 7 of the instructions; and examples 1, 3-15, and 17, at pp. 8-9
of the instructions. Note that the NPRM had incorrectly stated that
example 3, at p. 6 of the instructions would continue to accurately
reflect reporting under this rule. Several of the FAQs are based on
requirements that the Department changes with this rule.The
following FAQs, however, continue to accurately reflect reporting
requirements: 2-10, 12-26, 28, 30-37, 39, 44, 47, 49-50, 54, 56-59,
72-76, and 79-88. It should be noted however, that some of the
comments and FAQs, such as FAQs 49 and 73, while remaining accurate,
were intended to illustrate issues that are less likely to arise
under the revised rule. Others, such as FAQs 1 and 77, while largely
accurate, contain some statements that are based on or refer to
interpretations that are superseded by this rule.
---------------------------------------------------------------------------
A. The Bona Fide Employee Reporting Exception Under Section 202
This rule effectuates the Department's proposal to return to its
historical position that union officials should not report union leave
and no docking payments. 75 FR 48421. As discussed above, these
payments are made by a represented employer to its employees who are
serving on behalf of the union on labor-management relations matters in
accordance with the parties' collective bargaining agreement. First,
the historical interpretation under which such compensation was not
reported--to which this rule returns--comports more readily with the
language in section 202, than the interpretation underlying the
Department's 2007 interpretation. Second, such reporting imposes a
substantial burden on union officials on matters unlikely to pose
conflicts of interest and removing this burden ensures that there will
be no undue interference with the internal workings of labor unions and
labor-management relations. Third, there is no persuasive reason, as a
matter of policy, why union officials must report such payments, while
employers making such payments are under no similar obligation. See 75
FR 48421-48423.
Sections 202(a)(1) and (5) of the LMRDA require a labor
organization officer or employee to report payments that the official,
his or her spouse, or minor children receive from an employer whose
employees the labor organization represents or is actively seeking to
represent, ``except payments and other benefits received as a bona fide
employee of such employer.'' 29 U.S.C. 432(a)(1) & (5) (emphasis
added).
Until the 2007 rule, the Department's policy had been to exclude
from reporting payments and other benefits received for activities
undertaken on behalf of the union, as well as for any other
``activities other than productive work,'' but paid for by the
employer. Thus, the instructions for the 1963 Form LM-30 stated that
the following payments and benefits were exempt from Form LM-30
reporting:
[p]ayments and benefits received as a bona fide employee of the
employer for past or present services, including wages, payments or
benefits received under a bona fide health, welfare, pension,
vacation, training or other benefit plan; and payments for periods
in which such employee engaged in activities other than productive
work, if the payments for such period of time 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.
Pre-2007 Form LM-30 Instructions, Part A (Items 6 and 7) at (iv).
See 28 FR 14384 (Dec. 27, 1963).
The 2007 rule narrowed the exemption in the Form LM-30
instructions, as quoted above, by limiting it to situations where such
payments were made pursuant to a bona fide collective bargaining
agreement and totaled 250 or fewer hours during the filer's fiscal
year.
1. Review of Comments Received
The Department received 17 substantive comments on the issue of the
union leave and no docking payments. Of these 17 comments, 14 supported
the removal of reporting for such payments: 12 unions, one law firm,
and one public policy organization. Additionally, three comments
opposed the change, including two public policy groups, and 225
individuals who sent in form letters.
a. Comments in Support of NPRM
The Department received 13 comments that provided general support
for removing union leave and no docking payments from the Form LM-30
reporting requirements, with about one-half providing specific comments
in support of the changes. One international union commenter concurred
with the view that the ``legitimacy'' of such payments is established
when they are included in a collective bargaining agreement or
employment practice, and that they do not pose conflict-of-interest
problems like ``no show work, featherbedding, or similar practices.''
The commenter further stated that requiring reporting for such payments
for union officials, and not employers, imposes an ``unnecessary
burden'' on the officials and deters employees from serving as
representatives. A national union concurred with the Department's view,
as expressed in the NPRM, that such payments do not pose a conflict of
interest, and also noted that employers are not required to report such
payments on the Form LM-10.
Another international union maintained that such reporting would be
burdensome, unrelated to the purpose and intent of the statute, and
``disruptive of many well-established labor-management relationships.''
The commenter also stated that such arrangements are known to the
employees, who benefit along with the employer from this practice, and
it presented evidence of the burdensome nature of reporting such
payments. It explained that union officials would be required to keep
track of all hours worked under union leave or no docking arrangements
and calculate benefits as well as wages earned, adding that such
information would not easily be obtained from the employer, who may not
desire to release it. Such reporting, the commenter contended, may
discourage employee participation in the union, and would not disclose
conflicts of interest in that no docking arrangements are already known
to employees in a bargaining unit either by being required by a
collective bargaining agreement or being made pursuant to a custom
under a collective bargaining agreement. Further, the commenter stated
that members know that when stewards or other union representatives
``administer the contract, process grievances, or represent members in
disciplinary actions,'' they are receiving payment from the employer.
A national union discussed the burden and disincentive that
reporting union leave and no docking payments would have on employees'
willingness to serve the union. Another national union emphasized that
such payments, received pursuant to a collective bargaining agreement,
are made with full knowledge of the employees and
[[Page 66450]]
thus reporting is not needed to provide transparency. The union
explained that the burden that such reporting would impose would
discourage members from representing their fellow employees in
``grievances, serving on safety and health committees, and
participating in collective bargaining.'' An international union
stressed that such payments do not pose conflicts of interests, as they
``primarily serve'' the employers by promoting ``prompt and fair
resolution of grievances and other workplace issues so that work
continues and morale remains high.''
Further, a national union stated that in determining whether or not
a payment is received ``as a bona fide employee,'' a distinction must
be made between payments made ``by virtue'' of a union official's
employment with the employer and payments made without regard to such
relationship. In this union's experience, employees volunteer to serve,
on their own personal time, on joint labor-management, safety and
health, and other committees, with the collective bargaining agreement
only ensuring that they do not lose any compensation or benefits.
Finally, a law firm supported the Department's proposed return to
its historical position that union leave and no docking payments are
not reportable. It urged the Department to clarify that employers are
not required to report such payments under section 203 of the Act. The
firm asserted that such payments should be considered to be made as
``compensation for, or by reason of, [an employee's] service as an
employee for such employer.'' \8\ It stated that without such
clarification an employer may feel obligated to report such payments,
even though union officials are not required to report their receipt of
such payments. As the Department discusses in later sections of the
preamble, this rulemaking solely addresses reporting under section 202
of the Act and that interpreting section 203 requirements would be
beyond its scope.
---------------------------------------------------------------------------
\8\ The Department of Justice, not this Department, is
responsible for interpreting and enforcing section 302 of the Taft-
Hartley Act. The language quoted is from section 302(c) of the
statue.
---------------------------------------------------------------------------
b. Comments in Opposition to NPRM
The three comments opposing this aspect of the Department's
proposal offered arguments in support of the 2007 rule's premise that
union leave and no docking payments presented a conflict of interest
for union officials and must be reported to ensure appropriate
transparency. Two of the commenters argued that the Department's
proposal was based on an impermissible reading of the statute.
A public policy organization offered some specific observations
regarding the effect of allowing union leave and no docking to go
unreported. It claimed that the Department lacked authority under the
Act to excuse union officials from reporting such payments, suggesting
that the proposed rule was based simply on the new Administration's
dissatisfaction with the reporting requirement rather than a considered
view of the statute's requirements. The comment argued that payments
for work done for the union cannot be received as a ``bona fide
employee.''
Additionally, the public policy organization claimed that by
eliminating reporting, ``de facto no-show jobs'' and ``featherbedding''
would be concealed and substantial payments to union officials would go
unreported. Such payments, in its view, constitute an improper
``subsidy'' for union activity. Another commenter, a public policy
organization, argued that the Department's proposal would conceal
instances of ``no-show jobs,'' and other fraudulent arrangements. This
public policy organization also asserted that, in proposing to remove
union leave and no docking payments from Form LM-30 reporting, the
Department was ignoring the structure of the statute and establishing
an ``administrative exemption.''
The individuals who commented by form letter also addressed this
issue and stated that no docking reporting should not be removed
because most stewards receive no extra compensation for their duties,
which could make them susceptible to ``other forms of rewards.''
The two public policy organizations stated that the burden
associated with the 2007 rule is significantly overstated. One
organization stated that the Department's proposal overlooked how the
2007 rule mitigated burden by establishing a 250-hour reporting
threshold. One of the organizations argued, albeit without further
support, that most union officials would not have to report their union
leave or no docking payments, because these payments would not meet the
250-hour threshold.
The organization also argued that the Department's burden estimates
in the 2010 NPRM demonstrated the absence of any significant burden
associated with reporting union leave and no docking payment, noting
that the Department estimated that the proposed changes would only
reduce recordkeeping time by five minutes (15 minutes in the proposed
rule as opposed to 20 minutes in the 2007 rule) and the overall
reporting by 30 minutes (90 minutes in the proposed rule as opposed to
120 minutes in the 2007 rule).
A public policy organization also objected to the Department's
assessment of the burden associated with the 2007 rule, as discussed in
the NPRM. It stated, on one hand, that any burden is not the result of
the 2007 rule but has existed since the enactment of the statute (even
if the Department, in the commenter's opinion, did not always enforce
the Form LM-30 requirements), and, on the other hand, that the 2007
rule created no additional burden because only ``atypical financial
arrangements that benefit some union officials'' were reportable under
the rule.
Taking issue with the view that union leave and no docking payments
pose no conflict of interest where required by a collective bargaining
agreement or made pursuant to a custom under a collective bargaining
agreement, another public policy organization argued that these
payments create ``the definite possibility of becoming a conflict of
interest.'' In this regard, it cited a dissenting opinion in
Caterpillar v. UAW, 107 F.3d 1052, 1060 (3d\.\ Cir. 1997)(Alito, J.
dissenting), where the dissenting judge stated such payments create a
conflict, because ``union negotiators * * * may agree to reduced
benefits for employees in exchange for financial support for the
union.''
One public policy organization acknowledged that the courts have
determined that union leave and no docking are not unlawful under LMRA
Section 302, but it nevertheless contends that the courts have
``misconstrued'' such provision, and that such payments, as well as the
granting of ``super-seniority'' to union officials, do create a
conflict of interest for the union officials, as the officials could
exchange benefits for the bargaining unit as a whole for benefits for
themselves. The comment asserted that ``any special benefit'' creates a
conflict of interest, and it cites United States v. Phillips, 19 F.3d
1565, 1566-69 (11th Cir. 1994), to illustrate this point. It also
contended that disclosure furthers the public's and government's
ability ``to determine the validity of the financial transaction.''
Additionally, the commenter rejected the idea that union leave and no
docking provided value to the employer, insisting, for example, that
the payments did not increase the speed of handling grievances, and
that, in any event, such considerations have no relevance to the
statute.
[[Page 66451]]
The public policy organization also contended that any conflict of
interest should be disclosed so members can ``exercise their democratic
rights'' when choosing representatives, and that the Department will
hamper members' ability to exercise such rights by establishing a Form
LM-30 that will provide ``less information on the financial activities
of their representatives.'' Another public policy organization
similarly argued that the Department is proposing to reduce the
``amount of information'' made available to members, the government,
and the public regarding payments to union officials.
Additionally, the public policy organization argued that the effect
of the union leave and no docking payments is to shift costs of union
officer, employee, and steward training to the employer and to defray
costs involved in the union's political activities. Thus, the commenter
contended that reporting is needed for the public to be made aware of
these effects. Furthermore, the commenter insisted that the effect of
the NPRM's ``new definition of `bona fide employee''' will require the
filing of other LMRDA reports, including ``persuader reports'' under
section 203 of the Act.
Finally, both public policy organization commenters disagreed with
the Department's position that, as a matter of policy, there was no
persuasive reason why union officials should report union leave and no
docking payments while employers are not required to do so pursuant to
the Form LM-10, Employer Report, and section 203 of the statute.
2. Response to Comments
In response to the comments received, and for the reasons stated in
the NPRM and discussed herein, this rule effectuates the Department's
proposal to rescind the requirement in the 2007 rule that union
officials report compensation and benefits they receive under employer
union leave and no docking policies. In the NPRM, as noted above, the
Department advanced three reasons for its proposal: (1) The historical
interpretation under which such compensation was not reported comports
more readily with the language in section 202 than the interpretation
in the 2007 rule; (2) the 2007 rule imposes a substantial burden on
union officials to report on matters unlikely to pose conflicts of
interest and this burden could unduly interfere with the internal
workings of labor unions and labor-management relations; and (3) the
absence of any persuasive policy reason why union officials must report
receiving such payments while employers making such payments are under
no similar obligation.
With regard to the language of section 202, the Department believes
it is best read to require reporting of payments only when a union
official is not a bona fide employee of the employer making the
payment. This reading departs from the 2007 rule's approach, which
sought to equate payments to ``bona fide employees'' with payments made
to union officials for ``productive work'' on the employer's behalf. In
the 2010 NPRM, the Department made the additional points, discussed
below, in rejecting the position taken in the 2007 rule. An
individual's status as an employee is based on the various factors
articulated in the common law. See Nationwide Mutual Ins. v. Darden,
503 U.S. 318 (1992). ``Bona fide'' is synonymous with ``good faith'' or
``genuine,'' i.e., without fraud or deceit.\9\ Thus, section 202(a)(1)
is most naturally read to except from reporting union leave and no
docking payments to a current or former employee of the company making
the payment unless made under the guise of employment, such as where
payment is for a no-show job with the company, in an amount that
unreasonably exceeds the value or amount of the work performed, or the
payment is made on terms inconsistent with the parties' negotiated
agreement or the workplace custom and practice under the agreement. In
contrast, where a payment made to an individual working on behalf of
the union by his current or past employer is sanctioned by a collective
bargaining agreement or by custom or practice of the workplace pursuant
to the collective bargaining agreement, the legitimacy or ``bona
fides'' of the payment, received as a result of a genuine employment
relationship, is established.
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\9\ See Black's Law Dictionary (8th ed. 2004), which defines the
term as: ``1. Made in good faith; without fraud or deceit. 2.
sincere; genuine''; The Random House Dictionary of the English
Language, Unabridged (2d ed. 1987), which defines the term as: ``1.
made, presented, etc. in good faith; without deception or fraud * *
*. 2. genuine.--syn. 1. honest, sincere, lawful, legal. 2.
genuine.--ant. spurious, deceitful, false.'' See also Black's ``bona
fide operation,'' defined as ``[a] real, ongoing business''; and
``bona fides,'' defined as ``1. Good faith. 2. Roman law. The
standard of conduct expected of a reasonable person, esp. in making
contracts ands similar actions; acting without fraudulent intent or
malice.'' See 75 FR 48422.
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In response to the comments received, the Department notes that
payments received as bona fide employees may include wages and other
benefits received as compensation for service as an employee of the
employer, and other compensation, such as jury duty leave, military
leave, and maternity and paternity leave. It is not relevant whether or
not the payments made to employees are for work or other activities
engaged in under the control or direction of the employer, as employers
routinely provide payments to employees as bona fide employees in such
circumstances, which the 2007 rule also recognized. See the definition
of ``bona fide employee,'' in the 2007 Form LM-30 Instructions, which
exempts, in part, payments or benefits received for ``leave for jury
duty.'' Further, the Department does not recognize any difference
between union leave and no docking payments from other types of leave
payments that are not for ``productive work,'' assuming that they are
all bona fide, or good faith, payments.
The Department disagrees with the commenters' conclusions that
unless union leave and no docking payments to union representatives are
reported there will be no disclosure of de facto ``no-show jobs,''
``featherbedding,'' or similar abuses of the employment
relationship.\10\ Contrary to this commenter's view, such payments are
reportable on the pre-2007 Form LM-30, the 2007 Form LM-30, and the
revised Form LM-30, as they are payments that are not received as a
bona fide, i.e., good faith, employee. See IM entry 248.200; see also
the NPRM at 75 FR 48422.\11\ Nothing in the Department's proposal
suggested otherwise. Regardless of the label the commenter might
attach, e.g., de facto ``no-show job,'' what is relevant is whether or
not the payment was received as a bona fide employee. Further, as
mentioned, the legitimacy of the payment is established when it is made
pursuant to the terms of a collective bargaining agreement. Thus, the
determination of whether or not such payments are made pursuant to a
collective bargaining agreement, or a custom or practice made pursuant
to a
[[Page 66452]]
collective bargaining agreement, is not only relevant but statutorily
necessary. ``Bona fide'' means ``genuine'' or in ``good faith,'' the
application of which, in a unionized workplace, must be made in part by
analyzing the collective bargaining agreement.\12\
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\10\ The Department disagrees with the assertion that a union
official remaining on an employer's rolls under a grant of ``super-
seniority'' would have had an obligation, simply upon that status,
under the Act to report all payments received from an employer. Like
any union official, an official with this status would have been
required to report union leave or no docking payments under the 2007
rule. However, payments made to an official for his regular
production work have never been reportable under the Act. Payments
received for production work are not reportable because they are
received as a bona fide employee of the employer making the payment.
An employee's super-seniority status does not change this analysis.
See 72 FR 36127-28.
\11\ The Department states that, as a general matter, union
leave and no docking payments are received by union officials as
bona fide employees, but it will evaluate the factual circumstance
concerning any type of payment to a union official, on a case-by-
case basis, if there is any question whether or not the bona fide
nature of the arrangement has been established.
\12\ See Caterpillar, Inc. v. UAW, 107 F.3d 1052 (3d Cir. 1997)
(employer's payments of salary and benefits to union grievance
chairpersons did not violate section 302 of the LMRA). The majority
stated that the collective bargaining agreement ``does not immunize
otherwise unlawful subjects but, by defining the basis for the
payments, speaks directly to the question posed by the statute as to
whether the payments are ``compensation for, or by reason of * * *
service as an employee.'' Id. at 1057.
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Further, the Department disagrees with a commenter's suggestion
that no docking and union leave payments are a type of
``featherbedding'' or ``no show jobs'' and as such are unlawful or at
least subject to disapproval on public policy grounds.\13\ Indeed, as
just discussed, ``no-show jobs,'' ``featherbedding,'' and similar
improper payments are distinct from those payments that an employee of
the employer receives as a bona fide employee of such employer.
Moreover, it is longstanding Departmental policy that the bona fide
employee exemption can only be applied to union officials if they are
current or former employees of the employer. See IM entry 243.200
(based on an opinion rendered on August 17, 1962). As stated, the bona
fide nature of the payments is established by virtue of the collective
bargaining agreement or by custom and practice under the collective
bargaining agreement, or by policy, custom, or practice without regard
to an employee's position within a labor organization. The Department
emphasizes that it did not propose to exempt any payment from an
employer to a union official pursuant to a collective bargaining
agreement, nor did it propose to exempt any payment from an employer to
a union official simply because the official is also a current or
former employee of such employer. Rather, the Department proposed and
here adopts the position that payments and other benefits from an
employer to a union official are exempt if such payments and other
benefits are ``received as a bona fide employee of such employer''
(emphasis added). See section 202(a)(1).
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\13\ The commenter may have its own distinctive notion of how
these terms may be used, but its suggestion that union officials
receiving compensation or union leave benefits for the work they
perform on labor-management matters is somehow improper or tainted
is misplaced. Simply put, the terms ``featherbedding'' and ``no show
jobs'' cannot be fairly applied to the work undertaken by union
officials in representing the union and its members in administering
the contract between the union and the employer. The term
``featherbedding,'' is usually associated with practices to keep
workers on a company's payroll, even though the jobs are no longer
needed because of changes in production methods. See Robert's
Dictionary of Industrial Relations. As there defined, the term
refers to ``make work for [a union's] members through the limitation
of production, the amount of work to be performed, or other make-
work arrangements.'' Id., 251. See also 29 U.S.C. 158(b)(6) (making
it an unfair labor practice for a union ``to cause or attempt to
cause an employer to pay or deliver or agree to pay or deliver any
money or other thing of value, in the nature of an exaction, for
services which are not performed or not to be performed''). ``No-
show jobs'' is a term more commonly associated with extortion or
shakedown by criminal elements, rather than as a means of preserving
a worker's livelihood in the face of technological change or a
payment with the object of promoting constructive labor-management
relations. Unlike ``no-show jobs'' where an individual receives pay
for no work, union officials are performing the work for which they
are being compensated, work deemed to be in the mutual interest of
the union and the employer. Clearly, ``featherbedding'' and ``no-
show jobs,'' as these terms are commonly understood, cannot fairly
be applied to union leave and no docking arrangements in which union
officials engaged in activities that advance the collective
interests of a company's workers represented by the union. While
featherbedding and no-show jobs are reportable on the revised Form
LM-30, union leave and no docking payments are not.
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Additionally, as stated in the NPRM and noted in the 2007 rule,
union leave and no docking payments were common at the time the LMRDA
was enacted. 72 FR at 36126. As set out in the NPRM, these payments
were not an issue of concern in the hearings before the McClellan
Committee or in any of the legislative materials relating to the LMRDA,
unlike payments such as for no-show work or featherbedding. 75 FR at
48422. As noted in the 2007 rule, the legislative history does not shed
light on whether Congress had a specific intention to require or not
the reporting of such payments by union officials. See 72 FR at 36126.
While, as noted in the 2007 rule, legislative silence is not generally
a conclusive guide to interpreting statutory text, it is notable, as
explained in the 2010 NPRM, at 75 FR 48422, that Congress did not
identify union leave or no docking payments as requiring disclosure to
union members and the public as a matter of course. See 72 FR at 36126.
Equally significant, such payments were not in any way proscribed by
the AFL-CIO codes of ethics that strongly influenced the reporting
provisions of the LMRDA. See 72 FR at 36112-13. See Senate Hearings, at
123 (statement by Professor Cox that union officials who followed the
AFL-CIO Ethical Practices would have ``virtually nothing to disclose in
his report to the public'').
With regard to the second reason advanced in the NPRM for removing
union leave and no docking from the Form LM-30 reporting requirements,
the Department continues to believe, as explained below, that such
reporting imposes a substantial burden for union officials on matters
unlikely to pose conflicts of interest, and thus unduly interferes with
the internal workings of labor unions and labor-management relations.
In response to those commenters who argued that the Department is
downplaying the importance of section 202 reporting, the Department has
acknowledged repeatedly in the various LM-30 rulemakings that section
202 is intended to capture payments that, although not necessarily
illegal, are ``atypical financial arrangements'' that should
nevertheless be disclosed to union members and the public if they
present a potential conflict of interest. Such disclosure aids union
democratic self-governance and assists government agencies and the
public to identify potential corruption. The Department has also
acknowledged that a ``special benefit'' received by a union official
from a represented employer should be disclosed if it would likely
constitute an actual or potential conflict of interest. At the same
time, however, the Department is mindful that section 202 does not
require general reporting of union officials' financial information.
In the Department's view, union leave and no docking payments, like
other payments received by a bona fide employee, reflect ordinary
arrangements, mutually agreed upon by the employer, the union, and the
employees, that do not present such a danger of a conflict of interest
or corruption. As articulated in the NPRM, the Department does not view
union leave and no docking payments as presenting the type of danger
that Congress intended to highlight through reporting. Such payments,
where established by virtue of the collective bargaining agreement, or
by custom and practice under the collective bargaining agreement, or by
policy, custom, or practice without regard to an individual's position
within a labor organization, do not present the sort of conflicts of
interest presented by other payments to union officers and employees.
Rather, they serve the mutual goals of employers and unions. They help
ensure that individuals with first-hand knowledge of an employer's
workplace will be able to take a position with the union, a benefit not
only to the union and employer but also the represented employees. Such
payments are voluntary; without the assent of both management and
labor, the payments
[[Page 66453]]
cannot be made. They are not kept secret from employees.\14\
---------------------------------------------------------------------------
\14\ These payments are usually made under the terms of a
collective bargaining agreement and tied to the same rate of pay
that the union official would have received under the agreement for
time worked at his or her trade. Indeed, the court in Caterpillar
Inc. v. UAW, stated ``each rank-and-file employee has the
opportunity to vote'' on the collective bargaining agreement, which
is ratified by the union membership, and which provides the
membership a means to hold officials receiving the payments
accountable. The court asserted that such payments thus differ from
``bribery, extortion, and other corrupt practices conducted in
secret.'' See Caterpillar 107 F.3d at 1057. Moreover, under section
104 of the LMRDA, each bargaining unit member may receive and
inspect a copy of the collective bargaining agreement.
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Moreover, the Department is persuaded that an employer's agreement
to pay its employees to work for or serve the union does not, in and of
itself, have an influence on the duties or loyalties of the union
official, since union leave and no docking payments are on the same
terms as the payments the bona fide employee would otherwise receive if
he or she continued work performed for and under the control of the
employer. Indeed, the members themselves are paid by the same employer.
Furthermore, when the union official or representative no longer serves
in such a labor-management capacity he or she could return to regular
full-time production work for the employer receiving the same payments
and benefits received while working as a union official or
representative.\15\
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\15\ The Department also notes that a union official or
representative who receives union leave or no docking payments from
an employer, as a bona fide employee of the employer, does not,
thereby, owe any allegiance to such employer in conflict with any
duty to the union and its members, as the union appoints or elects
its own representatives.
---------------------------------------------------------------------------
The Department disagrees with the view of a public policy
organization that any ``special benefit'' received by a union official
must be reported, or that any ``special benefit'' nurtures an
environment in which self interest takes priority over the interests of
a bargaining unit. Relying on United States v. Phillips, 19 F.3d 1565
(11th Cir. 1994), the commenter suggested that union leave, no docking
payments, and ``special benefits'' create not only a hypothetical
conflict of interest, but reflect ``in fact, how labor unions
operate.'' As an initial matter, the Department strongly disagrees with
the notion that financial self-interest on the part of union officials
animates how unions represent the interests of their members.
Additionally, the commenter's reliance on Phillips is misplaced.
The Phillips decision does not concern union leave and no docking
arrangements. In that case, an employer and union officials were
convicted, in part, for violating the LMRA by ignoring a collective
bargaining agreement and granting retroactive leaves of absences, and
thus pension benefits, to the officials. The Department believes the
court reached the right result in that case. Further, the opinion in
that case cannot be read to suggest that the improper conduct there
involved was at all symptomatic of how union officers conduct their
activities on behalf of their members, nor does it affect the reporting
of union leave and no docking arrangements. Moreover, the result in
that case lends support to the Department's proposal. In Phillips, the
payments received were by union officials who were no longer employees
of the employer at the time the benefits were arranged, and the
retroactive leave was not provided for in the collective bargaining
agreement. Because the benefits there at issue were not received
pursuant to union leave or no docking arrangements or otherwise
received by union officials as bona fide employees of the employer, the
benefits would have to be reported under both the Department's proposal
and the 2007 rule. Moreover, the commenter's reliance on Phillips is
further undercut by that court's recognition, citing BASF Wyandotte
Corporation v. Local 227, 791 F.2d 1046, 1049 (3d Cir. 1986), that no
docking payments are not unlawful under the LMRA. See Phillips, 19 F.3d
at 1575.
The Department finds instructive the discussion concerning union
leave and no docking payments in Caterpillar, Inc. v. UAW, 107 F.3d
1052,1056 (3d Cir. 1997), where the court recognized that such
payments, while not compensation ``for hours worked in the past,
certainly were `by reason of' that service.'' The court also noted that
the union leave and no docking are arrangements in which ``every
employee implicitly gave up a small amount in current wages and
benefits in exchange for a promise that, if he or she should someday be
elected grievance chairperson,'' the employer would continue to pay his
or her salary. Id. Thus, such payments only benefit those union
officials who are members of the bargaining unit, and all members of
the bargaining unit have the potential of receiving such payments if
they become union officials. Further, all represented employees benefit
from the work of their fellow employees who represent them.
In response to the commenter who asserted that union leave and no
docking payments constitute an improper ``subsidy'' to the union, the
Department disagrees. These payments are provided by mutual agreement
of the union and the employer to facilitate labor-management relations.
The payments are made to current or former employees who have been
selected by the union to perform this service to the bargaining unit, a
practice that provides benefits to both labor and management. These
payments are similar to other benefits provided to employees
represented by the union such as payment for jury duty, military
service, and other situations as discussed above.
In response to the commenter who questioned the impact of union
leave and no docking reporting on labor-management relations, the
Department is particularly concerned about the potential consequence of
requiring reporting of payments received under union leave or no
docking policies (i.e., union members will be discouraged from running
for union office and others from serving as stewards). The Department
believes that its historical position to except union leave and no
docking payments from reporting is consistent with the purposes of the
LMRDA and with the Congressional plan that the government avoid
unnecessary intrusion into internal union affairs. Cf. Wirtz v. Local
153, Glass Bottle Blowers Assn., 389 U.S. 463, 470-71 (1968). Employers
have historically agreed to compensate stewards, safety and health
committee representatives, and others for such work because they see it
as adding value to their organizations. As explained in the 2010 NPRM,
a number of states require the establishment of joint labor-management
safety and health committees. 75 FR 48424. Having employees serve on
employee assistance programs and wellness committees is also seen as a
cost-effective business decision by many employers. Id. The Department
concurs with those commenters who stated that union leave and no
docking arrangements increase the speed of grievance adjustments, and
otherwise benefit labor-management relations. The Department does not
view the section 202 reporting provisions as requiring the reporting of
such mutually beneficial arrangements between employers and employees.
Regarding the Department's characterization of the reporting burden
as ``substantial,'' the union commenters generally agreed with this
assessment. However, some public policy groups disagreed, with one
focusing upon the 250-hour threshold.\16\ As discussed
[[Page 66454]]
below, such burden is substantial, even with the 250-hour exemption.
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\16\ The Department also disagrees with the comments regarding
the significance of the 250-hour threshold, as it is not clear why
the number of hours worked pursuant to a union leave or no docking
arrangement affects a potential conflict of interest. See
Caterpillar, Inc. v. UAW at 1056., in which the majority questions
why Congress would sanction multiple employees receiving less than
eight hours per day of no-docking payments but would criminalize
eight hours of union leave payments per day for a single employee.
---------------------------------------------------------------------------
As noted above, one commenter criticized the Department's
description of the burden associated with the 2007 rule, noting that
the proposed rule reflected only a five-minute recordkeeping savings.
This commenter overlooked that the significant number of union
officials who would be excluded from filing under the proposed and
final rules will be saved the 120-minute burden imposed by the 2007
rule and, for those who do file, the reporting burden has been reduced
by 25 minutes. Further, the burden estimate for the 2007 rule only
tracks the number of and burden upon respondents (i.e., filers) to the
2007 rule. As such, the 2007 rule did not include the number of and
burden on union officials, stewards, and other union representatives
who, although not reaching the 250-hour union leave threshold, would
need to keep track of such hours to determine whether or not filing
would be required for their union leave or no docking payments. See 75
FR 48424, n. 9. Moreover, the burden on respondents and non-respondents
is heightened because such payments are not likely to generate a
conflict of interest and may discourage individuals from serving as
representatives for their fellow workers.
Additionally, as articulated by some of the commenters, it may
prove difficult for union officials and representatives to obtain
information concerning benefit compensation from their employers in
order to comply with the union leave and no docking reporting required
under the 2007 rule. These practical problems faced by union officials,
stewards, and other representatives in maintaining records necessary to
meet the reporting burden placed on them were not fully considered in
the 2007 rule. Unless the employer has a payroll reporting system that
allows the union stewards to clock in and out every time they have to
perform union work, the stewards would have to keep their own records.
A member's work on behalf of the union is not always performed during a
series of discrete intervals where it is easy to determine when union
work begins and ends. Sometimes, such representatives will briefly
engage in union work when a co-worker comes and speaks to the on-duty
steward. Sometimes the conversation occurs when the representative is
on the way to the break room or at lunch. Sometimes union work occurs
during a work-related conversation with a supervisor or manager and a
grievance question comes up. Thus, the amount of time required to
perform steward and similar functions may vary significantly from day
to day and week to week and is therefore not easy to predict. For
example, in the building and construction trades, with its very mobile
workforce and short-term employment on construction projects, stewards
will change from job to job, not just from week to week.
As the Department explained in the NPRM, there is no persuasive
policy reason why union officials must report such union leave and no
docking payments, and thus bear the burden of such reporting, while
employers making such payments are under no similar obligation or
burden. As stated in the NPRM, the Department has reexamined the policy
underlying the current requirement and has concluded that the
inconsistent application is unreasonable regarding the imposition of
these reporting requirements on union officials but not employers. 75
FR 48423. The Department disagrees with the commenters' statement that,
in making this determination, the Department was ignoring the structure
and language of the statute. To the contrary, the Department's view is
entirely consistent with the statute. The specific reference in section
203 excepting from reporting ``payments of the kind referred to in
section 302(c) of the [LMRA]'' does not require that section 202 be
read to mandate such reporting where such payments are received by an
employee.\17\ Indeed, there would appear to be no reason why such
payments, regularly made by some employers in the ordinary course of
conducting labor relations, would require union officials, as the
recipients of such payments, to report their receipt but not require
employers making the payments to report them. The commenters have
provided no persuasive argument to counter this observation.
Additionally, the instructions, as drafted, mitigate any concern that
such payments are concealed from union members. Under the rule, union
leave and no docking payments must be reported unless they are made
pursuant to a collective bargaining agreement, or by custom and
practice under a collective bargaining agreement, or by policy, custom,
or practice without regard to an individual's position within the
union.
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\17\ See LMRDA Interpretative Manual, at section 241.600. This
section states that the reporting exceptions in section 203 do not
affect the reporting by union officers and employees in section 202,
``where the applicable provision of section 202 does not provide a
pertinent exception.'' (emphasis added). Section 202, however,
contains a pertinent exception: the bona fide employee exception.
---------------------------------------------------------------------------
Finally, the Department notes that a commenter suggested that the
proposed change would create other potential consequences affecting
election law, labor-management matters unrelated to the LMRDA,
persuader activity reports under section 203 of the Act, and other
matters involving public policy. The commenter did not fully explain
its concerns, but it appears that some of these issues involve statutes
over which the Department has no authority and that none of these
concerns are material to the changes proposed by this rulemaking. While
the discussion of other LMRDA provisions is obviously necessary to
address some issues, this rule only addresses the scope of reporting
required by union officers and employees pursuant to LMRDA section 202.
As discussed below, other commenters have asked the Department to use
this rulemaking to resolve issues that may arise under the Act's other
reporting provisions. While these comments are helpful to the
Department in identifying concerns among the various regulated
communities and informing the Department about how it might best direct
its compliance resources, the Department cannot resolve those concerns
in this rule.
B. Coverage of Stewards and Similar Union Representatives Under Section
202
The Department is effectuating its proposal to return to its
longstanding policy that union stewards and similar volunteer union
representatives are not as a general rule covered by the Form LM-30
reporting requirements. A union steward is responsible for informing
employees of their rights under the collective bargaining agreement and
applicable law, investigating grievances filed by union members,
representing union members in presenting those grievances to
management, and otherwise enforcing the collective bargaining
agreement. See generally Herman Erickson, The Steward's Role in the
Union 29-54 (1971).
As proposed in the NPRM, 75 FR 48423-25, and as articulated below,
the Department rescinds the definition of ``labor organization
employee'' in the 2007 Form LM-30 that extends Form LM-30 coverage to
such union representatives and inserts the following language in the
revised Form LM-30
[[Page 66455]]
Instructions in Section II, Who Must File.\18\
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\18\ The definition of ``labor organization employee'' in the
NPRM included the word ``exclusively'' prior to ``as a union steward
* * *''
For purposes of the Form LM-30, an individual who serves the
union as a union steward or as a similar union representative, such
as a member of a safety committee or a bargaining committee, is not
considered to be an employee of the union by virtue of service in
---------------------------------------------------------------------------
such capacity.
In the final rule, the Department added the last phrase, in
italics, for clarity. As explained in the NPRM, individuals serving as
stewards or in other volunteer positions would be subject to the same
reporting obligations as other officers and employees, if they are
officers pursuant to their union's constitution or bylaws--an atypical
situation--or otherwise qualify as a union employee. The italicized
words better convey this point than the language proposed in the NPRM,
which had used the adverb ``exclusively'' to qualify the statement.
In extending the union officer and employee reporting obligation to
union stewards in the 2007 rule, the Department determined that a union
steward receiving no docking or union leave payments would be
considered to be a labor organization employee within the meaning of
the Form LM-30. As stated in the preamble to that rule: ``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.'' 72 FR at 36109. Stewards were deemed to be ``labor
organization employees'' by virtue of their receiving union leave or no
docking payments from an employer.
As stated in the 2010 NPRM and upon further review, the Department
believes that the 2007 rulemaking did not satisfactorily address or
adequately support the expansion of the Form LM-30 reporting
requirements to include stewards. Rather, the rule focused on the
``bona fide employee'' exception of section 202, which, as mentioned,
was revised to require the reporting of no docking and union leave
payments. (See the discussion above concerning this change to the
``bona fide employee exception.'') The rule also provided, almost in
passing, that stewards as well as union officers and employees needed
to report such payments, based upon whether or not the official
qualified as a bona fide employee of the payer-employer during the time
for which payment was made. 72 FR 36124. (emphasis added).
Upon review and reconsideration, the Department took the position
in the 2010 NPRM that the Form LM-30 reporting requirements should not
be expanded to include stewards. As there noted, requiring ``stewards''
to file Form LM-30 reports as ``employees,'' solely on the basis of
having received union leave, ``no docking,'' or ``lost time'' payments,
raises policy, interpretative, and practical concerns.
First, from a policy perspective, imposing obligations on union
stewards and other volunteers (e.g., those who serve on health and
safety, productivity improvement, and bargaining committees) intrudes
in internal union affairs. Union stewards and other representatives
perform valuable tasks and extending reporting requirements to them
would significantly hamper union efforts to recruit and retain stewards
and other representatives.
Second, an examination of the text of the relevant provisions of
Title II of the LMRDA suggests that Congress did not intend that
stewards be considered to be union employees. While section 202
requires reporting from ``every officer of a labor organization and
every employee of a labor organization (other than an employee
performing exclusively clerical or custodial services),'' it does not
require reporting from stewards. In contrast, however, Congress
expressly required employer payments to stewards to be reportable,
pursuant to section 203, subject to certain exceptions. The Department
explained in the 2010 NPRM that the absence of similar language in
section 202 is a strong indication of Congressional intent to exclude
agents, stewards, and similar representatives from the prescribed
reporting requirements. Additional support for this position can be
gleaned from the LMRDA's legislative history, as explained in the NPRM.
Congress, revealingly, did not include the term ``stewards'' in
describing the regulated class established by section 202, despite
inserting the term in other LMRDA sections, thus indicating that those
members who serve as ``shop stewards'' are of a different category than
``labor organization employees.'' When Congress wanted financial
payments made to stewards to be reported, it knew how to do so.
1. Review of Comments Received
The Department received 16 comments that specifically addressed
this particular issue. Of these 16 comments, 13 supported the return to
the historical interpretation that such individuals are not considered
union employees for reporting purposes under section 202, 12 unions,
and one law firm. Three comments opposed the change, including a public
policy group, a legal defense foundation, as well as 225 individuals
who sent in a form letter.
a. Comments in Support of NPRM
There were 13 comments in support of the proposal to rescind
required reporting by union stewards. A federation of labor unions
stated that the 2007 rule significantly increased the universe of
potential filers, noting especially the addition of stewards and other
``on-the-job union representatives,'' as employees of the union. In the
commenter's view, this imposed Form LM-30 requirements on ``tens of
thousands of union members who voluntarily'' perform representation
functions for fellow workers during the regular workday.
An international union supported the Department's view that steward
reporting is not required based on legislative intent. The commenter
stressed the NPRM's analysis of the structure of the LMRDA, which
recognized that ``stewards'' are not included in section 202, as well
as the legislative history and intent, such as a prior draft of section
202 that specified their inclusion. The commenter characterized the
removal of stewards reporting to be ``reasonable'' and consistent with
the intent of the Act, and agreed that the inclusion of stewards would
hinder members' willingness to volunteer to serve their fellow workers
and would be a loss to labor-management relations.
A national union stated that subjecting stewards to the reporting
requirements would discourage employees from volunteering to serve in
that capacity. Another national union also maintained that the 2007
rule greatly expanded the Form LM-30 reporting requirements, and stated
that stewards are members who volunteer to ``play a key role'' in
ensuring smooth workplace operations. Thus, they should be
``encouraged'' to serve the union and not ``punished with onerous
reporting.''
An international union emphasized that requiring stewards to file
the Form LM-30 would discourage members from serving in this important
position. Further, according to the commenter, stewards benefit
management as well as the employees and the union, and removing them
from potential reporting obligations furthers labor-management
relations. The commenter expressed its view that the Department should
not discourage this involvement. Another international union stressed
that this change in steward coverage ``will end considerable
confusion'' over the
[[Page 66456]]
reporting requirements, which, combined with the burden associated with
the form, has, in the commenter's experience, ``deterred aspirants''
for steward and similar volunteer positions crucial for unions and the
workplace.
A national union described stewards and similar positions as
``voluntary, unpaid positions'' that are filled by members who are not
officers or employees of the union. Stewards generally handle
grievances during breaks or before or after their regular working
hours, while they also often receive union leave or no docking payments
for union work during the employer's time. Regardless, the commenter
contended that imposing coverage on such individuals would ``seriously
undermine cooperative labor-management relations and productivity.''
Not only would individuals be discouraged from volunteering to serve,
but those that do may be deterred from doing so during work hours,
delaying grievance adjustments.
Some union commenters acknowledged that individuals who are union
stewards may be required to report ``in the unusual circumstances''
when the steward is a constitutional officer position, is a paid
position in the union, or is an employee of the union under
circumstances distinct from his or her status as steward.
Further, a law firm also agreed with the Department's view as
stated in the NPRM that, if Congress had intended that stewards would
be subject to the reporting requirements of section 202, it would have
indicated that intention in fashioning the terms of section 202 as it
did under section 203. In contrast to section 202, employers are
required by the express terms of section 203 to report payments made to
stewards.
b. Comments in Opposition to NPRM
In response to the NPRM, OLMS received a form letter signed by 225
individuals in opposition to the Department's proposal. The letter
stated that stewards are an ``essential part of union representation,''
elected by coworkers, to ``responsible positions,'' and have the status
of a ``union official.'' The letter also noted that because most
stewards receive no compensation for performing their duties, they may
be more sensitive to other forms of reward, suggesting to these
individuals the need for conflict-of-interest reporting by stewards.
A few public policy groups also opposed the Department's proposal
to rescind the general reporting requirement for stewards. One public
policy organization agreed with the Department insofar as union leave
and no-docking payments are concerned, but it argued that the NPRM went
too far in exempting stewards and similar representatives from all
reporting. This commenter stated that these union representatives
should report all income received directly or indirectly from employers
that is not related to their representation role, such as payments
received for mowing the lawn of a management representative or painting
the representative's house.
Finally, a public policy group claimed, without elaborating, that
most stewards perform functions of union officers and therefore are
``officers'' within the meaning of the LMRDA required to report
pursuant to LMRDA section 202.\19\ Moreover, the commenter contended
that the Department has no authority to exempt from coverage of the Act
as many as 80,000 individuals who, in its view, are covered by the
reporting provisions of section 202; this commenter also concurred with
the view that stewards are union employees.
---------------------------------------------------------------------------
\19\ The commenter further argued that if the Department
classifies stewards as ``essentially employees of an employer,''
then agency fee payers would have no union fees to pay. The
commenter offers no further explanation for its conclusion, which is
not self-evident. However, as the Department has noted in a previous
rule, the Department does not regulate payments by agency fee payers
or reports prepared by unions showing how they compute costs that
are allocated to agency fee payers. See 68 FR 58395.
---------------------------------------------------------------------------
2. Response to Comments
The Department concurs with the comments affirming the central and
important role that stewards and similar union representatives play in
the labor-management context. As stated by many of the commenters,
stewards and similar union representatives differ from union officers
and employees in that they are union members who volunteer portions of
their time to union representation without additional compensation.
Additionally, unlike officers, stewards are often appointed; in many
construction unions, they are appointed (or removed) by the Business
Manager of the local union. Stewards, safety and health, and bargaining
committee members are typically created and empowered by the collective
bargaining agreement, not by the union's constitution and by-laws.
Additionally, the Department concurs with the numerous commenters who
confirmed the Department's position in the NPRM that imposing
obligations on union stewards and other volunteers may also
significantly intrude in internal union affairs and labor-management
relations.
The Department also concurs with the unions that stated that the
2007 rule increased burden on stewards, in part, through the confusion
surrounding their coverage, thus also significantly intruding in
internal union affairs and labor-management relations. Although the
2007 rule denied such a chilling effect would be created, the
Department has reconsidered this position. The Department has concluded
that the impact on those who would have to file, coupled with the
confusion and uncertainty created by extending all of the Form LM-30
reporting obligations to stewards and similar union representatives--
even for those that actually had no payments or interests to report--
invariably would dissuade some individuals from continuing in, or later
volunteering for, those positions. Moreover, independent of the
reporting required by the 2007 rule, union stewards and other
representatives perform valuable tasks and extending onerous reporting
requirements to them would ``chill'' future offers to serve. Imposing
reporting burdens on such individuals clearly will temper the
willingness of individuals to volunteer to serve in such positions--a
loss to the union, the employer, and these individuals' fellow
employees, as well as to the effective conduct of labor-management
relations.
Section 202 does not refer to stewards as union officers or
employees. Because other sections of the LMRDA expressly apply to
stewards, the Department views their omission from section 202 as an
intention to exclude them from its application. As noted in the NPRM,
75 FR 48424, employers must report payments to stewards pursuant to
section 203; and stewards are explicitly covered by the fiduciary
responsibilities provision of section 501 and the bonding provisions of
section 502. The Department acknowledges the central role that stewards
play and responsibilities that they exhibit within labor organizations,
as demonstrated by the provisions of the LMRDA that apply to them.
However, as stated, the statutory structure indicates that Congress
deliberately did not apply the section 202 requirements to stewards,
presumably because it did not want to unduly interfere with legitimate
labor-management relations.
Furthermore, the statute provides for disclosure of payments to
stewards without imposing reporting obligations on the stewards
themselves. Section 203 of the statute requires employers to disclose
any payment, subject to certain exemptions, to any ``officer, agent,
shop steward, or other representative of a labor organization.'' Thus,
the concerns
[[Page 66457]]
of the commenter that was troubled by the prospect that payments to
stewards other than those for no docking or union leave would be
undisclosed are unwarranted.
The Department disagrees with the comment that most union stewards
necessarily must be considered union officers and, as such, required to
file reports pursuant to section 202. The Act defines union officers as
``any constitutional officer * * * and any member of [the union's
executive board or similar governing body.'' LMRDA, section 3(n). As
noted earlier, a steward generally is responsible for informing
employees of their rights under a collective bargaining agreement,
investigating and presenting grievances, and otherwise enforcing the
collective bargaining agreement. These are not executive
responsibilities normally associated with union officer positions, as
described in union constitutions and bylaws; rather, they draw their
essence from the collective bargaining agreement. In unusual
situations, the position of steward is a constitutional office in the
union (or is authorized to perform the functions of an officer). In
other instances, an individual, although serving as a steward, is an
employee of the union under circumstances distinct from his or her
status as steward. In those circumstances, such individuals, both
historically and under this rule, are subject to the reporting
requirements of the Form LM-30, as union officers or union employees.
The Department notes that several union commenters concurred with this
position as well.
Finally, the Department disagrees with the suggestion that the
Secretary's proposal is inconsistent with the Act and that the
Department, in effect, lacks discretion to disregard what the commenter
views as the clear command that stewards are employees of the union
when they act on the union's behalf. Until the 2007 rule, stewards had
not been required to file reports under section 202, and the 2007 rule
was based on an interpretation of the ambiguous statutory term ``labor
organization employee.'' 72 FR 36144. The rule did not claim that
coverage of stewards was required by the terms of the statute, and
indeed it did not place coverage of stewards in the category of revoked
``administrative exceptions.'' 72 FR 36156.
The structure of section 202, itself, demonstrates that Congress
did not intend that stewards be considered to be union employees by
virtue of service in such capacity. Again, the position of `steward' is
not enumerated in section 202 as it is in other provisions of the
statute. No commenter challenged this view of the statutory language,
and several comments supported it. Rather, under section 202, only
union employees and officers are required to submit reports. In sum,
for the reasons stated in the NPRM and earlier in this preamble,
stewards and other volunteers, as a general rule, are neither officers
nor employees of a union. The commenters offer no persuasive argument
that the Department has departed from the Act's reporting mandates.
C. Reporting of Loans and Other Transactions With Credit Institutions
This rule effectuates the Department's proposal to amend the Form
LM-30 to exempt from reporting marketplace transactions with bona fide
credit institutions, including loans, interest, dividends, and payments
and credit extended through credit card transactions, provided that
they are arm's length transactions in accordance with usual business
practice. In so doing, the Department establishes the appropriate
balance between privacy and disclosure intended under the LMRDA--to
disclose only a union official's actual or potential conflicts of
interests, while keeping private bona fide investments ``because they
are not matters of public concern.'' Senate Report, at 15, reprinted in
1 Leg. History, at 411. See 75 FR 48425.
The 2007 rule established the general requirement that union
officials report the details of any loan received from any business
that deals with the official's union, the union's trust, or represented
employer (in substantial part). 72 FR at 36133-38. This aspect of the
rule engendered strong protests from union officials and some segments
of the financial services industry as intrusive and unduly complex.
Thus, shortly after the rule's publication, the Department issued
guidance to reduce the complexity in the rule and the confusion about
its requirements. The Department issued this guidance through a series
of Form LM-30 Frequently Asked Questions (FAQs), posted on the
Department's Web site,\20\ which identified several kinds of payments
from credit institutions that did not require reporting so long as they
were arm's length transactions in accordance with usual business
practice. These payments included interest and dividends involving
savings and checking accounts and certificates of deposit and credit
card arrangements.
---------------------------------------------------------------------------
\20\ http://www.dol.gov/olms/regs/compliance/RevisedLM30_FAQ.htm. FAQs 70-73 deal with issues surrounding payments from
credit institutions. FAQ 70 stated, in part, that union officials do
not need to report ``credit card transactions (including unpaid
balances) and interest and dividends paid on savings accounts,
checking accounts or certificates of deposit if the payments and
transactions are based upon the credit institution's own criteria
and are made on terms unrelated to the official's status in the
labor organization.'' FAQs 71 and 72 outlined the obligations of
union officials regarding home loans, which clarified that such
loans must be reported if received from a trust in which the
official's union is interested, a business that deals with the
official's union or a trust in which the union has an interest, or a
business a substantial part of which deals with an employer the
official's union represents or is actively seeking to represent.
Finally, FAQ 73 affirmed that the de minimis exemption applies to
transactions, interests, and dividends from a financial institution,
even if it had dealings with the official's union.
---------------------------------------------------------------------------
In the 2010 NPRM, the Department explained that the 2007 rule
reflected a policy choice in favor of the disclosure of information,
even without a showing of a likely conflict of interest, and even with
the risks concerning burden upon and intrusion into the private affairs
of union officials. 75 FR 48425. In the 2010 NPRM, the Department
further explained that it may not have given sufficient weight in
fashioning the 2007 rule to Congress's concern that the LMRDA should
not unnecessarily regulate unions and their officials, and that the
burden of reporting such routine transactions would outweigh the value
of any additional information disclosed. Id.
The Department explained that loans and other transactions made on
market terms are usual, regular transactions, unrelated to the
officials' status in the union, and are therefore unlikely to pose a
conflict of interest with the officials' duties to the union. 75 FR
48426. In contrast to these loans and transactions, a loan, gift, or
other benefit obtained from a transaction other than at arm's length
provides the union official with a net monetary gain, and consequently
a potential motive to deal with a business in a way contrary to the
interests of the union. Thus, the Department concluded that the better
policy is to require the reporting of loans and other bona fide
financial transactions from a credit institution only where the
transaction is on other than market terms. Id.
Furthermore, as discussed in the NPRM, the proposed bona fide
financial transaction reporting exemption under sections 202(a)(3) and
(4) would prevent the submission of superfluous reports that would
overwhelm the public with unnecessary information, thus impeding the
discovery of true conflict-of-interest payments. 75 FR 48425. The
proposal also would prevent unnecessary burdens on union officers and
employees and avoid interference with the privacy of such officials.
Id.
[[Page 66458]]
Additionally, the Department there explained, at 75 FR 48426, that
in the 2007 rule the Department excepted from reporting under section
202(a)(6) such bona fide financial transactions with a credit
institution because of the burden associated with reporting what ``are
among the most common financial transactions undertaken by
individuals.'' 72 FR 36118. The NPRM stated the Department's belief
that this reasoning also must apply to the reporting of marketplace
loan transactions under sections 202(a)(3) and (4). 75 FR 48426.
The NPRM explained that the proposed revision was limited to bona
fide loans from legitimate credit institutions. 75 FR 48426. The
Department has not changed other longstanding interpretations of
section 202 that require union officers and employees to report other
payments from vendors, service providers, credit institutions, and
other businesses that deal in substantial part with the represented
employer or in any part with either the official's union or any trust
in which the official's union is interested or loans received from
employers or businesses that are not credit institutions.\21\ Id. As
explained below, the Department has determined to adopt, without
change, the position set forth in the NPRM regarding bona fide
financial transactions with credit institutions on Part B of the
revised Form LM-30:
---------------------------------------------------------------------------
\21\ As stated in the 2010 NPRM:
The proposed modification does not relax the obligation to
report on loans or other financial transactions (including credit
card arrangements and interest-bearing accounts) where a union
official receives terms more favorable than the market allows, where
for example a union official receives a loan because of the
official's status despite a credit history that would normally
prevent an individual from receiving credit, or payments on the loan
are extended or forgiven because of preferential treatment as a
union official.
75 FR 48426, n. 11.
---------------------------------------------------------------------------
Bona fide loans. Do not report bona fide loans, including
mortgages, received from national or state banks, credit unions,
savings or loan associations, insurance companies, or other bona fide
credit institutions, if the loans are based upon the credit
institution's own criteria and made on terms unrelated to the
official's status in the labor organization. Additionally, do not
report other marketplace transactions with such bona fide credit
institutions, such as credit card transactions (including unpaid
balances) and interest and dividends paid on savings accounts, checking
accounts or certificates of deposit if the payments and transactions
are based upon the credit institution's own criteria and are made on
terms unrelated to the official's status in the labor organization.
1. Review of Comments Submitted Concerning the Proposed Changes to the
Reporting of Loans Under LMRDA Sections 202(a)(3) and (4)
The Department received 14 comments about the proposed exemption
regarding the reporting of loans. Of these 14 comments, two were from
public policy organizations, 11 were from national/international
unions, and one comment was from a federation of international labor
unions.
a. Comments in Support of the Proposed Exemption Regarding Reporting of
Loans
Comments submitted by all eleven national/international unions and
the federation of international labor unions supported the Department's
proposal to exempt the reporting of bona fide market rate loans from
credit institutions. There comments expressed many common themes,
including union officials' right to privacy in personal, routine
financial matters unrelated to their union role, the undue burden
associated with reporting bona fide arm's length transactions, and the
absence of any link between these transactions and conflict-of-interest
concerns.
Three commenters agreed that the Department's proposal achieves a
correct balance between the privacy of union officers and employees and
the Act's goal of disclosing actual or potential conflicts of interest.
Another commenter stated that the requirements established by the 2007
rule (apparently as distinct from the interpretation in the FAQs)
``intru[des] into [union officials'] private affairs, and would produce
information which is irrelevant to their union duties and the purposes
of the LMRDA.'' As expressed by another commenter, the 2007 rule's
``broad requirement does not comport with the Act's intent to require
only the disclosure of transactions in which there is actual or
potential conflict of interest with an official's duties to his/her
union and delves into personal matters that are of absolutely no public
concern.''
Another commenter noted a parallel between the Department's
proposal and the approach used in other ``ethics regimes,'' such as the
financial disclosure rules established by each body of Congress. It
explained that Congress does not require its members to report on loans
that are made on terms generally available to the public, and that it
made sense to treat similarly loans made to union officials on such
terms.
b. Comments Opposing the Proposed Section 202(a)(3) and (4) Exemption
Regarding Reporting of Loans From Bona Fide Credit Institutions
The two public policy organizations disagreed with the Department's
proposal, arguing that such loans should be disclosed by union
officials on the Form LM-30. One of these organizations stated that
``the fear that seemingly private mortgage information will somehow
become public due to the reporting requirements of the Form LM-30 is
misplaced,'' in that mortgages are public documents that can be
obtained from a state recorder's office or, in some cases, accessed
online. The same commenter addressed the Department's statement in its
proposal, 75 FR 48425, that its revised interpretation ``would prevent
the submission of superfluous reports that would overwhelm the public
with unnecessary information,'' expressing its view that this concern
is misplaced due to the technological developments of the 21st century.
It characterized the Department's view as meaning that ``more
information actually means less useful information.'' The commenter
added that OLMS computer systems could easily handle all Form LM-30
reports, and allow cross-checking other forms, and stated that the
public can view Form LM-30 data on http://www.unionreports.gov to
``find whatever information they seek.''
Another public policy organization commented that the Department's
proposed administrative exemption for bona fide loans with terms no
more favorable than those available to the public ``misses the point of
disclosure and the need for it.'' The commenter added that, while the
loan terms may not be more favorable than those available to the
public, there is no ``guarantee that the loan was given to a qualified
individual union official (e.g., the union official may have a very low
credit score or income insufficient to make the payments).'' The
commenter also stated that ``union officers have been known to have
their loans completely forgiven or paid off by another source,'' and
added, ``* * * if there is no disclosure of the loan, then no one will
know that a loan should perhaps not have been given or even that a
possibly questionable loan exists.'' Additionally, this commenter
referenced a media report concerning a public official's ``special
loan'' arrangements with a particular mortgage company, asserting that
just as voters benefit from such disclosure, union
[[Page 66459]]
members would benefit from the disclosure of such loans.
c. Other Comments
Although the Department did not propose to eliminate the
requirement that a union official must report loans from a represented
employer that is a credit institution, such as a bank whose employees
are represented by the official's union, some commenters submitted
comments requesting the elimination of this requirement. Such a request
is beyond the scope of this rule, but the Department, for completeness,
discusses these comments below.
A federation of international labor unions urged the Department to
create a reporting exemption, under section 202(a)(5) of the LMRDA, for
bona fide loans and other bona fide financial transactions between a
union official and a credit institution employer whose employees the
official's union represents or is actively seeking to represent. An
international union concurred with this request. These unions argued
that by not applying the same arm's length exemption, as proposed
generally in the 2010 NPRM,\22\ to transactions involving credit
institutions whose employees are represented by an official's union,
the Department would be ignoring the regular course of business
exemption in section 202(a)(5), which they assert relieves any
reporting on any ``regular course of business'' transactions.\23\
---------------------------------------------------------------------------
\22\ Union officials must report, pursuant to section 202(a)(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.''
\23\ The commenter notes correctly that the Department did not
address its section 202(a)(5) argument in the 2010 NPRM. The
Department there noted that any loans from an employer represented
by the official's union (or whose employees it actively seeks to
represent) must be reported pursuant to section 202(a)(2) of the
LMRDA--including bona fide loans from a credit institution employer.
See 75 FR 48426., n. 11.
---------------------------------------------------------------------------
The commenter asserted that the section 202(a)(5) marketplace
transactions exemption should be applied to bona fide financial
transactions with credit institutions. The commenter argued that the
Department should give effect to what it sees as the same statutory
interests involving routine transactions that would otherwise be
reportable under other provisions of section 202. The commenter relied,
in part, on its general reading of the Act's legislative history, which
it reads to express an intention by Congress to not discourage any
arm's length business transactions, which are not ``questionable in
nature,'' illegal, or pose actual or potential conflicts of interests.
This, according to the commenter, would also impose a significant
burden on union officials whose unions represent or seek to represent
employees of credit institutions. The commenter also stated that bona
fide loans and other bona fide financial transactions between a credit
institution employer and a union official are not reportable by the
credit institution employer under section 203, citing the LMRA section
302(c)(3) exemption, 29 U.S.C. 186(c)(3). The commenter argues that,
since credit institution employers are not required to report such
loans and transactions on the Form LM-10 (Employer Report), then union
officials should not be required to report such loans and transactions
on Form LM-30.
1. Response to Comments
Upon consideration of the comments received on this issue, the
Department has determined to revise the reporting obligation for union
officials by adopting an exemption to the reporting of bona fide loans
and other financial transactions made on market terms with credit
institutions. In the Department's view, loans made on market terms are
of little or no interest to union members, yet they disclose to members
and the general public matters about which union officials, no less
than other individuals, have a legitimate expectation of privacy.\24\
But for the Department's guidance and the position adopted in today's
rule, a union official would have to report each mortgage or other bank
loan received from any credit institution that deals with his union, a
section 3(l) trust, or, in substantial part, with the represented
employer. In the Department's view, the burden associated with such
requirement would far outweigh the value of any information disclosed.
In the 2007 rule, the Department excepted from reporting under section
202(a)(6) arm's length loans, interest, and dividends earned during the
regular course of business with a credit institution, because of the
burden associated with reporting what ``are among the most common
financial transactions undertaken by individuals.'' 72 FR 36118. The
Department believes that this reasoning also must apply to the
reporting of marketplace loan transactions under sections 202(a)(3) and
(4).
---------------------------------------------------------------------------
\24\ As discussed in the text, the proposed modification does
not relax the obligation to report on loans or other financial
transactions (including credit card arrangements and interest-
bearing accounts) where a union official receives terms more
favorable than the market allows, where for example a union official
receives a loan because of the official's status despite a credit
history that would normally prevent an individual from receiving
credit, or payments on the loan are extended or forgiven because of
preferential treatment as a union official. Moreover, loans received
from employers or businesses that are not financial institutions
will have to be reported as will any loans on other than market
terms from employers or businesses that have a relationship with the
official's union.
---------------------------------------------------------------------------
The Department notes that union commenters agreed with the approach
proposed in the 2010 NPRM, as well as the supporting rationale the
Department offered. These commenters agreed that any benefit associated
with disclosing arm's length transactions was heavily outweighed by the
burden, loss of privacy, and limited utility that such disclosure would
entail.
Only two policy organizations submitted comments in opposition to
the proposal. One asserted that the Department had overstated the
impact that the rule would have on an official's privacy. In this
regard, it asserted that some of the same personal financial data that
would be reported under the terms of the 2007 rule, such as mortgage
information, may already be accessible to the public. However, the
Department notes in response to this comment that such information is
not made public in a reporting regime intended to disclose actual or
potential conflicts of interest, as would be the case with the Form LM-
30. That some mortgage information may be available publicly by people
with easy access to that data does not excuse the intrusion that
results from making public what most people still consider to be
private financial information. Requiring a union official to collect
and, in effect, publish all such information in the Form LM-30
certainly magnifies the intrusion. Further, that certain financial
information can already be accessed by the public does not justify
requiring that such information be reported on Form LM-30. Moreover, as
discussed, the reporting of routine bona fide loans and similar
transactions does not advance the disclosure purposes served by section
202 and therefore the burden associated with such reporting is not
warranted.
One commenter stated that the Department was mistaken in its view
that requiring bona fide loan-type information to be reported on the
Form LM-30 could impede the utility of the form to union members and
the public. The commenter pointed out that the Department's Form LM-30
Web site employs technology allowing data to be effectively managed and
searched. The Department does not disagree with this
[[Page 66460]]
characterization of the efficiency of the OLMS Web site, but this
observation is not relevant to the issue presented in the NPRM, as the
Form LM-30 does not require general financial disclosure. Rather, its
purpose is to highlight actual or potential conflicts of interest
involving union officials. Thus, collecting large amounts of
information with little or no utility can obscure other information
concerning possible or actual conflicts of interest, as each report
submitted must be searched separately in order to find information
relevant to actual or potential conflicts of interest. Intermixing
meaningful reports with thousands of innocuous reports impedes easy
review of the reports that disclose actual or potential conflicts.
Eliminating superfluous information removes an unnecessary burden on
union officials and promotes the objective of section 202 to disclose
actual and potential conflicts of interests.
The commenters expressed understandable concern that any loans or
other transactions with terms preferential to union officials be
reported. The Department's proposal, however, ensures that any such
loans will be disclosed. Only loans and other transactions that reflect
market rates are excepted from reporting. These transactions do not
carry with them any indicia of a conflict, actual or apparent, between
the union official and his or her duty to the union. As discussed in
the 2010 NPRM and expressly stated in the Form LM-30 instructions,
transactions not ``based upon the credit institution's own criteria,''
according to ``usual business practice,'' or ``made on terms related to
the official's status in the labor organization'' must be reported on
the revised Form LM-30. For example, if a loan is given to a union
official with a low credit score, if a loan is extended or forgiven, if
the loan does not reflect market terms, including usual fees, or if it
otherwise evinces preferential treatment based upon the officials'
union status, it must be reported. Any relaxation of the loan's terms,
repayment requirements, or forgiveness must also be reported if based
on preferential treatment because of the official's union status.
Furthermore, loans received from employers or businesses that are not
credit institutions must be reported. The same considerations apply to
other transactions with credit institutions, including credit cards and
interest-bearing accounts.
Finally, as noted, two commenters requested the Department to
exempt from reporting loans and related transactions from credit
institutions that are represented employers. Because the Department did
not propose to eliminate this requirement, no extensive discussion is
required. As noted in the NPRM, the Department acknowledged that it was
not changing this aspect of the 2007 rule. Further, the Department
notes that, historically, the Department has held that any loan to an
official from an employer whose employees are represented by the
official's union are reportable pursuant to 202(a)(2), without any
statutory or other exceptions (other than the de minimis threshold).
See IM sections 244.100 and 244.120; see also the pre-2007 Form LM-30
Instructions, Part A, exemption (iii).\25\ The 2007 rule upheld this
principle, and the Department stated in the preamble to the 2010 NPRM
that a union official would need to report any loans from an employer
represented by the official's union (or whose employees it actively
seeks to represent).'' See 75 FR at 48426 n. 11. Additionally, the
Department notes that the appearance of a conflict of interest and any
temptation to curry favor by offering what appears to be an arm's
length loan or related transaction on favored terms is much greater
where the official's union represents (or seeks to represent) the
institution's employees than where a loan is made by an institution
that has a more attenuated relationship with the official's union.
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\25\ The exemption (iii) of Part A of the pre-2007 Form LM-30
Instructions exempts transactions ``involving purchases and sales of
goods and services in the regular course of business at prices
generally available to any employee of the employer. This does not
apply to transactions involving stocks, bonds, securities, or loans,
for example.''
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D. Scope of Reporting Requirements Under Section 202(a)(6)
In the NPRM, the Department proposed to narrow the scope of
reporting required under section 202(a)(6) with respect to (1) Payments
from business competitors to the employer whose employees the union
official's union represents or actively seeks to represent; (2)
payments received from trusts; and (3) payments from unions. In this
final rule, the Department has adopted its proposals on these points.
As explained in the NPRM, sections 202(a)(1)-(5) of the LMRDA
establish conflict-of-interest reporting requirements concerning
payments received by union officers and employees from two sets of
entities: (1) Employers that a union represents or is actively seeking
to represent; and (2) businesses, such as vendors and service
providers, that buy or sell to the represented and potentially
represented employers, the union official's union, or trusts in which
the official's union is interested. In each case, the reporting
obligation is triggered by the particular relationship between an
official's union and the entity from which the official receives a
payment or in which the official holds an interest.
By contrast, section 202(a)(6) does not specify any relationship
between an entity and an official's union, nor does it express when
payments must be reported. Rather, it more broadly requires union
officials to report any payment of money or other thing of value 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 of 1947, as amended
(LMRA)). As noted in the NPRM and discussed in the 2007 rule, the
Department has long interpreted section 202(a)(6) as a ``catch-all''
that captures conflict-of-interest payments from employers not
otherwise reportable in the previous five subsections of 202. Thus,
LMRDA Interpretative Manual section 248.005 states, in part:
``[Section] 202(a)(6) is designed for those situations which pose
conflict-of-interest problems which are not covered in the previous
five sections of 202.'' 72 FR at 36129. Further, the 2007 rule made
clear that section 202(a)(6) can be read to encompass disclosure of any
employer payment that could present a financial conflict of interest
for the union official. Id. The Department did not propose to change
this requirement.
After a review of the comments received, the Department retains the
general requirement, as earlier proposed, that officials report
payments from employers and labor relations consultants from whom a
payment would create an actual or potential conflict between the
filer's personal financial interests and the interests of the filer's
labor organization (or the filer's duties to the labor organization).
As proposed, the Department included a non-exhaustive list in the
instructions for the revised Form LM-30 of examples of such actual or
potential conflicts of interest. These examples included payments from
business competitors of the employer whose employees the union
official's union represents or whose employees the union is actively
seeking to represent. Further, to ensure that only actual or potential
conflict-of-interest payments are reported, the Department has
qualified this requirement so that a union official, as a general rule,
must report such financial interests only if the official is
[[Page 66461]]
involved with the union's organizing, collective bargaining, or
contract administration activities or possesses significant authority
or influence over such activities. As explained in the NPRM, an
official will be required to report such payments where he or she
possesses such authority or influence by virtue of his or her position,
even if such authority has not been exercised. This rule also
effectuates the proposal to retain the requirement that union officials
must report payments received from an employer that is a not-for-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 official's labor organization.
The Department is revising, as proposed, the reporting requirements
insofar as payments from certain trusts and labor unions pursuant to
section 202(a)(6) are concerned. In contrast to the 2007 rule, which
required payments from trusts to be reported, the Department proposed
to return to its historical position that such payments are not
reportable because they do not pose an apparent or actual conflict of
interest between the official's personal financial interests and his
duty to the union and its members. As explained in the 2010 NPRM and
based upon the considered analysis in the Department's 1967 opinion on
this issue, the Department believed that these payments pose ``no
conflict with which Congress was concerned.'' 75 FR 48428. Further, the
Department believes, as stated in the NPRM, that the better reading of
section 202(a)(6) of the LMRDA is that labor unions and trusts are not
within the universe of ``employers'' from which union officials should
report payments, as both entities are treated separately from other
``employers'' under the Act. In drafting the LMRDA reporting and
disclosure requirements, Congress delineated separate requirements for
these discrete statutory actors (unions and trusts), and reporting of
labor organization disbursements is set forth in section 201 of the
statute, not section 202. Moreover, the Department maintains that this
reading of the statute better implements the labor union and labor-
management reporting requirements of the LMRDA.
Finally, the Department also retains, as proposed, the requirement
that union officials must report five types of payments received from
an employer, regardless of the relationship the employer has with the
filer's union. These reportable payments to a union official (or the
official's spouse or minor child) from any employer or labor relations
consultant to an employer are payments for the following purposes: (1)
Not to organize employees; (2) to influence employees in any way with
respect to their rights to organize; (3) to take any action with
respect to the status of employees or others as members of a labor
organization; (4) to take any action with respect to bargaining or
dealing with employers whose employees the filer's union represents or
whose employees the union is actively seeking to represent; and (5) to
influence the outcome of an internal union election. 72 FR at 36128,
36173. These payments, per se, create an actual or potential conflict
between the filer's financial interests and his or her duties to the
labor organization.
The Department received 15 comments on the scope of section
202(a)(6), with 12 supporting all of the changes,\26\ one supporting
the changes in part and opposing in part, and two comments opposing all
of the proposed modifications to this aspect of the NPRM. The comments
on specific aspects of the rule are addressed below.\27\ As a
preliminary matter, however, the Department believes it important to
address the view expressed by two commenters that none of the proposed
changes to reporting under section 202(a)(6) are justified.
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\26\ Seven of these commenters supported the proposed changes to
the 2007 rule but also opposed other portions and thus suggested
additional modifications to the form.
\27\ Two commenters suggested that the Department should further
revise the section 202(a)(6) requirements to limit reportable
interests solely to those payments made by employers that would
impact the labor-management relationship between a union and a
represented employer. Thus, for example, they would exempt from
reporting payments to a union official from a charity to which the
official's union contributes. Because the Department did not propose
such change, the comments are outside the scope of the rule. The
Department briefly notes, however, that the suggestion is at odds
with the general ``catch-all'' purpose of section 202(a)(6), would
leave undisclosed conflicts of interest, and is not compelled by the
language of section 202(a)(6) or the Act's structure.
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In essence, these commenters read section 202(a)(6) as a mandate to
require a union official to report on his or her financial interests
with virtually all employers. The Department disagrees. It remains of
the view that its interpretation is sound as a matter of law and
policy. Granted, the terms of section 202(a)(6) are expansive,
requiring a union official to report ``any payment of money or other
thing of value * * * which he or his spouse or minor child received
directly or indirectly from any employer.'' In contrast to the breadth
of section 202(a)(6), however, each of the other paragraphs of section
202(a) addresses payments by particular employers or businesses that
have dealings with the official's labor organization (202(a)(4)) or an
employer whose employees are represented by the official's union or the
union actively seeks to represent, (202(a)(1), (2), (3), (5)). The
actual or potential conflict of interest for payments from and
interests in such entities is evident.
The literal language of section 202(a)(6), if applied as the
commenters advocate, would render superfluous the limiting language in
the other subsections, as it would potentially require reporting from
any entity that is an employer, regardless of whether or not the entity
had any connection with the union and its represented employers. Given
the absurdity of such construction, the Department, mindful of the
statute's language and legislative history, has interpreted section
202(a)(6) as a ``catch-all'' provision, intended by Congress to capture
various payments that would pose apparent conflicts of interest, even
though outside the literal terms of subsections (a)(1)-(5). The
Department has never interpreted this section in the way these two
commenters apparently would prefer--as a mandate to require a union
official to report on his or her financial interests from virtually all
employers. The 2007 rule outlines this longstanding approach by the
Department, 72 FR at 36128-30, and the Department has continued the
same basic approach in this rulemaking, see 75 FR48426-29, 48434-35. As
recognized in the 2007 rule and the 2010 NPRM, the Secretary must
interpret the statute to clarify the intended reach of section
202(a)(6). 72 FR 36139-41; 75 FR 48429-30. Here, in contrast to the
2007 rule, the Secretary, in exercising her discretion to interpret
that section, has concluded that it does not require union officials to
report on certain payments received from employers that compete with
represented employers, section 3(l) trusts, and labor organizations.
1. Obligation To Report Payments From Business Competitors of the
Employer Whose Employees the Union Official's Union Represents or Whose
Employees the Union Is Actively Seeking to Represent
As explained in the 2010 NPRM and reiterated here, the Department
has historically viewed subsection 202(a)(6) differently than the other
subsections of section 202(a). The relationships addressed in
202(a)(6), such as that between a union official and a competitor
employer to a represented employer, are further removed from the
[[Page 66462]]
activities of the union than those involving the represented employer
and the other business relationships addressed in the first five
subsections of section 202. In particular, the competitor employer does
not have a current and ongoing relationship with the union; indeed,
neither is actively seeking such a relationship (if it did, sections
202(a)(1), (2), and (5) would likely apply). Further, any payment made
by a competitor or other employer to not organize or otherwise affect
the union official's responsibilities with the union is per se
reportable under Part C of the instructions. Moreover, the Department
believes that in the outside chance that there could be a conflict
concerning a union official and a competitor employer, the Department's
``significant authority or influence'' test, as shown in italics and
discussed below, would ensure its reporting.
The instructions to the Form LM-30, as revised in this rule,
provide:
Complete Part C if you, your spouse, or your minor child
received, directly or indirectly, any payment of money or other
thing of value (including reimbursed expenses) from any employer
(other than a Represented Employer under Part A or Business covered
under Part B above) from whom a payment would create an actual or
potential conflict between these \28\ financial interests and the
interest of your labor organization or your duties to your labor
organization. Such employers include, but are not limited to, an
employer in competition with an employer whose employees your labor
organization represents or whose employees your union is actively
seeking to represent, if you are involved with the organizing,
collective bargaining, or contract administration activities or
possess significant authority or influence over such activities. You
are deemed to have such authority and influence if you possess
authority by virtue of your position, even if you did not become
involved in these activities.
\28\ The NPRM stated, ``between your financial interests * * *''
The Department modified this phrase to read ``between these
financial interests,'' so filers are aware that they must look at
the payments and interests of their spouse and minor children as
well as their own.
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An example illustrates the difference between the 2007 Form LM-30
and the narrower reporting requirement implemented here. First, assume
that an individual employed by a union to handle computer problems also
works for a technology company that is a competitor of a company whose
employees are represented by the union. Under the 2007 rule, the
individual would have to file a Form LM-30 to report gifts, gratuities,
or other non-exempt payments he or she receives from the technology
company.\29\ Under this rule, the individual would not have to report
these payments. In contrast, assume that an individual employed by a
union as an organizer also works for a technology company that is a
competitor of a company whose employees are represented by the union.
Under both this rule and the 2007 rule, the individual would have to
file a Form LM-30 to report gifts, gratuities, or other non-exempt
payments he or she receives from the technology company.
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\29\ It should be noted that such employee would not be required
to report his regular wages from the employer. LMRDA, section
202(a)(6), which exempts payments of the kinds referred to in LMRA
section 302(c)(1), excepts these payments from reporting. A public
policy organization, which offered general opposition to the
proposed changes to the reporting of payments from competitor
employers, noted that the NPRM indicated that the wages paid by the
technology company would be reportable under the 2007 rule, and that
this mistake cast doubt on the entire NPRM. The text has been
clarified to make plain that regular wage payments are not to be
reported.
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Multiple commenters offered support for the proposal. One national/
international union supports the change as it reduces burden on
officials and focuses reporting on actual or potential conflict-of-
interest scenarios. With respect to burden, the commenter stressed the
``layers'' of subsidiaries and affiliates that must be researched to
identify the represented employer's competitors in order to determine
if reporting is required. Moreover, the commenter contended that this
information may not be publicly available.\30\
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\30\ The concerns of the commenters pertaining to the level of
``research'' that must be conducted in order to determine what
payments are reportable are unsubstantiated and exaggerated. As
discussed in greater detail in the top-down reporting section of
this preamble, III.E., the scope of the official's inquiry is
limited to considering non-exempt, atypical payments received from
an employer and only then must the official look at the relationship
that the employer has with the official's union. Nevertheless, by
limiting this aspect of reporting to officials that possess actual
authority or influence over subordinate affiliates, the rule should
ameliorate concerns among some filers.
---------------------------------------------------------------------------
One international union supported the change, but also suggested
that it should be narrowed further to require reporting of a ``gift''
only when an official has ``actual knowledge'' of an employer being a
competitor to a represented employer. It explained that such a change
would reduce a filer's burden because it would be unnecessary to
``research potentially complex chains of business ownerships through
webs of subsidiaries and affiliates.'' The Department does not concur
with this suggestion, as determining if an official had actual
knowledge would hinge reporting on a subjective assessment. Rather, a
reporting obligation is triggered by objective circumstances that
create an actual or potential conflict, or an appearance of one, and
then, upon its disclosure, allows members and the public to assess the
implications. As discussed in section V.C. of the preamble, the
asserted burden associated with this aspect of the rule is overstated.
As the Department explains in that section, the rule allows most filers
to compile the necessary information through a relatively easy three-
step process.
Two public interest organizations opposed the change. The first
stated that restricting reporting to officials involved in organizing,
collective bargaining, or contract administration is contrary to the
statutory text and the views Congress expressed in the legislative
history. The commenter maintained that this change would remove a
``significant amount of disclosure by employers and union officials''
who do not engage in these activities. Another public interest
organization similarly questioned why the Department would limit
reporting to situations ``where an official is involved with
organizing, collective bargaining,'' or so forth, as proposed. The
commenter argued that this limitation would run counter to the purposes
of the Form LM-30, which is to disclose conflicts of interest, and it
does not accurately reflect the administration of most unions, in which
any payments to any official, regardless of the formal title, could
``easily'' influence all the others. The commenter stated that, ``any
representative in any capacity should be required to report relevant
payments from any employer.''
The Department disagrees with the contention that this change to
section 202(a)(6) reporting is not based in the statute or is contrary
to the legislative history. To the contrary, the Department has
consistently held that section 202(a)(6) is a ``catch-all'' for
conflicts of interests not otherwise captured in the previous
subsections of section 202. The Department's interpretation is
consistent with section 202(a)(6), its legislative history, and the
purposes served by the Act's disclosure requirements. The Department's
proposal, as adopted in the final rule, provides clear examples to the
public as to what circumstances trigger reporting, without
overburdening union officers and employees. It triggers reporting on
the core, essential functions of a labor organization: organizing,
collective bargaining, and contract administration. In this regard, the
Department notes, contrary to the commenters' apparent suggestion, that
the Congressional goal in enacting section 202 was not to require
wholesale ``disclosure by
[[Page 66463]]
employers and union officials,'' but, rather, conflict-of-interest
disclosure; the revisions contained in this rule effectuate this
purpose.
The restriction of reporting to those with influence over
organizing and similar areas applies only to the broad ``catch-all''
provision of section 202(a)(6), and not to the other provisions of
section 202. Indeed, pursuant to these other provisions, the Department
will continue to require reporting by union officers and non-exempt
employees of payments from represented employers and the enumerated
businesses with close relationships with the officials' union.\31\
However, the Department does not interpret section 202(a)(6) in the
same manner, as a competitor employer is further removed in
relationship to the union. The Department notes, though, that Part C of
Form LM-30 still requires the reporting of any payment to any covered
union officer or employee, if the payment constitutes a per se
reportable activity, pursuant to the Revised Form LM-30 Instructions,
Part C: Other Employer or Labor Relations Consultant (reportable per se
activities). This position is consistent with the Department's
longstanding approach treating the broad section 202(a)(6) language as
a ``catch-all'' to capture likely conflict-of-interest payments not
otherwise captured by sections 202(a)(1)-(5).
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\31\ The Department notes that, in interpreting the scope of
``top-down'' reporting, the Department is only requiring reporting
by employees of intermediate and national/international unions of
payments from and interests in entities with requisite relationships
with lower-level unions, when such employees have significant
authority or influence over such lower-level unions. See Part III.E.
herein. The Department's approach here with respect to reporting
interests in and payments from a competitor of a company whose
employees are represented by the union is similar.
---------------------------------------------------------------------------
The Department also notes that a national union objected to the
Department's general ``catch-all'' requirement, retained in the NPRM,
that a union official must report any payment from an employer that
creates an actual or potential conflict of interest. The commenter
described the requirement as confusing and too broad. The commenter
objected that the Department's proposal would require reporting of
transactions that will have no effect on labor relations or union
administration. In response to this comment, the Department cannot
delineate every conceivable conflict-of-interest scenario, nor could
Congress, which is why it established section 202(a)(6). Generally,
entities from which payments are reportable are described in the
instructions, and the Department will provide compliance assistance to
filers with questions about specific circumstances.
2. Obligation To Report Payments Received From Trusts
In the 2010 NPRM, the Department proposed to return to its
longstanding interpretation that union officials are not required to
report payments received from trusts in which their unions have an
interest. These trusts are defined by section 3(l) of the LMRDA as a
``trust or other fund or organization (1) That was created or
established by a labor organization, or one or more of the trustees or
one or more members of the governing body of which is selected or
appointed by a labor organization, and (2) a primary purpose of which
is to provide benefits for the members of such labor organization or
their beneficiaries.'' See Form LM-30 Instructions, p. 13.
As explained in the NPRM, this interpretation is reflected in a
1967 opinion signed by the head of OLMS's predecessor agency and the
Department's Solicitor. As there stated:
Congress was concerned with arrangements with the primary
employer, that is, the one whose employees the union represents or
seeks to represent, which might impair the union officer's loyalty
as a representative of that organization [vis-[agrave]-vis] the
employer. Even assuming that a trust fund could successfully be
characterized as a primary employer, which we doubt, we fail to
perceive the existence of a conflict where a union official received
payments from a trust fund for which he also works, even if this
arrangement is approved by employer representatives on the trust.
The employer representatives are acting in their role as trustees
and thus no conflict-of-interest situation with which Congress was
concerned arises.
Id., p. 4-5. As the letter notes, payments from trusts to union
officers and employees--wages to employees or reimbursed expenses--are
payments reported elsewhere and, more importantly, pose ``no conflict
with which Congress was concerned.'' Kleiler-Donahue Ltr., p. 5.
A federation of unions, eight national/international unions, and
one law firm offered support for the Department's proposal regarding
payments from trusts and its stated rationale in the NPRM. In
particular, these commenters stressed that payments from section 3(l)
trusts to union officials do not pose an actual or potential conflict
of interest. One international union emphasized that such trusts are
created to benefit the members and their beneficiaries, so a payment
from the trust would not pose a conflict of interest for a union
official. Another international union added that Congress did not
intend union trusts to be treated as employers and other businesses
under section 202(a)(6). An international union commented that
reporting of expense reimbursements for serving as a trustee of a union
benefit fund had never been required, expressing support for the
Department's proposal to return to the former practice.
Further, one international union stated that the removal of such
reporting would eliminate an inconsistency between what union trustees
would report and management trustees were not required to report. An
international union stressed that reimbursements to union trustees
should not be reportable. Another international union offered two
technical corrections to the revised Form LM-30 Instructions, in Part
C, to make explicit that payments from trusts are not reportable. The
Department will address these suggestions later in the preamble section
on the revised form and instructions. See Part IV.
Two commenters opposed the Department's proposal to eliminate the
reporting of payments made by section 3(l) trusts to union
officials.\32\ A public interest organization asserted that the
Department offered ``no good reason'' for the return to its
``historical position''; that the Department had ``found no problem
that will be solved'' by the modification; and that the proposal was
``primarily based on a very old internal'' opinion. This commenter,
however, provided no basis for rejecting the Department's rationale,
nor did it offer any rationale as support for the position taken in the
2007 rule. In the 2010 NPRM, the Department cited the Kleiler-Donahue
letter to emphasize the longstanding nature of the position, as well as
to explain the letter's reasoning. 75 FR 48428. To reiterate the point
made in the NPRM, the preamble to the 2007 rule merely cited the letter
without refuting it, and the Department now returns to the position and
rationale stated in the letter. 72 FR 36154. Payments received from a
section 3(l) trust do not establish a conflict of interest, as the
interests of the trust and union, or an official's duties to the union,
do not diverge. Indeed, a section 3(l) trust must exist for the primary
[[Page 66464]]
purpose of providing benefits to the union members and their
beneficiaries. Moreover, requiring Form LM-30 reporting in situations
that do not pose a conflict of interest would be inconsistent with the
balanced reporting regimen intended by Congress.
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\32\ These organizations also asserted that the Department's
proposal as it applies to the reportability of payments to trusts
and unions is inconsistent with the Act's language, its structure,
and relevant case law. One of the commenters also asserted that the
proposal was contrary to the position that the Department has taken
in enforcement litigation under section 203 of the Act. Because
these assertions are focused primarily on the Department's proposal
to revise the reportability of certain payments from unions, these
arguments are discussed in the section that follows in the text.
---------------------------------------------------------------------------
Another public interest organization opposed the proposed change
contending that a conflict of interest arises and public disclosure is
required when an entity spends lavishly on union officials. The comment
cited examples of payments from several entities to union officials,
including two from filed LM-30 reports that, it asserted, would not be
disclosed under the Department's proposal.
In response to this comment, the Department again emphasizes that
section 202, and the Act as a whole, do not provide for general
reporting of any payment by an employer, business, or trust to a union
official that may have an undefined, arguable, or even subjective
``disclosure value.'' To be reportable, a payment must create a
divergence between the financial interest of the official and the
interests of the official's labor organization. See Revised Form LM-30
Instructions, Part C. Such circumstances do not generally arise
regarding a section 3(l) trust, as the union and the trust have a
common interest in ensuring that the trust operated for the benefit of
their common beneficiaries, the union's members. With regard to the
commenter's characterization of certain payments, this rulemaking is
not the appropriate place for issuing determinations regarding
disclosure in specific factual situations. However, as discussed below,
there are reporting requirements that apply in situations such as those
described by the commenter.\33\
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\33\ Although the commenter has identified information that may
be of interest to union members, it has provided no information that
indicates that those payments, in fact, pose a real or apparent
conflict with the official's duty to his union. The information that
the union reported just as readily evinces the symbiotic
relationship that exists between the official's union and the trust
and a unity of interest, rather than divided loyalty. Furthermore,
the commenter provides no information to indicate that the reported
information would be unavailable to members of the public through
public documents required of the trust by other regulatory
authorities such as the IRS or banking authorities. Moreover,
compliance assistance, not this rulemaking, is the appropriate
mechanism to address specific factual circumstances.
---------------------------------------------------------------------------
First, full disclosure is required concerning the financial
operations of certain entities previously considered to be section 3(l)
trusts that are wholly owned, controlled, and financed by a single
labor organization. These are ``subsidiary organizations'' of a labor
organization, and the financial transactions of such subsidiaries would
generally need to be reported on the labor organization's annual
financial disclosure report, thus providing disclosure. See the Labor
Organization Annual Report Form LM-2 Instructions, Section X \34\ and
the Labor Organization Annual Report Form LM-3 Instructions, Section X.
Second, although not covered by LMRDA section 202, many section 3(l)
trusts, such as pension and welfare plans, including many Taft-Hartley
plans, are covered by the Employee Retirement Income Security Act
(ERISA), which provides reporting and disclosure requirements as well
as other financial safeguards for employee benefit funds. Third,
pursuant to a longstanding interpretation retained in the 2007 rule and
this rule, while payments from a trust are not reportable by a union
official on the revised Form LM-30, payments from and interests in any
business that deals with the official's section 3(l) trust are
reportable.
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\34\ The Department notes that reporting for subsidiary
organizations on the Form LM-2, the annual financial disclosure form
for the largest labor unions, was removed from the reporting
requirements for that form as a result of revisions made in 2003.
See 68 FR 58374 (Oct. 9, 2003). Subsequently, in 2010, the
Department returned subsidiary reporting to the Form LM-2 reporting
requirements for fiscal years beginning on or after January 1, 2011.
See 75 FR 74936 (Dec. 1, 2010).
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3. Obligation To Report Payments From Unions
In the 2010 NPRM, the Department proposed to modify specific
aspects of the general requirement that union officials report payments
they received from labor organizations. 75 FR 48428. In support of the
proposal, the Department relied on its statutory analysis of the Act's
reporting provisions, concluding that section 202(a)(6) is better read
as limited to payments by employers--distinct from labor unions--
notwithstanding the acknowledgment, in discussing the reporting
obligations of an official of a staff union, that a union may be an
employer. 75 FR 48428-29. Further, as explained in the NPRM, the
Department's proposal would not affect a staff union official's
obligation to report payments he or she receives from a union-employer
whose employees the official's union represents or actively seeks to
represent.
The Department, in reconsidering the position taken on this
question in the 2007 rule, has concluded that a better reading of the
LMRDA is that a ``labor organization'' is distinct from an
``employer,'' as that term is used in section 202(a)(6). As stated in
the NPRM:
In drafting the LMRDA reporting and disclosure requirements,
Congress mandated separate requirements for the discrete statutory
actors: ``labor organizations,'' ``labor organization officers'' and
``labor organization employees,'' ``employers,'' ``labor relations
consultants,'' and ``trusts in which a labor organization is
interested.'' (While there are no reporting requirements for section
3(l) trusts, section 208 authorizes the Secretary to establish such
requirements for labor organizations concerning such entities.)
Further, the statute separately defined five of these six terms. See
sections 3(e), 3(i), 3(l), 3(m), and 3(n) of the LMRDA.
In the Department's view, section 201 requires ``labor
organizations'' to disclose, among other financial transactions and
information, disbursements to many individuals and entities, including
employers, businesses, their own officers and employees and,
potentially, those of other labor organizations. Section 203, on the
other hand, requires ``employers'' to file certain reports. As applied
to section 202, ``labor organization'' officers and employees must
report payments from ``employers'' and ``businesses'' that have
established certain relationships with the official's ``labor
organization.'' The statute's reporting provisions thus establish
``employers'' and ``labor organizations'' as distinct and separate
entities. There is nothing in the statute that indicates that Congress
intended, for reporting purposes, that the category of employers also
would include labor organizations, or that Congress meant for officers
and employees to report transactions with labor organizations acting as
such. If Congress had intended that result, it seems apparent that in
drafting section 202 it would have explicitly identified payments from
labor organizations as reportable.\35\
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\35\ This reasoning is consistent with LMRDA Interpretative
Manual section 260.005. This section provides that no report is
required for activities performed by an attorney on behalf of a
union (distinct from activities performed for an employer), even
though the attorney meets the definition of ``labor relations
consultants'' under section 3(m), because the only section of the
Act which requires reports from labor relations consultants is
section 203(b), which provides for reports from every person who has
an agreement with an employer for certain purposes.
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The Department holds the view that this reading of the statute
better implements the labor union and labor-management reporting
requirements of the LMRDA. First, as stated above, conflict-of-interest
payments from labor organization-employers represented by staff unions
are reportable under sections 202(a)(1), (2), and (5). Second, the
various reports required under section 201--Form LM-2, LM-3, and LM-4
Labor Organization Annual
[[Page 66465]]
Reports--require all covered labor organizations to disclose any
disbursements, including those to officers and employees of other
unions. Such disbursements include those addressed in Part B, Schedule
3, Employer's Relationship 5(b)-(e), of the 2007 Form LM-30 that
required filers to report payments from certain unions. See 72 FR
36163. All of these disbursements constitute payments from labor
organizations in their capacity as the representative of employees, not
as an employer of employees. A union member or a member of the public
would naturally look to the labor organization's annual financial
disclosure report, and not the Form LM-30 reports, to view
disbursements from a particular union. Further, pursuant to section
201(c), union members can view the underlying records of their union's
reports to ascertain further information related to the payments to
third-party union officials.
Multiple commenters offered support for the proposal regarding
payments from unions and the stated rationale in the NPRM. In
particular, multiple national/international union commenters stated
that the statute does not allow the reading of ``employers'' to include
``labor organizations,'' outside of the staff union context. One
international union stressed that section 201 provides for reporting
from unions, and that a ``plain reading'' of the Act clearly
distinguishes between ``labor organizations'' and ``employers'' for
purposes of financial reporting and, with the exception of payments to
staff union officials, does not require union officials to report
payments received from a union. This union points out that payments by
a union are captured on the union's own reports, as prescribed by
section 201 of the Act. Two unions emphasized the Act's legislative
history as well as the statutory language. One international union also
offered support for IM section 260.005. None of these commenters
disagreed with the Department's analysis that union-employer payments
to staff union officials should be reportable.
One commenter based its opposition to the Department's proposal on
the LMRDA's definitions of ``employer'' and ``employee.'' The commenter
contends that these ``clearly defined terms'' apply to the whole of the
Act, and they must include labor organizations and labor organization
employees, as one cannot be an ``employee'' under the Act unless one
works for an ``employer.'' According to the commenter, the 2007 Form
LM-30 defined these terms pursuant to the statutory definitions without
removing a ``subset'' of employers from the definition, namely ``labor
organizations'' and section 3(l) trusts. The commenter also asserted
that the Department's interpretation in the NPRM causes ``structural''
problems, as the Department ``ignored'' that unions are ``employers''
in areas other than section 202. The commenter cited rules of statutory
construction and case law articulating these rules to argue that terms
within a statute must be applied consistently throughout the statute.
To do otherwise, it asserted would create a ``Pandora's Box'' of
problems, as unions must report payments to their ``employees''
pursuant to section 201 and union ``employees'' must comply with the
section 202 reporting requirements.
Further, the commenter stated that Congress would have excluded
``labor organizations'' from the definition of ``employer'' in the
LMRDA if it intended for unions to not be covered by section 202(a)(6).
The commenter also contended that the Department's ``discrete statutory
actors'' argument was inconsistent with the Department's litigation
position in Warshauer v. Solis, 577 F.3d 1330 (11th Cir. 2009) and the
court's holding in that case.\36\ In the commenter's view, the
Department there argued that ``employer'' is not just the represented
employer, but any private sector employer. The commenter concluded that
the Department cannot have it ``both ways,'' that ``employers,''
``labor organizations,'' and ``labor relations consultants'' cannot be
discrete actors under the Department's theory in Warshauer. The
commenter also states its view that under the Department's analysis a
union-employer and its consultants could be required to file reports
under the persuader activity language of section 203.
---------------------------------------------------------------------------
\36\ In that case, the court held that an attorney who was
designated legal counsel (DLC) (designated by the union to provide
legal services to its members for claims relating to workplace
injuries) is subject to the LMRDA's section 203 reporting
requirements as an ``employer'' if it has employees and makes
reportable payments to unions or union officials.
---------------------------------------------------------------------------
Another public interest organization criticized the position taken
by the Department in the NPRM, stating that there is ``little basis''
for excluding unions from the ``employers'' of section 202(a)(6). The
commenter rejected the idea that ``employers'' and ``labor
organizations'' are discrete statutory actors, arguing instead that the
definition of ``employer'' is ``broad and inclusive'' and does not
exclude labor organizations. The commenter also rejected the notion
that Congress would have included the term ``labor organization'' in
section 202 if it intended for payments from them to be reported by
union officials. In its view, such intention is negated because the Act
``neither narrowly defines'' when a union is an employer, nor
``specifically excludes'' unions from the definition of the term, thus
indicating that the ``plain reading'' of the statute is that labor
organizations can be employers. Further, the commenter cites the
National Labor Relations Act (NLRA) definition of employer, which
excludes labor organizations (except when acting as an employer). The
commenter also asserts that the Department ``argues against'' itself by
asserting that labor organizations can be employers in the context of
staff unions. Finally, the commenter referred to the removal of unions
and trusts from the scope of ``employer'' under section 202, as an
effort to eliminate ``unions and labor union-controlled trusts'' from
the section LMRDA section 203 reporting requirements concerning
employer and labor relations consultants.
With regard to the particular contentions by the two commenters,
the Department concurs with the observation that ``labor
organizations'' and ``employers'' are not mutually exclusive. Indeed,
labor organizations often act in a dual capacity, as both labor
organizations and as employers. Further, the statute does not define
``employer'' in a manner that excludes ``labor organizations'' from its
definition, which facilitates coverage of staff unions under the Act
and labor organization ``employees'' in various parts of the statute,
several of which the commenters cited, including section 202. The
Department also acknowledges that the LMRDA defines the term ``labor
organization'' differently than does the NLRA.
The Department disagrees with the assertion that it utilizes
``employer'' inconsistently throughout the Act. As stated in the NPRM,
the Department considers that the better application of section
202(a)(6) is to exclude payments from ``labor organizations,'' as the
LMRDA establishes separate reporting requirements for ``labor
organizations'' and ``employers,'' a statutory construction that
reduces redundancy in the reporting requirements and burden on unions
and their officials. Indeed, payments from labor organizations are
reportable pursuant to section 201, while union officials must report
conflicts of interest pursuant to section 202, and employers and labor
relations consultants must report under certain circumstances pursuant
to section 203. Thus, the ``plain reading'' of the term ``employer''
within section 202 does not include labor organizations acting as labor
organizations. If Congress
[[Page 66466]]
intended for payments from labor organizations to be reported pursuant
to sections 202(a)(6) or 203(a)(1), then it would have included the
term ``labor organization'' along with ``employer.''
Contrary to the commenters' view, the Department's position is
consistent with the structure of the Act. For example, section 201
establishes initial and annual reporting requirements for entities that
meet the statutory definition of ``labor organization,'' and when
section 201 refers to an ``employee'' of a labor organization, then it
clearly is referring to the subset of labor organizations that also
qualify as an ``employer,'' as this is the only reading of the statute
in which labor organizations can have employees. Further, in section
504(a), the statute uses the terms ``employer'' and ``labor
organization'' separately and explicitly, to enumerate each situation
in which a person is barred from serving a union or employer, or as a
labor relations consultant for either entity. In section 504(a)(3), the
statute bars an individual from serving as a labor relations consultant
or adviser to a ``person engaged in an industry or activity affecting
commerce,'' a term that is broader than both ``employer'' and ``labor
organization.'' See LMRDA section 3(d). Thus, the approach articulated
in this rule does not establish any ``structural'' problems identified
by the commenters, nor does it open any ``Pandora's Box,'' as one
commenter suggested.
The commenter is mistaken in its understanding of the Department's
position in Warshauer v. Solis. In that case, the court held that the
Department did not act arbitrarily and capriciously in determining that
the term ``employer'' in section 203(a)(1) included employers who did
not participate in persuader or other labor relations activities. In
Warshauer, the plaintiff, an attorney providing legal services to
members of a union, conceded that he was an ``employer'' but argued
that only employers who persuade employees about their right to
organize and bargain collectively must file reports, and that he did
not engage in this activity. The pertinent statute, section 203,
contained five reporting provisions, four of which were triggered by
persuader activity. The remaining provision was not so limited,
requiring reporting based solely on certain financial payments, and the
Department contended that its plain language required the plaintiff to
file a report without regard to whether he engaged in persuader
activity. In Warshauer, like here, the Department interpreted the
language in light of the other requirements imposed on filers by the
statute (there on ``employers,'' here on labor union officials), the
Department's longstanding interpretation, and, secondarily, on the
Act's legislative history. See Brief for Appellee, 2008 WL 526954,
Argument at I.A.1. & 2., B. 3.a. & b., C. 1. (brief is without
pagination on Westlaw); 577 F.3d 1330, 1335-36 (upholding Secretary's
interpretation after considering the language of section 203(a)(1) and
its context among the five subsections of section 203).
In Warshauer, the Department did not assert that the term
``employer'' must be read in a way that would require a labor union
with employees to be treated as an employer for all purposes under the
Act. Both the Department's brief and the court's opinion focus on the
particular language of section 203((a)(1)), there at issue. While the
Department argued in that case that section 3(e) of the Act ``defines
the universe of employers'' encompassed by section 203(a)(1)'s employer
reporting requirements, neither the Department's brief nor the court's
opinion is in any way inconsistent with the Department's interpretation
of section 202(a)(6). Further, while the Department argued that
``employer'' encompassed the universe of employers encompassed in
section 3(e) of the Act, it did not assert that every payment from all
such employers was reportable. Rather, in additional guidance, the
Department delineated the kinds of relationships that employers must
have with unions to trigger reporting for payments to such unions and
their officials. See Form LM-10 FAQ 10. The Department's position here
is consistent with Warshauer. The court did not address the issue
whether the term ``employer'' included ``labor organizations,'' either
in section 202 or 203, but instead recognized that Congress
specifically limited the ``employers'' in other subsections of 203, but
chose not to in section 203(a)(1). See Warshauer v. Solis, 577 F.3d at
1335. While Warshauer stands for the principle that ``employer'' in
section 203(a)(1) is broader than merely employers who participate in
persuader or other labor relations activities, it does not address the
different question as to whether ``labor organizations'' acting as such
are included within this term, given that the statute delineates
separate reporting provisions for ``labor organizations'' and
``employers.'' The reasoning in Warshauer supports the Department's
determination here that if Congress intended to include payments from
``labor organizations'' acting as such in section 202(a)(6), then it
would have included the term ``labor organization'' alongside
``employer.''
Further, the Department's analysis on this point is also consistent
with the one case that addressed the scope of the section 202 reporting
requirements. In U.S. v. McCarthy, 300 F. Supp. 716, 720-21 (S.D.N.Y.
1969), the court held that a union officer must report a salary
received from a labor relations consultant to an employer, pursuant to
section 202(a)(6). The union officer argued that such payments were
exempt under LMRA section 302(c)(1) (the section 302 exemptions are
relevant because section 202(a)(6) refers to section 302(c)), but the
court held that a ``labor relations consultant'' is not a statutory
``employer'' under the LMRDA. Otherwise, the court recognized, the
intent of section 202, to disclose conflict-of-interest payments, would
be circumvented. Hence, the court held that the provision exempting
regular wage payments from an employer was not applicable to regular
wage payments from the labor relations consultant.
There is no merit to the contention that the Department's proposal
unreasonably distinguishes between staff unions and other unions that
also have employees. The distinction is based on the fact that the
payments (such as gratuities) must be reported under sections
202(a)(1)(2), and (5)--as payments by a represented employer to a union
official--while in the other circumstances enumerated in the 2007 rule,
the union is not making the payments as an employer. This treatment
ensures that the Form LM-30 reporting requirements apply to staff union
officials as they would to officials of other LMRDA-covered unions.
Regarding the commenter's concern that the changes proposed would
deny union members any information about payments made by a union to
union officials, the Department reiterates the point made in the NPRM
that any such payments would be included in the payor-union's annual
financial disclosure report, either in the aggregate or, in specified
circumstances, itemized when they reach $5,000. See 75 FR 48428-29. If
payments in question are exclusively benefits, then they would be
included in Schedule 20 of the Form LM-2. Members of the local could
also examine the underlying documents related to the reporting, for
just cause, pursuant to section 201(c). As stated, the reporting and
disclosure of labor organization expenditures are pursuant to LMRDA
section 201, not section 202.
As to the comment that alleged the Department lacks understanding
of the Act, the Department first reiterates that
[[Page 66467]]
``labor organizations'' can be employers when acting as employers.
Thus, payments from a union-employer to a staff union official are
reportable on the Form LM-30 pursuant to section 202(a)(1). The result
is the same, even if the union-employer is a non-LMRDA covered union,
evidencing the consistency in the Department's approach. Moreover, the
commenter's argument does not flow logically, as, under the 2007 rule,
not all non-exempt payments from LMRDA covered ``labor organizations''
to union officials were reportable pursuant to section 202(a)(6); just
those from ``labor organizations'' with employees were reportable.
Finally, regarding the contention that the Department's
interpretation will affect reporting under the persuader activity
provisions of section 203, this area is outside the scope of this rule.
The Department notes that the suggested problems are not self-evident.
See LMRDA Interpretative Manual section 260.005 (discussed earlier in
this section) for guidance on the application of section 203 in this
respect.
4. Obligation To Report Payments From Charities and Other Not-for-
Profit Organizations
In the NPRM, the Department proposed no changes concerning the
reporting of payments received by union officials from not-for-profit
organizations. Nonetheless, the Department received four comments from
unions, asserting that such payments should not be reportable because
they do not arise out of labor-management relations. The commenters
contend, in essence, that section 202(a)(6), should not be applied to
payments that do not take place within this context. Such a request is
beyond the scope of this rule, but the Department, for completeness,
discusses these comments below.
One federation of unions praised the Department's narrowing of
reporting on payments received by union officials from trusts and
unions. It agreed with the Department's assessment that each entity is
a discrete actor not named in section 202. It also contended, however,
that the text and legislative history and purpose of section 202
require that ``employer'' in section 202(a)(6) be read to include only
labor relations conflicts of interest not covered in sections
202(a)(1), (2), and (5). The federation asserted that the ``employer''
in section 202(a)(6) included employers in the same ``labor market'' or
``likely organizing targets.'' The comment presented three arguments
supporting this view: section 202(a)(6) uses the term ``an employer,''
like sections 202(a)(1) and (5); the section also uses ``labor
relations consultant'' to an employer, rather than more broadly ``any
person who acts as a labor relations consultant to an employer''; and
the subsection cites the LMRA section 302(c) exceptions, which apply in
a labor-management context. An international union stated that
extensive reporting concerning charities and other not-for-profit
organizations exists elsewhere, citing the Form 990 filed with the IRS
and the reporting of payments to such entities from unions on the Form
LM-2. Thus, Form LM-30 reporting of payments from such entities to
unions, in its view, would be redundant, burdensome, and without a
statutory basis.
The Department addresses these concerns only briefly. As noted, the
Department proposed only limited changes to reporting under section
202(a)(6). Similar arguments directed at restricting the reach of that
section were considered and rejected by the Department in the 2007
rule. 72 FR 36130. The Department has not reconsidered this position,
but notes that the interpretation suggested by the commenters is not
compelled by the language of section 202(a)(6) or the legislative
history relied upon by the commenters. Furthermore, the Department
notes that payments from a charitable organization to a union official,
including director's fees and reimbursed expenses, are potential
conflicts of interest, as the union official could be influencing the
union to donate to the charity in order to maintain the position and
income associated with his or her position on the charity's board, and
not based upon the union's best interests. The commenters have offered
no persuasive reason why union members should be denied information
that allows them to make a determination about a potential conflict of
interest. Additionally, while some reporting may be duplicated by other
reporting frameworks, the Form LM-30 enables members and the public to
view potential conflict-of-interest payments to union officials in one
location, which justifies any marginal, additional burden on the union
official.
Another commenter, a law firm, offered recommendations on reporting
regarding payments from charities and other not-for-profit
organizations. The commenter argued that requiring reporting of
reimbursed expenses would discourage union officials from providing
volunteer services to such organizations. The Department considers that
any payment, including a payment for expenses incurred in voluntary
service, must be reported to serve the conflict-of-interest reporting
obligation intended in the Form LM-30 rule. The requirement to report
does not apply universally to payments from all charities and non-
profits, but only to payments from a charity or other non-profit that
``receives or is actively and directly soliciting (other than by mass
mailing, telephone bank, or mass media) money, donations, or
contributions from the official's labor organization.'' In such
circumstances, the need for conflict-of-interest reporting is apparent.
The commenter also urged the Department to state that a non-profit
organization is not actively seeking contributions from a union in
receiving a membership dues payment from the union or a payment for
advertising in the non-profit's publication. The effect of such a
construction would be to exempt union officials from reporting payments
from a non-profit under these circumstances, thereby defeating the
intended conflict-of-interest disclosure purposes. It should be noted
that the issue of what constitutes solicitation of donations is not
relevant in the situation posed by the commenter. As presented by the
commenter, the non-profit organization actually receives money or
contributions from the union. The Form LM-30 rule provides that a union
official must report payments received from a charity or non-profit
organization if that organization receives money or contributions from
the official's union or is actively and directly soliciting donations.
Thus, the issue of what constitutes solicitation of donations for
purposes of applying the Form LM-30 rule is not relevant. Further, it
is beyond the scope of this rulemaking to make a determination
concerning what activity constitutes solicitation of donations of union
funds.
E. Scope of ``Top-Down'' Form LM-30 Reporting by National,
International, and Intermediate Body Labor Organization Officers and
Employees
In the NPRM, the Department proposed to extend the top-down
reporting requirements, expressly established for officers of
international, national, and intermediate unions by the 2007 rule, to
employees of such organizations, who had been excepted from reporting
under the 2007 rule. Under the proposal, employees of parent and
intermediate unions, like the officers of such unions, would be
required to report on financial interests in, and payments from,
companies that have dealings with their union's subordinate affiliates
and their trusts, as well as certain companies doing business with a
represented employer. The NPRM also proposed to eliminate
[[Page 66468]]
two limited exceptions established by the 2007 rule (sometimes referred
to as ``carve-outs'') whereby union officers, when applying the top-
down reporting requirements, were not required to report on: (1)
Payments received by the officer's spouse or minor children as bona
fide employees; and (2) financial interests held in companies that did
business with an employer whose employees were represented by
subordinate affiliates. 72 FR 36122. Apart from eliminating these
exemptions, the Department proposed no changes to top-down reporting by
officers of parent and intermediate unions.
Based on a review of the comments, the Department has modified its
proposal insofar as it affects reporting by employees of parent and
intermediate unions. In the final rule, the Department requires these
employees to report on ``top-down'' financial interests and payments
where they hold positions of significant authority or influence over
the subordinate affiliates. The ``significant authority or influence''
trigger is similar but not identical to the Department's proposal in
the 2010 NPRM to reduce the burden associated with the reporting of
payments from companies that are in competition with a represented
employer.\37\ Comments on the NPRM suggested that a similar approach
would eliminate some of the uncertainty and burden surrounding top-down
reporting. As discussed in greater detail below, the Department concurs
with the suggested approach. It ensures that employees of parent and
intermediate unions generally will report any financial interests that
could pose a conflict of interest, while eliminating the uncertainty
regarding reporting on matters that pose little or no risk of a
conflict of interest.
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\37\ In the NPRM, the Department proposed to limit reporting
interests in, and payments from, competitors to represented
employers. Under the proposal, officers and employees--without
regard to their place in the overall hierarchy of their unions--
would only have to report on interests and payments from such
employers if they hold a position with significant authority or
influence over organizing, collective bargaining, or contract
administration activities. The Department has adopted this proposal
in the final rule. This issue is more fully discussed above in
section III. D.1.
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Additionally, the Department has adopted the proposed elimination
of the carve-outs. The Department has accordingly modified the scope of
top-down reporting for union officers and employees to read:
When applying the Form LM-30 reporting requirements, you are
required to look at employers and businesses that have specified
relationships with the level of the union in which you serve as an
officer or employee. However, if you are an officer of a national,
international, or intermediate union, you must also look at
employers and businesses that have specified relationships with
subordinate affiliates (e.g., a local union or other subordinate
body), as well as your own level of the union. These relationships
are identified below in the instructions for completing Parts A, B,
and C of the form. If you are an employee of a national,
international, or intermediate union and possess significant
authority or influence (whether or not exercised) over a subordinate
affiliate's activities (e.g., its organizing, collective bargaining,
contract enforcement, spending or investment decisions, or union
administration), you are also required to look at employers and
businesses that have specified relationships with such affiliate, as
well as your own level of the union. See instructions below.
1. Background
Many labor organizations consist of a three-tier hierarchy: local
labor organizations, intermediate bodies, and a ``parent'' national or
international labor organization. This section of the rule concerns the
obligation of a union officer or employee of a higher-level union
(intermediate or national/international) to report his or her interests
in and payments (and those of the filer's spouse and minor children)
from employers and businesses that have a relationship with subordinate
affiliates of the employee's union.
Under sections 202, union officers and employees must report
payments from, holdings in, or transactions with:
An employer whose employees the filer's labor organization
represents or is actively seeking to represent;
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
A business that deals with the filer's labor organization
or, as interpreted by the Department, a trust in which the filer's
labor organization is interested.
The scope of the reporting obligation thus depends on which
organizations constitute the filer's ``labor organization.'' The issue
here is the disclosure obligation of potential conflicts of interests
that arise between a union official and his or her responsibility to
his or her immediate organization as well to any subordinate labor
organization(s) within the union's structure.
In the rulemaking that culminated in the 2007 final rule, the
Department interpreted the language of section 202 to require top-down
reporting. In reaching this conclusion, the Department relied on the
structure of the statute, the findings by the McClellan Committee
concerning conflicts of interest between higher-level officers and
subordinate unions, the stated purpose of the LMRDA to redress the
problems identified in the McClellan hearings, and the Department's
longstanding interpretation in the LMRDA Interpretative Manual that
certain top-down reporting was required. 72 FR 36121-24.
Although the instructions to the Form LM-30 had historically been
silent on this point, there has been longstanding administrative
precedent applying the section 202 requirements to higher-level union
officials. For example, in Section 241.100 of the LMRDA Interpretative
Manual, the Department addressed the reporting standards for
international union officers, as follows:
Section 202(a)(3) of the Act requires reports from ``every
officer of a labor organization'' of income 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.'' An international union officer must
report his income from such a business even though he is not an
officer of the local which represents the employees of the business,
and even though his duties as an international officer do not
include representation activities.
2. Overview of Comments Received and Department's Response
Twelve comments, all from unions, including one federation of
unions, specifically discussed the top-down reporting requirement. An
additional three union commenters expressed overall support for
comments submitted by the federation of unions, which included
recommendations on top-down reporting. One international union
supported the Department's proposed top-down reporting requirement as
articulated in the NPRM. All others expressed opposition, asserting
that the Department's proposed top-down approach creates undue burden,
and represents a considerable expansion of the scope of top-down
reporting requirements set forth in the 2007 rule.
Comments To Eliminate the Top-Down Reporting Requirement and
Department's Response
Six of the commenters who opposed the proposed top-down reporting
requirement asserted that this reporting requirement should be
eliminated altogether in light of the burden that it imposes. One
international union asserted that it not only opposed the
[[Page 66469]]
NPRM's proposed expansion to the top-down reporting requirement, but
also believes that the 2007 rule's top-down reporting requirement is
unnecessary and ``of little value in disclosing real conflicts of
interest.'' Another commenter asserted that both labor organization
officers and employees should have to report only in relation to
matters involving the level of the union hierarchy that they serve and
not any subordinate affiliate.
The Department disagrees with this view and does not support the
elimination of a top-down reporting obligation. As explained below, the
reporting burden associated with top-down reporting has been overstated
and is insufficiently supported by the commenters. Further, such a
restricted rule on top-down reporting would eliminate all disclosure of
any potential conflicts of interests of higher-level union officers and
employees concerning subordinate organizations, a position never
previously taken by the Department. For example, similar to the
situation presented in IM section 241.100, international union officers
and employees may encourage subordinate unions to purchase goods or
services from a business in which they have an interest, or a business
from which they received a gratuity, such as a printing company or
travel agency. The subordinate affiliate, fearing repercussions if it
does not do business with this vendor, may engage its services, even
though other vendors may offer better rates, services, or products.
As a further example, a national union officer or employee whose
spouse is an employee of a service provider may influence lower-level
unions to do business with this provider. Top-down reporting, as well
as the other aspects of section 202 of the LMRDA, is intended to obtain
disclosure of this kind of conflict-of-interest situation, and such
reporting is of value to members and the public. Several commenters
acknowledged that higher-level union officers and employees may engage
in conduct raising actual or potential conflicts of interest with lower
levels of their unions. Eliminating the top-down reporting obligation
in its entirety would circumvent the intent of the LMRDA to provide
disclosure of actual or potential conflicts of interest.
Comments To Limit Top-Down Reporting to Trusteeship Situations and
Department's Response
Two international unions commented that they favored the
elimination of the top-down reporting requirement, but suggested
alternatively that the requirement should be limited to situations in
which a parent union has placed a subordinate union under trusteeship.
They argued that a trusteeship represents the only situation in which
parent body officers and employees have financial and managerial
control over subordinate affiliates. The Department disagrees with this
approach because it would be unduly restrictive in its exclusion of
other scenarios--beyond trusteeships--that could present a conflict
between union officials' personal financial interests and their duty to
the labor union and its members.
Comments on Burden and Department's Response
Several commenters stated that top-down reporting requires union
officers and employees to conduct research, often extensive, to
identify employers or businesses with which lower-level affiliates
bargain or otherwise deal. One commenter described the proposed top-
down reporting requirement as ``unreasonable and overly burdensome''
and expressed concern that inadvertent failure to file Form LM-30
reports could represent a possible Federal law violation. Another
commenter expressed concern about the inability of international union
officers and employees to obtain information necessary to comply with
the reporting obligation, and predicted that, by being overly
inclusive, ``the result will likely be widespread, though unwitting and
unintentional, noncompliance, with no useful information for the
public.''
Additionally, some commenters stated that the expansion of top-down
reporting imposes a far greater burden than the reductions otherwise
associated with the proposed rule. Although acknowledging the
possibility of potential conflicts of interest between higher-level
union officers and employees and business conducted with subordinate
affiliates, another commenter stated that such potential conflict does
not justify the reporting burden, especially in the absence of a
central repository of businesses whose relationships with subordinates
could trigger reporting. This commenter noted that compiling and
updating such a list would be costly and burdensome.
Seven international unions opposed the Department's proposal to
eliminate certain top-down reporting exclusions that were established
in the 2007 rule. One commenter asserted that ``while `top-down'
reporting by officers is unnecessary and overly burdensome, expanding
such reporting to now include employees is even further removed from
capturing the types of conflict-of-interest payments envisioned by the
LMRDA.'' The commenter added that the requirement places LM-30 filers
in a ``severely compromising and legally tenuous position,'' and
expressed concern about the additional reporting and recordkeeping
burden associated with the elimination of the ``carve-outs'' from the
2007 rule.
Another commenter expressed concern that the proposal expands the
top-down reporting obligation beyond even what the 2007 rule deemed
feasible and necessary,'' and disagrees with the proposed elimination
of the 2007 rule's ``three critical narrowing principles'' associated
with top-down reporting. With respect to the proposal to eliminate the
reporting exemption in the 2007 rule for bona fide employee payments to
spouses and minor children an international union stated, ``It is
unreasonable to require that all such things of value, legitimately
received by the spouse in the course of his or her own employment, be
subject to scrutiny and reporting solely because of some inadvertent
common connection to a separate local union or related trust fund, at
least where the international officer or employee in question has no
authority or ability to influence the local union or trust fund
decision-making process.'' \38\
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\38\ Three international unions stated that the burden
associated with the top-down reporting requirements was greatly
compounded by the Department's decision to retain the 2007
definitions of ``substantial part'' and ``actively seeking to
represent,'' by requiring greater research by union officers and
employees to determine how the definitions of the terms would apply
to lower levels of the officer or employee's union.
Section 202(a)(3) requires a union official to report income and
benefits from and interests in businesses that deal in ``substantial
part'' with an employer whose employees the official represents or
is ``actively seeking'' to represent. Sections 202(a)(1), (2), and
(5) require the reporting of payments from, interests in, and
transactions with employers whose employees the official's union
represents or is ``actively seeking to represent.''
The 2007 rule defines ``substantial part'' as 10% of the
entity's business, and provides that the labor union must take
concrete steps that demonstrate that it is ``actively seeking'' to
represent employees of an employer. This rule does not substantively
alter these definitions, which affect numerous aspects of reporting
pursuant to sections 202(a)(1)-(5), independent of the top-down
reporting issue. These issues are also discussed above at section
III.F.1. (``substantial part'') and III.F.2 (``actively seeking to
represent'').
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The Department disagrees with these commenters that the burden
imposed by full top-down reporting is not justified by the actual or
potential conflicts of interest that will be reported. Initially, the
Department emphasizes, as articulated above, that top-down reporting is
necessary to disclose certain actual or potential conflict-of-interest
situations. Further, to illustrate the
[[Page 66470]]
Department's contention that the commenters' view of top-down burden is
overstated, it is helpful to look at the methodology involved in
determining whether a top-down report is owed. The first step is for a
union officer or employee to look at the types of interests in, income
and benefits received, and transactions engaged in during his or her
fiscal year. The second step is to eliminate from this list those that
are exempted by the general exclusions, if applicable, such as publicly
held stock, income received by the union officer or employee as a bona
fide employee of a represented employer, and the de minimis threshold.
This step likely will reduce the number of potential reportable
transactions. The third step is to then determine whether any of the
remaining financial transactions were derived from represented
employers, as well as service providers and vendors of the represented
employer, the union, and the union's trusts.\39\ The commenters appear
to be suggesting that the inquiry would skip the first two steps and go
directly to the third.
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\39\ A fourth step could involve the ``catch-all'' Part C of the
revised Form LM-30, pursuant to section 202(a)(6), which would
require reporting of any payments from any other employer (other
than one already identified in sections 202(a)(1)-(5)) from whom the
receipt of the payment by an official would create an actual or
potential conflict of interest. But OLMS proposed restricting the
reporting of payments from employers in competition with represented
employers to union officers and employees with significant influence
over organizing, collective bargaining, or contract administration
activities related to a particular represented employer, see 75 FR
48427, and this rule adopts that limitation for employees. See
discussion above in section III.D.1. This eliminates the top-down
issue for most employees of parent and intermediate unions. For
those that must report, it is only because they possess the
significant authority or influence out of which a conflict may
arise.
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Indeed, officers and employees of parent and intermediate unions
will not be required to look at every relationship that lower-level
entities have, but, rather, only those that relate to the few, if any,
employers and businesses identified in step three of the process. The
Form LM-30 report is to be completed by union officers and employees
only when reportable transactions occur during a reporting period,
usually a calendar year. Reporting is self-initiated. Reportable
transactions are generally not the norm. In determining whether a
report is owed, an officer or employee of a parent or intermediate
union would consider the nature of a transaction or interest of which
he or she has knowledge, rather than consider information about the
operations of every subordinate affiliate. Moreover, with regard to an
officer or employee's dealings with vendors and service providers, not
all transactions with such entities must be reported. Instead, only
those matters involving financial situations in which one has an
interest or derives income or other benefits with monetary value, as
required by sections 202(a)(3) and (4), must be reported. Reportable
benefits would include gratuities, such as complimentary hotel rooms,
but not regular business or commercial transactions in which no such
gratuity is conferred. See IM section 246.400. Thus, an officer or
employee would not be required to report the value of the hotel room
for which he or she paid market value on terms available to the public.
Union officers and employees, like most individuals, do not
generally receive large gifts and gratuities in connection with their
business dealings, and therefore are unlikely to have any reporting
obligations. Further, those who do receive such gifts and gratuities
are likely to have received them as a result of a vendor or service
provider's intent to influence the union officer or employee. In any
event, if gifts or other benefits are conveyed or received, a union
officer or employee would be in position to seek further information
concerning the entity providing the gift or other benefit, and, if the
requisite relationships exist, the reporting requirements dictate
disclosure so members and the public can determine whether or not a
potential conflict of interest exists. Additionally, a union officer or
employee with a significant interest in a business, like any similar
individual with such an interest, is likely in a position to know the
entities with which the business deals. The same risk of conflict
exists where a spouse or minor child of an officer or employee with
significant authority or influence over a subordinate affiliate works
for a company that has business dealings with those affiliates or
business with or involving an employer whose employees are represented
by the affiliates. Under the 2007 rule, an international officer whose
spouse works on commission for a business supply/printing company that
sells personal computers, office furniture, and printing services
throughout the country to locals affiliated with the international
union would not report the spouse's income, even though the potential
conflict of interest that such a relationship poses is apparent. Under
the revised rule, such income is reportable.
Thus, potential filers are not required to engage in extensive
research or create a ``central repository'' to determine the
applicability of the Form LM-30 reporting requirements in top-down
situations. In instances where the union officer or employee or his or
her spouse or minor child is an employee of a vendor or service
provider, receives an occasional payment, such as a gift or gratuity or
a discount on a purchase, or otherwise has difficulty determining the
applicability of the top-down or other reporting requirements, the
Department is available to provide compliance assistance. In this
regard, the Department advises that any officer or employee who
encounters such difficulty should request necessary information in
writing from the union, vendor, service provider, or employer. If the
entity refuses to provide the information, the officer or employee
should contact the Department for assistance in obtaining the
information. In the meantime, the union officer or employee should make
a good faith determination, based on the information reasonably
available, whether reporting is required for the matter involved. If
the union officer or employee determines that no report is required,
the officer or employee should retain the written request for
information that he or she presented to the business, employer, or
union and any related documentation.
If an investigation is conducted, there is no risk of prosecution
absent unusual circumstances calling into doubt the legitimacy of the
good faith determination. See 72 FR at 36133. The Department emphasizes
that criminal liability only results from a willful action or from
knowingly making a false statement or representation of a material fact
or knowingly failing to disclose a material fact. See LMRDA Section
209, 29 U.S.C. 439.
The Department disagrees with the concern expressed by some
commenters that top-down reporting, as prescribed in the 2007 rule,
would result in ``widespread * * * non-compliance.'' The Department
expects that union officers and employees will undertake the task
responsibly and without undue burden, as the rule reasonably achieves
conflict-of-interest reporting without undue burden on filers. In
particular, the Department anticipates that the ``significant authority
or influence'' modification it has adopted in the rule will reduce the
general level of concern that the proposal may have created among
employees of parent and intermediate unions. The Department expects
that only a small fraction of such individuals will have any top-down
reporting obligations.
[[Page 66471]]
Comments To Narrow the Scope of Top-Down Reporting to Individuals
Having ``Significant Authority or Influence'' and Department's Response
A federation of national and international labor unions proposed
narrowing the scope of top-down reporting by limiting reporting to
situations in which the filer has ``significant authority or
influence'' over the subordinate labor union. The commenter noted that
the Department had proposed under Part C of the instructions to limit
reporting payments from employers in competition with represented
employers to situations in which an employee possessed significant
authority or influence over certain union functions, such as
negotiations, contract administration, or organizing. The federation
noted that the Department justified this Part C limitation by stating
that it relieves ``the undue burden'' of requiring the filer ``to
undertake research in order to discover'' who are ``competitors to
their union's represented employers.'' 75 FR 48427.\40\ The commenter
asserted that requiring all national or international union officers
and employees to conduct research to identify employers or businesses
with which lower-level affiliates bargain or otherwise deal would
impose a similar ``undue burden.''
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\40\ The commenter is referring to the following statement
(implementing section 202(a)(6) of the Act):
[An officer or employee must report a payment received from
certain employers, including] an employer in competition with an
employer whose employees your organization represents or whose
employees your labor organization is actively seeking to represent,
if you are involved with the organizing, collective bargaining, or
contract administration activities or possess significant authority
or influence over such activities. You are deemed to have such
authority and influence of you possess authority by virtue of your
position, even if you did not become involved in these activities.
75 FR 48450. See 75 FR 48420, 48427, 48434 (discussing this part
of the instructions). The 2007 rule required that officers and
employees report such payments even if they had no involvement with
the activities identified above or possessed no significant
authority or influence over such activities.
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Three national/international unions specifically concurred with the
federation's proposal to narrow top-down reporting to those officers
and employees with ``significant authority or influence.'' Advocating
for limiting the top-down requirement to a ``more rational level,'' one
commenter stated that narrowing the requirement by the ``significant
authority or influence'' variable would ``help to lessen the
considerable burden of requiring officers or staff to know all the
business relationships involving * * * more than a hundred subsidiary
entities.'' Another commenter stated that a vast majority of its
international union officers and employees have no responsibilities or
authority with respect to the union's numerous local unions and
intermediate bodies, and described the idea of limiting reporting to
officers and employees with ``significant authority or influence'' as
``far more practicable, yet still burdensome, and more in tune with the
Act's ultimate objective of limiting reporting to areas where there
exists an actual or potential conflict of interest.'' \41\
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\41\ This commenter proposed using criteria set forth under the
Fair Labor Standards Act (FLSA) to determine, on a case-by-case
basis, if an individual has ``significant authority or influence''
over the subordinate entity. The commenter, apparently, is referring
to the test used for the FLSA's administrative exemption. See 29 CFR
541.201-.203. The Department disagrees with this suggestion
regarding the application of the FLSA factors, as these factors will
not easily correspond to the activities of union officers and
employees and the purpose of the determination regarding such
significant authority or influence.
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Upon consideration of these comments and a further consideration of
how best to achieve the Act's intended disclosure without imposing
unreasonable burden, the Department has concluded that the federation's
suggestion is a better approach than the approaches taken in the 2007
rule and the 2010 NPRM. While the Department disagrees with the view of
certain commenters that top-down reporting is not justified--however
limited--because of the burden associated with it, the Department
concurs that most union employees do not have significant authority or
influence over matters related to lower-level unions and therefore
would not present the kind of conflict between their personal interests
and their responsibilities to the union that the LMRDA intended to
disclose. The Department also acknowledges that such employees are
likely to be less familiar with the Form LM-30 requirements than
officers and employees with significant authority or influence over
these affiliates. \42\
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\42\ The Department recognizes that some might see a unified
approach for officers and employees as preferable to the approach
adopted in the final rule. The Department notes, however, that it
did not propose any change to the basic approach established for
officers in the 2007 rule and supplanting this approach now could be
perceived as unfair to commenters. Furthermore, on a practical
level, the Department believes that disclosure is equally well
served by the approach adopted in the final rule. Generally, an
officer of a parent or intermediate union, by virtue of his or her
office, exercises significant authority or influence over
subordinate affiliates. While the same is not true of most employees
of parent and intermediate unions, in those instances where an
employee possesses such authority, he or she has the same reporting
obligation as an officer.
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Additionally, those employees who exercise significant authority or
influence over subordinates, unlike most employees, are positioned to
affect relationships involving subordinate affiliates and to be
influenced by a represented employer or a potential or current vendor
or service provider of a lower-level union. Thus, the Department is
interpreting section 202 in a manner that targets Form LM-30 top-down
reporting to those employees with significant authority or influence
over lower-level unions, as a reasonable way to capture conflict-of-
interest situations while avoiding possible confusion for those
employees who are unlikely to have conflicts of interest involving
lower-level bodies. This approach ensures that the Form LM-30 reporting
requirements do not unnecessarily intrude upon the legitimate internal
operations of unions, and thus better implements the Congressional
purpose behind section 202. In the Department's view, this approach
effectuates the statute's disclosure purpose while limiting unnecessary
intrusion on unions and their employees. Further, because of other
aspects of this final rule that exempt from reporting such transactions
as mortgages, car loans, and similar transactions--so long as they are
based on market rates and prices--the burden associated with top-down
reporting, as have all aspects of Form LM-30 reporting, has been
substantially reduced from the requirements established in the 2007
rule.
By requiring employees who exercise authority or influence over
subordinate affiliates to report on interests and payments in companies
that do business with these affiliates or with represented employers,
the Department brings top-down reporting into greater congruence with
the language of section 202, which requires conflict-of-interest
reporting by both officers and employees. Although there is an
inferential basis for the distinction made in the 2007 rule between
union officers and union employees, i.e., that only relatively few
employees (compared to union officers) wield the influence that would
give rise to potential conflicts of interest, neither the statute nor
the 2007 rule distinguishes between the two categories in any other
respect for reporting purposes. Moreover, there is little basis for a
blanket exclusion of higher-level union employees, because such
individuals (e.g., union organizers) could exercise significant
authority or influence over matters relating to subordinate affiliates.
Furthermore, regarding the other 2007 carve-outs to top-down
reporting
[[Page 66472]]
(payments received by the officer's spouse or minor children as bona
fide employees and financial interests held in companies that did
business with an employer whose employees are represented by a
subordinate affiliate), the statute also does not distinguish between,
on one hand, financial interests held by officers and employees, and,
on the other hand, financial interests held by their spouses and minor
children. Additionally, there is little basis for excluding interests
in and income and benefits derived from a business that deals with the
employer but not the union and its trusts, and the 2007 rule did not
explain any perceived distinction. In the Department's view, this
exclusion creates confusion regarding the scope of top-down reporting,
as indicated in the comments to the NPRM, which reflected a
misunderstanding by the commenters about this aspect of the 2007 rule.
It also illustrated potential under-inclusiveness of the ``bona fide
employee'' exception to top-down reporting in the 2007 rule, such as
the example of the higher-level union officer who influences affiliates
to do business with the company that employs the spouse of the officer
or employee. Finally, section 241.100 of the LMRDA Interpretative
Manual, upon which reporting by higher level officers was based,
involved a conflict-of-interest scenario that would not have been
reported under the rule.\43\ Reporting will now be required for that
scenario.
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\43\ In short, this section, which had been issued in 1962,
provided that an international union officer must report interests
that the officer and his spouse had in a company that dealt in
substantial part with a represented employer of a subordinate body,
despite the officer's lack of specific authority for representation
activities. While the interpretation was specific to income received
for an entity that had dealings with a subordinate affiliate,
neither the interpretation nor the language of the statute supports
an argument that limits reporting to these specific factors. The IM
section is also consistent with the purpose of the statute, which
requires officers and employees to publicly disclose possible
conflicts between their personal financial interests and their duty
to the labor union and its members.
---------------------------------------------------------------------------
The Department is also not applying the identical standard utilized
in Part C of the revised instructions for payments received under
section 202(a)(6), regarding payments received from an employer in
competition with a represented employer. There, an officer or employee
must report a payment from such a competitor employer, if the
individual is involved with the organizing, collective bargaining, or
contract administration activities or possesses significant authority
or influence over such activities. This standard is appropriate under
such circumstances, as section 202(a)(6) employers (and particularly
the competitor employer example) are further removed from the union
than the closer relationships described in section 202(a)(1)-(5).
In the top-down reporting scenario, the potential conflicts of
interest of union officers and employees with significant authority or
influence extend to any area of union activity engaged in by
subordinate affiliates.\44\ These higher-level union employees may
exercise control over the actions and decisions of lower-level unions
in any area of union activities, including not only organizing,
collective bargaining, and contract enforcement, but also including
spending or investment decisions and union administration. Further,
such higher-level employees may have substantial communication or
interaction with officers and employees of subordinate bodies whereby
they ``significantly influence'' the actions by such lower-level
bodies. Moreover, union officers of a higher-level body possess
significant authority and influence by virtue of their position, and
they are covered under this rule's top-down reporting requirements
without exception. Such higher-level officers are elected directly by
members at lower levels of the union, or indirectly through
representatives chosen by such lower-level unions, and thus are
accountable to those members and can influence the officers and
employees of the lower-level unions.
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\44\ Section 202 assumes that all union officers and employees
(other than exclusively clerical or custodial employees) possess
sufficient authority and influence, at their level of the union,
without reference to specific duties and responsibilities, to
warrant conflict of interest reporting if the official receives a
payment from or has an interest in the statutorily-enumerated
entities. However, the statute is not explicit, in the case of
higher-level union officials, as to whether reporting is required
with respect to potential conflicts of interest in relation to
subordinate affiliates within the union's hierarchy. Nevertheless,
it is the Department's view that top-down reporting is necessary to
ensure that conflict of interest payments are captured, as
illustrated above. Some union commenters, as identified above,
explicitly acknowledged that conflict of interest scenarios are
possible with transactions involving lower levels of the union.
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Finally, the Department does not adopt a limitation of the
``significant authority or influence'' requirement to ``a matter
potentially implicated by the transaction in question,'' as recommended
by one commenter, because the potential conflict of interest for an
officer (or an employee with significant authority or influence over a
subordinate affiliate) is clearly implicated without any further
clarification.
F. Other Issues Concerning the Form LM-30 Reporting Requirements
While the Department proposed changes to only five substantive
areas of the 2007 rule's reporting requirements, the comments to the
NPRM addressed other areas related to Form LM-30 reporting. These
issues include: the definitions of ``substantial part'' and ``actively
seeking to represent'' in LMRDA section 202 (a)(3); the definition of
``labor organization officer'' in section 202; the reporting of
director's fees; the de minimis reporting exemptions; value range
reporting; and alternative statutory constructions of section 202. For
completeness, the comments on these areas are addressed below. While
these comments are helpful to the Department in identifying concerns
among the various regulated communities and directing compliance
resources, the comments address matters that are beyond the scope of
this rule.
1. The Definition of ``Substantial Part'' in Section 202(a)(3)
LMRDA section 202(a)(3) requires union officials to report any
interests in and payments from, ``any business a substantial part of
which consists of buying from, selling or leasing to, or otherwise
dealing with, the business of an employer whose employees such labor
organization represents or is actively seeking to represent'' (emphasis
added). In the 2007 rule, the Department determined that 10% or more of
a business's annual receipts will be considered ``a substantial part''
of its business. See Definition 15, ``substantial part,'' in the 2007
Form LM-30 Instructions; 72 FR 36133. In the 2010 NPRM, the Department
stated it was retaining the 2007 definition of ``substantial part.''
See 75 FR 48434.
Three national/international union commenters asserted that the
definition of ``substantial part'' in the 2007 rule unnecessarily
complicates compliance with the Form LM-30. One commenter, noting the
difficulty it poses for top-down reporting by officials of parent and
intermediate unions, stated that it unfairly requires a union official
to ``take affirmative steps to investigate.'' Another national/
international union commenter argued that defining ``substantial part''
as 10% or more creates too low a threshold for reporting. The commenter
instead suggested that a larger percentage (it did not suggest a
particular percentage) would be a more appropriate threshold, citing to
section 245.200 in the LMRDA Interpretative Manual, which addresses
whether a company's dealings with an employer
[[Page 66473]]
that amounted to some 80% of its business was ``substantial'' within
the meaning of section 202(a)(3).\45\ In the commenter's view, setting
the threshold at 10% requires reporting about payments received from
companies only doing a modest amount of business with a covered
employer, requiring, in its view, ``an inordinate amount of time to
survey and evaluate every single business,'' which an official, his or
her spouse, or minor child have transactions with or holdings in during
the fiscal year. The commenter cited the unfairness in not limiting
reporting to situations in which the filer has ``actual knowledge.''
The commenter added that the filer is at the ``mercy of the business''
where the information is not publicly available, and that businesses do
not have a legal obligation to provide the data and may even be legally
obligated to not disclose such information. The two other commenters
generally agreed with this commenter's observations.\46\
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\45\ 245.200 Substantiality of Dealing Union Officers A and B of
a local union are co-owners of a building corporation. The
corporation, through intermediaries who are regular meat
wholesalers, sold meat to employers who bargain with the local
union. In 1962, some 80% of the corporation's business of
approximately $100,000 was with such employers. Both A and B owe
reports for the year 1962 with regard to their interest in and their
income from the building corporation pursuant to section 202(a)(3),
since both the interest and the income are ``derived from, any
business a substantial part of which consists of buying from,
selling or leasing to, or otherwise dealing with, the business of an
employer whose employees such labor organization represents or is
actively seeking to represent.''
\46\ The same theme is repeated in the comments submitted on the
Form LM-30 definition of ``actively seeking to represent,'' as
discussed in the next section of the text.
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The Department does not agree that the definition of
``substantial'' adds any additional burden, or requires an
``inordinate'' amount of time to apply, separately from the top-down
reporting obligation. The statute establishes reporting in certain
enumerated situations involving interests or income or benefits from
vendors or service providers, such as where the vendors or service
providers deal in substantial part with a represented employer. 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, no
matter how small. In this regard, a quantitative approach is
appropriate in analyzing the level of business engaged in for a vendor
or service provider, and it is relatively easy for a filer to apply,
thus reducing burden.
A filer does not need to investigate the relationship of every
vendor or service provider to each represented employer of his or her
union; the filer only needs to look at those in which he or she has an
interest or from which he or she has received income or other benefit.
Further, the commenter presented no evidence that the 10% threshold
constitutes only a ``modest'' rather than ``substantial'' percentage of
business for most entities, and is therefore unlikely to target likely
conflict-of-interest scenarios.
As discussed in the preamble to the 2007 rule, 72 FR 36133-34,
section 245.200 of the LMRDA Interpretative Manual (set forth in the
margin), does not define a reporting threshold. It does not specify or
imply that reports would not be required of union officials if the
corporation derived less than 80% of its business from the employer.
The example's inclusion of the 80% figure illustrates only one
``substantial business'' relationship that would require a report--not
a threshold to use in determining whether a reporting obligation is
triggered. Furthermore, no commenter suggested an alternative
percentage threshold to 10%.
There is no merit to the suggestion that a reporting obligation
attaches only where a union official possesses actual knowledge that
the vendor's volume of business with a relevant employer was greater
than the reporting threshold. This approach would provide an incentive
for a union official to remain willfully ignorant of the business
relationship between a vendor in which he or she holds an interest or
from which he or she receives a payment and a represented employer. A
subjective standard in which actual knowledge of the amount of business
triggers reporting would also be difficult to implement.
The Department recognizes that some union officials may encounter
difficulty in learning the amount of business a vendor conducts with
the represented employer. The Department, however, believes that the
likelihood of such difficulty is overstated, and the filer is not at
the ``mercy'' of a business to determine whether or not the
substantiality threshold has been met. This is especially true 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.
There may be some instances where the union official encounters
some difficulty in obtaining information, such as where the official is
an employee of the vendor or receives a gift or gratuity from, or a
discount on a purchase provided by, the vendor. In such instances, the
union official should request 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 meantime, the union official should make a good faith estimate,
based on the information reasonably available, of 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. See 72 FR at 36133.
With regard to the concerns expressed about potential criminal
liability from a filer's failure to identify all companies that have
conducted substantive business with a represented employer, the
Department emphasizes that criminal liability only results from a
willful action or from knowingly making a false statement or
representation of a material fact or knowingly failing to disclose a
material fact. See LMRDA Section 209, 29 U.S.C. 439. Thus, a filer who
makes a good faith, conscientious effort to comply with the reporting
requirements should have no concern about criminal liability.
2. Definition of ``Actively Seeking To Represent'' in Section 202
LMRDA sections 202(a)(1), (2), and (5) require union officials to
report certain payments, interests, transactions, and arrangements from
an employer whose employees its union represents or is actively seeking
to represent. Additionally, LMRDA section 202(a)(3) requires union
officials to report any interests in, and payments from, ``any business
a substantial part of which consists of buying from, selling or leasing
to, or otherwise dealing with, the business of an employer whose
employees such labor organization represents or is actively seeking to
represent'' (emphasis added). The 2007 rule created a definition for
``actively seeking to represent,'' a term not previously defined in the
Form LM-30 and its instructions as follows:
``Actively seeking to represent'' means that a labor organization
has taken steps during the filer's fiscal year to become the bargaining
representative of the employees of an employer, including but not
limited to:
[[Page 66474]]
Sending organizers to an employer's facility;
Placing an individual in a position as an employee of an
employer that is the subject of an organizing drive and paying that
individual subsidies to assist in the union's organizing activities;
Circulating a petition for representation among employees;
Soliciting employees to sign membership cards;
Handing out leaflets;
Picketing; or
Demanding recognition or bargaining rights or obtaining or
requesting an employer to enter into a neutrality agreement (whereby
the employer agrees not to take a position for or against union
representation of its employees), or otherwise committing labor or
financial resources to seek representation of employees working for the
employer. Where a filer's union has taken any of the foregoing steps,
the filer is required to report a payment or interest received, or
transaction conducted, during that reporting period.
Note: Leafleting or picketing, such as purely ``informational''
or ``area standards'' picketing, that is wholly without the object
of organizing the employees of a targeted employer will not alone
trigger a reporting obligation. For example, if a union pickets a
sporting goods retailer solely for the purpose of alerting the
public that the retailer is selling goods that are made by children
working in oppressive conditions in violation of accepted
international standards, the picketing would not meet the ``actively
seeking to represent'' standard.
The 2007 Form LM-30 Instructions, Definition 1. In the 2010 NPRM,
the Department stated that it was leaving unchanged the 2007 definition
of ``actively seeking to represent.'' See 75 FR 48434.
The Department received five comments on the Department's 2007
definition of ``actively seeking to represent.'' One public policy
organization supported the definition. Three national/international
labor unions criticized the definition, and a federation of
international labor unions offered a clarification of the definition.
Three national/international union commenters urged the Department
to reevaluate the ``actively seeking to represent'' definition, arguing
that the proposed rule's expanded top-down reporting obligation,
coupled with this definition, significantly adds to the overall burden
on filers. One of these commenters called the 2007 rule's definition
``absurdly broad.''
One commenter argued that ``[i]t is unfair to subject union
officers and employees to prosecution for failing to track vaguely-
defined activities at every subordinate level of their union.'' The
commenter urged the Department to adopt a revised definition that is
``narrower'' and ``more objective,'' and that is ``limited to discrete
and enumerated activities that clearly constitute organizing employees,
such as a labor organization demanding recognition from an employer or
filing an NLRB petition during the reporting period.'' Another
commenter echoed the concern about the definition's ``vague triggers,''
and ``urge[d] the [Department] to remember that the LMRDA and the LM-30
reporting obligation are subject to criminal penalties.'' This
commenter suggested that revising the definition to include
``unequivocal conduct, such as filing a petition with the NLRB or
demanding representation or bargaining rights'' would avoid creating a
chilling effect for ``workers seeking to associate to protect and
advance their economic interests.'' Further, the commenter noted that
the absence of a ``durational limit on conduct'' will make it even more
difficult to determine the reporting obligation, and suggested that
``any conduct that constitutes actively seeking to represent should be
limited to actions undertaken during the reporting period about which a
union official is filing and not extend to conduct completed in prior
reporting years.''
The Department disagrees with these commenters' criticism of the
definition of ``actively seeking to represent.'' First, the matters
related to top-down reporting have been addressed in the previous
section on that topic, and the Department reiterates that the limiting
of such reporting to union officials with significant authority or
influence over lower level unions (all officers and those employees
with such influence or authority) will alleviate much of the
commenters' concern. Second, the criticism of the definition as
overbroad, with ``vague triggers,'' and without ``objective'' criteria,
is unpersuasive. The definition is narrowly tailored to acts that
constitute concrete steps towards organizing, as opposed to merely
having an interest in organizing. See the 2007 rule at 72 FR 36131. The
enumerated acts are objective in nature, as they are activities that
unions as a whole generally take to seek recognition, and they
illustrate ``concrete steps'' toward acquiring exclusive bargaining
representative status. Pursuant to the terms of the definition, the
activities, as well as the payments to be reported, must occur during
the particular fiscal year in question. Limiting ``actively seeking to
represent'' to ``demanding recognition or filing an NLRB petition''
does not constitute the entire universe of ``concrete steps'' that a
union can take to actively seek representation. Thus, creating such a
limitation would unduly limit reporting.
Moreover, while the activities listed are specific, the ``otherwise
committing labor or financial resources to seek representation of
employees working for the employer'' language is necessary, as the
Department cannot enumerate every conceivable scenario that constitutes
a situation in which a union is ``actively seeking to represent''
employees. In this regard, the term ``actively seeking to represent''
derives from the statute, and the definition is a reasonable attempt to
give meaning to the term. The definition of ``actively seeking to
represent'' will aid filers in complying with the reporting
requirements, and, as with the definition of ``substantial part,'' a
filer can request assistance from the Department if he or she is having
difficulty determining if reporting is required. Again, pursuant to the
statute, criminal liability is triggered only upon a showing of
willfulness.
A federation of international labor unions urged the Department to
make two changes to the definition of ``actively seeking to
represent.'' First, the commenter suggested that the word ``concrete''
be added before the word ``steps,'' so that the first sentence of the
definition would begin,
``Actively Seeking to Represent--means that a labor organization
has taken Concrete steps during your fiscal year to become the
bargaining representative of the employees of an employer, including
but not limited to * * *'' (emphasis added).
The commenter noted that adding the word ``concrete'' would make
the definition consistent with the Department's rationale for the
definition as stated in the 2007 rule,\47\ and would ``advance both the
public interest in clarifying the Department's intent and the
legitimate interests of union officials subject to the rule.''
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\47\ In the 2007 rule, the Department explained ``that the term
`actively seeking to represent' is intended to distinguish between
situations where a union has taken concrete steps to organize and
those where the union merely has an interest in organizing employees
of the employer in question.'' 72 FR 36131 (emphasis added).
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Second, the commenter stated that two examples of union ``steps''
that would constitute ``actively seeking to represent'' are in conflict
with the Department's stated rationale for the definition in the 2007
rule. The commenter urged the Department to revise the examples as
follows (note that the commenter's suggested additions are
[[Page 66475]]
in italics): (1) Sending organizers to an employer's facility to
solicit employee support for the union; and (2) Handing out leaflets
seeking or urging employee support for the union.''
The Department believes that the federation's first suggestion, to
insert the term ``concrete'' into the definition of ``actively seeking
to represent,'' would provide filers with additional clarity. The
Department considers such addition to be consistent with the stated
purpose of the definition, which is to view only concrete steps as
constituting ``actively'' seeking to represent. The Department does not
view this change as a material revision to the current rule and is
making the change.
The second suggestion would require the rule to be modified in a
substantial way and therefore is beyond the scope of this rule. The
Department, however, notes its disagreement with the commenter's
suggestions, as there are concrete steps that a union can take in
actively seeking to represent employees other than sending organizers
to an employer's facility expressly soliciting employee support for the
union or handing out leaflets expressly seeking or urging employee
support for the union.
3. Definition of ``Labor Organization Officer'' in Section 202
The LMRDA defines ``labor organization officer'' in section
3(n).\48\ The 2007 Form LM-30 Instructions further clarifies this
definition as set out in the margin.\49\
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\48\ ``Officer'' means any constitutional officer, any person
authorized to perform the functions of president, vice president,
secretary, treasurer, or other executive functions of a labor
organization, and any member of its executive board or similar
governing body. LMRDA section 3(n).
\49\ Labor organization officer means any constitutional
officer, any person authorized to perform the functions of
president, vice president, secretary, treasurer, or other executive
functions of a labor organization, and any member of its executive
board or similar governing body. An officer is (1) a person
identified as an officer by the constitution and bylaws of the labor
organization; (2) any person authorized to perform the functions of
president, vice president, secretary, or treasurer; (3) any person
who in fact has executive or policy-making authority or
responsibility; and (4) a member of a group identified as an
executive board or a body which is vested with functions normally
performed by an executive board.
Note: Under this definition, an officer includes a trustee
appointed by the national or international union to administer a
local union in trusteeship. If you are a trustee elected or
appointed by the local union to audit and/or hold the assets of the
union, you may or may not be a union officer, depending on your
union's constitution and other factors. If you serve in your union
in any capacity and you are unsure if your position is an officer
position, you are likely an officer of a labor organization if any
one of the following applies:
Your union's constitution or bylaws refers to your
position as an officer of the union
Your union's constitution or bylaws states that your
position has the authority to make executive decisions for the union
or that you are authorized to perform the functions of president,
vice president, secretary, treasurer, or other constitutionally
designated officer
Your union's annual Form LM-2 or Form LM-3 lists your
position as an officer of the union
In your position, you serve on your union's executive
board or similar governing body
See Definition 12, 2007 Form LM-30 Instructions.
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One national/international union commenter requested that the
Department amend the definition of ``labor organization officer'' so
that it is limited to ``individuals who are named officers holding
positions given policy-making authority pursuant to the union
constitution and bylaws.'' The commenter stated that the Department's
definition is overbroad and could result in the Form LM-30 reporting
requirements extending to a union member who was unaware that he would
be subject to Form LM-30 reporting requirements, including the top-down
reporting obligation. The commenter views the current definition as
reaching individuals the statute did not intend to reach, such as
``unsuspecting rank-and-file members.''
The Department disagrees with the commenter's views on this issue.
The rule's definition of ``labor organization officer'' is derived
directly from section 3(n) of the statute, and merely provides further
clarification of the term and, as an example, states under what
circumstances a trustee may be a union officer. The Department does not
view the definition as exceeding the scope or intent of section 3(n).
Moreover, the Department notes that pursuant to section 3(n) and the
``retained'' Form LM-30 definition, rank-and-file union members and
other volunteers, such as stewards, would not ordinarily be covered
union officers.
4. Reporting of Director's Fees
The 2007 rule requires that a union official who receives
``director's fees'' from an employer generally must report these
payments. The Department did not propose to eliminate this requirement.
A law firm opposed the requirement to director's fees to be reported on
Form LM-30. The Department rejects the suggestion to remove this
requirement, as this was not a change proposed in the NPRM, and,
furthermore, a union official's service on a board of directors, and
the accompanying fee, may influence the official's duties to the union.
5. De Minimis Exemptions
The 2007 rule adopted several de minimis exemptions, including: A
$250 reporting threshold; a $20 recordkeeping threshold; and a
``widely-attended gathering'' standard. The widely-attended gathering
provision exempts reporting of payments or gifts received while in
attendance at up to two of such gatherings per fiscal year for which an
employer or business has spent $125 or less per employee per gathering.
See the 2007 Form LM-30 Instructions, page 2. The Department has long
had a de minimis exemption for Form LM-30 reporting, which derives from
LMRDA Interpretative Manual sections 241.700 and 241.710, although
historically the exemption there applied to payments of ``insubstantial
value,'' without providing a quantitative threshold.\50\ The 2007 rule
retained a prior $100 exemption for unregistered securities, which
existed in the pre-2007 Form LM-30 Instructions. The Department
proposed no change to this exemption or the de minimis thresholds.
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\50\ In 2005, a reporting exemption of $25 was established,
which the 2007 rule subsequently raised to $250. Additionally, IM
section 241.700 requires that the payments of insubstantial value be
``given under circumstances unrelated to the recipient's status in a
labor organization.'' Neither the 2007 rule nor the revised rule
have this requirement.
---------------------------------------------------------------------------
Three commenters were pleased that the Department had not proposed
to eliminate the de minimis exemption, but suggested that the
Department consider revising the dollar thresholds for reporting and
linking them to a cost-of-living or other automatic adjustment
mechanism. A law firm expressed support for the 2007 rule's de minimis
exemptions,\51\ but suggested that the de minimis thresholds be
revised. The commenter urged the Department to increase the $20 and
$250 de minimis thresholds to $50 and $500, respectively, and to
increase the widely-attended gathering exclusion from $125 to $150.
---------------------------------------------------------------------------
\51\ This commenter also urged the Department to implement the
same de minimis thresholds for Form LM-10 reporting. Since this
issue is beyond the scope of this rule, the Department acknowledges
this suggestion, but will not address it in this rule.
---------------------------------------------------------------------------
Although the suggestions are beyond the scope of this rule, the
Department is not persuaded that a $50 recordkeeping threshold, a $500
reporting threshold, and a $150 widely-attended gathering threshold are
more appropriate than the current $20, $250, and $125 thresholds,
respectively. The Department views the current levels, based on dollar
values, as providing a reasonable distinction, applied nationally,
between gifts that may create a conflict of interest and those that do
not. The commenter did not provide any persuasive justification for why
the increased amounts would better distinguish between gifts that may
``conflict'' and those that do not.
[[Page 66476]]
A national/international union commenter urged the Department to
revise the de minimis thresholds, arguing that they are too low given
the steep costs of meals and entertainment charged by hotels located in
large metropolitan areas. The commenter provided examples of conference
rates at hotels where meetings are held, and listed examples of the
lowest cost food items available, many of which exceed the $20 de
minimis threshold.
The commenter also expressed concern that reporting such conference
and meal rates on Form LM-30 ``would very likely mislead union members
and provide fodder for anti-union consultants.'' The commenter added,
``To many union members, disclosing such large sums received for meals
might well call to mind lavish entertainment and cause concern about
possible susceptibility to improper influence * * * However, the
reality would [be] quite different--literally nothing more than a few
bagels and sandwiches, which the membership would not care about if
they knew the true facts. But under current rules, those members would
see a formal Government filing, presumably to deal with something
significant, and get exactly the wrong impression about their
representatives.''
The commenter noted that inflation will decrease the value of all
de minimis thresholds contained in the proposed Form LM-30, and
cautioned that the de minimis threshold problem will become more
significant with time. Finally, the commenter urged the Department to
adopt a method for establishing de minimis thresholds that reflect the
realities of union officials' circumstances, and cited the per diem
rates paid by government agencies as an example.
The Department disagrees with this commenter's suggestion to use
different de minimis thresholds, varying by locality or setting them to
a level based on the charges assessed for ``meals and entertainment * *
* by hotels located in large metropolitan areas.'' In the Department's
view, it would be impractical to establish varying rates by locality,
and pegging them to the most expensive charges for modest meals and
other gratuities would create too high of a dollar threshold, thus
potentially excluding from reporting actual or potential conflicts of
interest. Moreover, ``steep costs'' and ``large sums'' provided by a
represented employer and certain key businesses to union officials are
precisely the types of payments that should be reported on the Form LM-
30, to enable the members and the public to determine the impact, if
any, on the officials' duties.
The members should have information concerning these payments in
order to evaluate for themselves the effect on the officials' duties to
the union, such as whether or not they constitute ``lavish
entertainment'' and create possible ``susceptibility to improper
influence.'' An official concerned with the appearance of a particular
charge or charges could also provide further information on the Form
LM-30 to provide increased context to the payments, which would
diminish or eliminate the problem of members being misled or confused
by the payments.
The Department does not concur with the suggestions to index the de
minimis exemption thresholds with inflation or other quantitative or
qualitative mechanisms. The exemption is provided to ensure that
individuals are not required to report, and in some cases even track,
payments that are of insubstantial value and not likely to constitute
an actual or potential conflict of interest. Further, establishing a
quantitative assessment for determining de minimis amounts is superior
to a qualitative approach, as filers will easily know whether or not a
payment is exempt, without asking the Department to apply a set of
factors and determine whether or not the exemption is appropriate.
Indexing the thresholds and establishing a fluctuating standard would
jeopardize the convenience of the quantitative assessment and
unnecessarily risk increasing the burden on union officials--with no
apparent benefit in terms of transparency.
A law firm suggested that the Department clarify the exemption for
attendance at widely-attended gatherings. In its view, the Department
should revise the exemption so that ``individuals associated with
service providers to multiemployer plans, employers who contribute to
such plans, and employer-appointed trustees of plans that are unrelated
to the Form LM-30 filer's union may all be considered to be among the
`substantial number of individuals with no relationship to a union or a
trust in which a labor organization is interested.' '' The commenter
argues that, without such clarification, the widely-attended gathering
exception would be overly narrow, and union officials would need to
``identify by sight the service providers to plans and employer-
appointed trustees of plans with no relationship to their union or its
affiliated plans in order to ascertain whether an event qualifies as a
widely attended gathering.'' The Department acknowledges the
commenter's concern, but this rulemaking does not lend itself to
addressing a particular activity that does not involve a change
proposed by the Department. Without expressing a view on this matter,
the Department notes that it is available to provide compliance
assistance and guidance to filers on a case-by-case basis.
Additionally, a federation of international labor unions suggested
that the exclusion of income from unregistered securities (on page 5,
exclusion (ii)) be raised from $100 to $250 to achieve consistency with
the General Exclusion for payments of $250 or less (page 4) of the
instructions. A national/international labor union concurred with this
suggestion. The Department disagrees with this proposal. In the
Department's view, the $100 exemption for unregistered securities is
reasonable and consistent with past exclusions provided by the
Department. Further, there is no basis for concluding that the de
minimis threshold for unregistered securities must be identical to the
threshold for payments, such as gifts and gratuities, received.
6. Value Range Reporting of Financial Arrangements and Interests
A national union commenter suggested that item 7(b) in Part A of
the revised form, and item 12(b) in Part B, be modified to include
valuation categories (covering different ranges of dollar values, such
as between $5,000 and $10,000 or $10,000 to $15,000) that filers would
use to disclose the estimated value of financial arrangements and
interests. The commenter stated that ``the applicable statutory
language in the LMRDA is completely silent regarding whether union
officials have to report the exact value of a financial interest, or
whether an approximate range is sufficient.'' The commenter stated
that, for example, requiring the reporting of a ``value range'' of a
particular stock would adjust for possible fluctuation in the stock's
value, and noted the difficulty of determining ``a good faith
estimate'' due to the potential for significant fluctuation in the
value of a financial transaction or asset. The commenter also indicated
that Congress and the Office of Government Ethics apply these types of
valuation categories to the disclosure requirements concerning
presidential appointees' financial interests.
The Department disagrees that this approach to reporting would
increase the utility of the form. Introducing a complex requirement
actually may increase the reporting burden on filers. Additionally, the
commenter presented
[[Page 66477]]
no information or analysis as to how this would increase transparency
regarding actual or potential conflicts of interest.
7. Alternative Views of Reporting Required by Section 202
An international union representing professional athletes,
supported by a federation of unions, provided statutory analysis in
support of an argument that an endorsement arrangement is not
reportable on Form LM-30. The commenter asserted that sections
202(a)(3) and (4) should be interpreted to apply only to businesses in
which the union official has an ownership interest. The commenter's
position, at bottom, reduces to a claim that the use by Congress of the
word ``derives,'' rather than ``received'' in these sections evinces a
plain intention that the interests to be reported are solely
``ownership interests.''
As a general matter, the language of sections 202(a)(3) and (4)
does not provide for this limitation. First, a union officer must file
``a signed report listing * * * any * * * interest * * * and any income
or other benefit with monetary value (including reimbursed expenses) *
* * derived from, any business.'' 29 U.S.C. 432(a)(3), (4) (emphasis
added). The term ``any business'' cannot easily be read to mean ``any
business in which the union officer or employee owns an interest.''
Second, the commenter asserts that in normal usage the word ``derives''
is used ``in lieu of * * * received from'' and indicates that the
payment is from a business to an individual who holds an ownership
interest. But the statute uses the term ``derived'' to describe a
category of income that includes ``payments and other benefits received
as a bona fide employee.'' 29 U.S.C. 432(a)(1), (2). As income
``derived'' includes ``payments received,'' Congress was not using
``derived'' in the limited sense suggested by the commenter.
Additionally, the Department notes that the crucial distinction between
``derives'' and ``receives'' that the commenter attributes to these
terms is not borne out by their common understanding as synonyms. See,
e.g., ``Derive'' ``to take, receive, or obtain, esp. from a specified
source.'' Merriam-Webster's Collegiate Dictionary (10th ed. 2002);
``Receive'' ``to come into possession of: ACQUIRE < ~ a gift >''. Id.
There is simply no persuasive argument that the plain language of these
sections evinces the ``ownership'' delimited meaning the commenter
would attribute to the use of ``derived.''
Further, the interpretation would exclude from reporting payments
and gratuities provided by a vendor or service provider to a union
official seeking to generate business with the official's union. This
plain potential conflict of interest would go unreported, unless the
union official held an ownership interest in the business.
The Department has also considered the additional arguments
advanced by the commenter, including its assertion that the legislative
history supports its narrow view of what must be reported under these
sections. Upon review, the legislative history relied upon by the
commenter cannot be fairly read to reflect the narrow construction it
would force upon these sections. The commenter also suggests that its
preferred reading of sections 202(a)(3) and (4) and the legislative
history is embodied in the Department's own early interpretation of
these provisions. The commenter relies on a general discussion in the
Department's 1961 annual report about its then recent filing experience
under the Act. In context, however, it is clear that the Department, in
making these statements, was not offering an interpretation of sections
202(a)(3) and (4). Instead, the Department was merely reporting on its
early experience with reports under sections 202 and 203 of the Act.
Further, in any event, these statements do not evince an interpretation
that limits an official's reporting obligation under section 202 to
``ownership interests.''
The commenter candidly acknowledges that the meaning it attributes
to the ``1961 interpretation'' is at odds with the Department's
published interpretation that states: ``Union officers who receive
complimentary hotel rooms and other gratuities of substantial value
from the hotel at which the union holds its convention are required to
report pursuant to section 202(a)(4).'' Interpretative Manual, section
246.400. Although the commenter indicates that this interpretation was
issued by the Department sometime after 1984, the interpretation, in
fact, was issued in 1964.\52\ Thus, the position set forth in the LMRDA
Interpretative Manual demonstrates that the position taken by the
Department in the 2007 rule was not a new one.
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\52\ The LMRDA was enforced by various offices within the
Department prior to 1984, when OLMS was established. The commenter
inferred that since the interpretation was contained in a
publication issued by OLMS, it could not have predated 1984. The
Department's internal files show that the interpretation is dated
July 1964.
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The Department believes that its interpretation that requires union
officials to report gifts, gratuities, and other payments received by
union officials from companies that do business with the official's
union or represented employees is faithful to congressional intent. For
the same reasons, the Department rejects the commenter's alternative
request that even if the Department disagrees with its statutory
arguments, the Department should create an exception for its members
due to what it considers an unnecessary and undue burden on its
officials.\53\ Another commenter representing employees working in the
entertainment industry requested that its officials be exempted from
reporting certain gratuities, which it claimed were unique to the union
and its members' industry. This exemption request is outside of the
scope of the rule, would seemingly require a fact-based analysis, and
could not in any event be resolved on this limited record.
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\53\ The commenter states that ``out of an excess of caution''
the union's officials have been reporting these payments because of
the difficulty they have in determining whether the companies they
receive payments from conduct substantial business (10% or greater)
with the league. The Department emphasizes that payments from a
company doing business with a represented employer are reportable
only if the business is greater than 10% or more of the company's
annual receipts. The Department notes that the commenter does not
state whether filers have made any inquiries regarding the extent of
business conducted between the companies making payments and the
league. As stated in the preamble to the 2007 rule, the Department
is available to assist filers in obtaining such information if their
own efforts are unsuccessful. See 72 FR 36134.
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IV. Revisions to the Regulations, Form, and Instructions 54
This final rule revises the Form LM-30 in order to simplify its use
by filers by reducing the length of the form (from nine pages to two
pages) and its instructions (from 22 pages to 13 pages) and eliminating
or modifying some reporting requirements. The Department identifies
below the various changes effectuated by the final rule to the
Department's regulations implementing section 202, 29 CFR 404.4, the
Form LM-30, and its accompanying instructions, which are incorporated
into the regulations by reference. 29 CFR 404.3.
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\54\ For the convenience of LM-30 filers and the public, this
section restates most of the information contained in the comparable
section of the NPRM, revised as necessary to reflect differences
between the proposed and final rules. See 74 FR 48430-35.
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A. Regulations
Only one change has been made to the regulatory text. 29 CFR
404.1(f). In section 404.1(f), the Department removes the definition of
``labor organization,'' which had been added in the 2007 rule to
establish the scope of reporting required of higher-level union
officers. Paragraphs (g) through (j) of
[[Page 66478]]
section 404.1 also will be re-designated as (f) through (i),
respectively. The term ``labor organization'' is separately defined in
the LMRDA, and language regarding the scope of reporting for national,
international, and intermediate union officers and employees has been
added to the revised instructions.
B. Revised Form
The revised Form LM-30 utilizes a simplified format that will
better facilitate filers' compliance with Form LM-30 reporting
requirements and increase the form's utility to the public. Unless
otherwise noted, the revised form and instructions adopted by this rule
are the same as those proposed in the NPRM. Further, the Department
will address below comments received on the layout of the form and
instructions.
With respect to layout, the revised form more closely resembles the
pre-2007 form than the lengthier 2007 form. The revised form, which is
two pages in length, contains four sections: a section that contains
basic identifying information on the filer and his or her labor
organization, and Parts A through C. Part A is designed to capture
reportable transactions between union officials and represented
employers. Part B captures reportable transactions with businesses that
deal with the official's union or a trust in which the union has an
interest, or that have substantial dealings with a represented
employer. Part C covers transactions with other employers or labor
relations consultants. The form has been simplified by removing
numerous schedules, checklists, and examples. While the inclusion of
this information in the 2007 form was intended to assist filers, it is
the Department's present view that these additions made the form more
confusing and difficult to complete.
The revised form does not contain the summary schedule that was on
the first page (item 5) of the 2007 form. The Department does not
believe that requiring a summary schedule to report ``total reported
income or other payments'' and ``total reported assets'' is useful
information, by itself, and may be misleading. Without knowing the
context of the reportable transaction or transactions, a viewer does
not have a basis to assess the actual or potential conflict of interest
and the impact such a conflict would have on the official's duties to
the labor organization. For a filer with multiple payments, a summed
total on the front page of the form is misleading, even if the totals
are separated by assets and other payments, since a viewer of the form
can only judge a conflict of interest by looking at the monetary value
of the payment or interest along with its source and other pertinent
information. A sum of money or other payment or asset, in and of
itself, has no meaning, and can lead to confusion for the viewer and
reflect unfairly on the filer. Further, presenting a figure for ``total
reported income or other payments'' gives the impression that this
total represents payments received by the filer, when in fact, this
figure might also include items such as interest in personal or real
property, insurance, or share holdings.
The revised form does not contain sections on Employer and Business
Relationships (items 6 and 7, respectively, on the 2007 form). The
Department does not believe that this general information adds to the
usefulness of the form, because this information is reported on each
schedule. A bulleted checklist listing various reportable relationships
has also been eliminated.
The revised form's contact information sections in Parts A, B, and
C generally collect the same information requested in Schedule 1 of the
2007 form, except that the revised form does not ask whether the filer,
filer's spouse, or minor child had a relationship with the employer,
business, or labor relations consultant at the end of the reporting
period. The Department received no comments on this proposed change.
The revised form also eliminates the requirement that a filer provide
the Web site address of the employer, business, or labor relations
consultant in which the filer holds an interest or receives a payment.
The Department does not believe that the Web site address is necessary,
since viewers of the form can independently locate this information.
In place of the separate Additional Information Schedule, which was
included in the 2007 form, the revised instructions simply provide
guidance on how to provide additional information. Filers who choose to
complete the Form LM-30 in paper format are instructed to attach a
separate letter-size page, with identifying information. Filers who
complete the Form LM-30 electronically will be able to add additional
information as needed.
In response to the NPRM, ten labor organizations--one federation of
labor organizations and nine international unions--submitted comments
on the content and layout of the LM-30 form and instructions. All ten
commenters expressed support of the Department's proposed revisions and
endorsed the decision to adopt a form similar to the pre-2007 form.
Multiple commenters described this earlier form as ``simpler'' and
``more straight-forward'' than the 2007 form. The commenters that
generally opposed any changes to the 2007 rule did not comment on the
content and layout of the form and instructions.
The federation of labor organizations expressed support for the
Department's proposed revisions to the form and instructions, with
noted exceptions. The commenter stated that its experience providing
training to union officials on their reporting obligations ``indicates
that the vastly more complicated form and instructions adopted by the
2007 rule would have been very difficult for union officials to
understand and complete,'' and would likely have resulted in a lower
level of compliance than under a simpler report. This commenter also
suggested several changes to the proposed form and instructions. These
suggested modifications will be discussed below, in the specific form/
instructions sections to which they pertain. Two international union
commenters concurred with the comments submitted by the federation of
labor organizations, including suggested changes to the form and
instructions.
Three international union commenters expressed support for the
Department's proposal, but suggested some additional modifications to
the form and instructions. These suggestions will be discussed in the
relevant form/instructions sections below.
Multiple commenters asserted that the 2007 Form LM-30 reporting
requirements were overly burdensome, confusing, and complicated, and
questioned the purpose of the increased disclosure obligation. An
international union commenter stated that ``[t]he 2007 form was
extremely burdensome to filers, and confusing and misleading to the
public.'' Another international union commenter described the 2007 form
as ``virtually indecipherable.'' Another international union commenter
stated that the trainings for union officers and employees would have
been ``unnecessarily complicated--to no useful purpose--had the
Department determined to use the new form and instructions proposed in
2007.''
An additional international union stated that ``[t]he Department's
proposal correctly recognizes the unnecessary over-complication,
confusion, and burden caused by its 2007 rule. The new form and
instructions strike the correct balance between the Act's twin goals of
requiring disclosure of conflict transactions and not creating
unnecessary reporting burdens for union officials.''
[[Page 66479]]
Another international union commenter stated that ``the changes to
the form[ ] and instructions improve clarity, eliminate redundancy, and
reduce the amount of unnecessary information currently required to be
filed.'' The commenter added that the changes ``permit the DOL to more
effectively fulfill the goals of the LMRDA reporting requirements in
disclosing conflicts of interest.'' This commenter also stated its view
that the changes will help filers comply with the LM-30 reporting
obligation more ``efficiently'' and ``cost effectively'' than under the
2007 rule.
Section-by-Section Discussion of Revised Form
A section-by-section discussion of the revised form follows:
First Section--Basic Identifying Information (Items 1-5)
The first section of the revised form gathers basic information
about the filer and his or her labor organization. Item 1 requests the
Form LM-30 file number, and item 2 calls for the fiscal year covered in
the report. Item 3 provides a box to identify whether the form is being
filed as an amended report. The filer must provide his or her contact
information in item 4, which includes lines for his or her name and
street address (both required), and an email address (optional). In
item 5, the filer provides identifying information about his or her
labor organization, indicates whether he or she is an officer or
employee, and notes his or her officer position or job title. If the
filer serves as an officer or employee in more than one labor
organization, this information is captured on an item 5 Continuation
Page.
Below the first section, the revised form states, ``Complete Part
A, B, or C if, during the past fiscal year, you or your spouse or minor
child directly or indirectly had a reportable interest in, transaction
or arrangement with, or received income, payment, or benefit from the
entities described below.''
Part A--Represented Employer (Items 6 and 7)
In the revised form, ``Represented Employer'' is defined as ``an
employer whose employees your labor organization represents or it is
actively seeking to represent.'' If the filer had a reportable
interest, transaction, benefit, arrangement, income, or loan from his/
her ``Represented Employer,'' he or she must provide in item 6 the
employer's contact information, including the name and telephone number
of a contact person. In item 7a, the filer provides the nature of the
interest, transaction, benefit, arrangement, income, or loan; in item
7b, the filer enters its amount or value. As stated above, the
Department has removed the requirement that filers report the Web site
address for the employer.
As will be explained in the Revised Instructions section below, the
filer must complete a separate Part A for each transaction reported. A
Continuation Button is located below Part A if the filer needs to
complete one or more additional Part As.
Part B--Business (Items 8-12)
The revised form requires the filer to complete Part B if he or she
had a reportable interest in, transaction or arrangement with, or
received income, payment, or benefit from ``[a] business, such as a
vendor or service provider, (1) A substantial part of which consists of
buying from, selling or leasing to, or otherwise dealing with the
business of a Represented Employer described in Part A or (2) any part
of which consists of buying from or selling or leasing directly or
indirectly to, or otherwise dealing with your labor organization or
with a trust in which your labor organization is interested.''
If the filer has reportable activity with such a business, he or
she must provide in item 8 the contact information for the business,
including the name and telephone number of a contact person. In item 9,
the filer must indicate the entity the business deals with by checking
the box for (a) Labor organization, (b) trust, or (c) employer. If the
filer checks the box for trust or employer, he or she must provide the
trust or employer's name and contact information in item 10. The filer
must describe the nature of the dealings in item 11a, and report the
value of the dealings in item 11b. Additionally, the filer must
describe in item 12a the nature of the interest, benefit, arrangement,
or income and report in item 12b the amount or value of the interest,
benefit, arrangement, or income. As stated above, the Department has
removed the requirement that filers report the Web site address for the
business. As will be explained in the Revised Instructions section
below, the filer must complete a separate Part B for each transaction
reported. A Continuation Button is located below Part B if the filer
needs to complete one or more additional Part Bs.
Part C--Other Employer or Labor Relations Consultant (Items 13 and 14)
The revised form requires the filer to complete Part C if he or she
had a reportable interest in, transaction or arrangement with, or
received income, payment, or benefit from ``an employer (other than a
Represented Employer or Business covered under Parts A and B above)
from whom a payment would create an actual or potential conflict
between your personal financial interests and the interests of your
labor organization (or your duties to your labor organization); or a
labor relations consultant to such an employer or to the Represented
Employer listed in Part A.''
If the filer has reportable activity with such an employer or labor
relations consultant, he or she must provide in item 13a the contact
information for the employer or labor relations consultant. In item
13b, the filer must indicate whether the entity is an employer or
consultant. The filer must describe the nature of the payment in item
14a, and report the amount or value of the payment in item 14b. As
stated above, the Department has removed the requirement that filers
report the Web site address for the employer or labor relations
consultant.
As will be explained in the Revised Instructions section below, the
filer must complete a separate Part C for each transaction. A
Continuation Button is located below Part C if the filer needs to
complete one or more additional Part Cs.
In its comments submitted in response to the NPRM, a federation of
labor organizations suggested that ``Contact name'' and ``Telephone''
be removed from Part A (item 6), Part B (items 8 and 10), and Part C
(item 13a). The commenter stated that filers are not in the position to
designate a contact person for employers and businesses. The commenter
added that ``inviting inquiries to the employer or business from
members of the general public seems inadvisable,'' especially since the
Department could make such inquiries. The Department disagrees. In its
view, filers should be able to easily ascertain the contact information
for an employer or business from which they have received income, a
gift, or another benefit, or in which the filer has an interest, or
otherwise has engaged in a business transaction or arrangement.
Further, the reporting of this contact information will assist union
members and the public to cross-check information reported on Forms LM-
10 and Forms LM-30, and assist the Department in determining reporting
compliance.
Signature and Verification (Item 15)
The filer must provide his or her signature, date, and telephone
number in item 15, which is located on the
[[Page 66480]]
bottom of the first page. As explained in the instructions, filers are
instructed to view the OLMS Web site for further information on how to
electronically sign and submit the Form LM-30. The signature line on
the revised form is identical to that on the 2007 form, except that the
revised form assigns the heading ``Signature and Verification'' to item
15. The signature line on the 2007 form did not include a heading.
C. Revised Form LM-30 Instructions
1. General
The revised instructions reflect significant changes in both layout
and content from the 2007 form. The content has been changed to reflect
the specific changes adopted by this rule, as discussed earlier in this
preamble. Other changes have been made to add clarity and eliminate
unnecessary repetition. The discussion immediately below highlights
significant changes between the revised and 2007 instructions.
As noted above, the revised form and instructions reinstate the
general ``Parts A, B, and C'' format featured in the pre-2007 form and
instructions, replacing the multiple-schedule format introduced by the
2007 rule. The revised format is clearer and more streamlined and will
make the form much easier for filers to understand and complete,
without affecting the usefulness of the information disclosed.
The revised instructions do not include a separate ``Definitions''
section, which was included in the 2007 instructions. The revised
instructions instead present definitions and clarifications of key
terms in the context of the sections in which they first appear in the
document. When a definition follows a section of the instructions, the
term to be defined is italicized. Further, if a defined term is used in
multiple places, the later references refer back to the section in
which the term is first used and defined. This approach will help
filers understand key terms as they read through the instructions, and
will eliminate the need for filers to frequently refer to a separate
``Definitions'' section to determine what must be reported and how it
must be reported.
The Department has removed the examples that are dispersed
throughout the 2007 instructions. These examples, many of which
involved situations confronted by a very small number of filers, made
the form unnecessarily complex and difficult to complete, without
meeting the intended goal of providing helpful guidance. Following the
publication of a revised Form LM-30, the Department intends to provide
compliance assistance support to Form LM-30 filers.
Additionally, the Department has substantively modified the
definitions of some key terms that are found in the 2007 Form LM-30
Instructions. First, the Department has removed the definition of
``bona fide employee'' as used in the 2007 rule and added the bona fide
employee exemption found in the instructions for the pre-2007 form,
with minor edits for clarity, as explained below. The language that was
added reads:
Payments and benefits received as a bona fide employee of the
employer for past or present services, including wages, payments or
benefits received under a bona fide health, welfare, pension,
vacation, training or other benefit plan; and payments for periods
in which such employee engaged in activities other than productive
work, if the payments for such period of time are: (a) Required by
law or a bona-fide collective bargaining agreement, or (b) made
pursuant to a custom or practice under such 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 such employee's position with a labor
organization.\55\ (emphasis added).
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\55\ The final part of the instructions read, in the pre-2007
Form LM-30 Instructions and in the NPRM, as: ``or (c) made pursuant
to a policy, custom or practice which the employer has adopted
without regard to any holding by such employee of a position with a
labor organization.'' The Department made changes in the final rule
to this language to ensure clarity.
Second, the Department has modified the definition of ``labor
organization employee.'' As a result, the Department has inserted the
following language into the revised Form LM-30 Instructions in Section
II, Who Must File: ``For purposes of the Form LM-30, an individual who
serves the union as a union steward or as a similar union
representative, such as a member of a safety committee or a bargaining
committee, is not considered to be an employee of the union, by virtue
of service in such capacity.'' (emphasis added). Note that the
definition has been slightly modified from the NPRM for clarity
purposes, as explained in Part III, Section B, with the addition in
italics and removal of the word ``exclusively'' before the phrase ``as
a union steward.''
Third, the Department has removed the definition of ``labor
organization'' (Part III, D10), which had been added to the 2007 rule
in order to describe the top-down reporting obligation of national,
international, and intermediate body officers under section 202 of the
LMRDA. As explained earlier in this preamble, the term ``labor
organization'' is separately defined in the LMRDA.
Fourth, the instructions have been revised to reflect that, under
this rule, employees of parent and intermediate unions have top-down
reporting obligations if they have significant authority or influence
over subordinate affiliates. Two exemptions for top-down reporting,
established by the 2007 rule, have been eliminated. The Department had
proposed that the top-down reporting obligation would apply to all
employees of parent and intermediate unions, as had been established
for all officers of such unions by the 2007 rule. In response to
comments submitted on the proposal, the final rule has modified this
requirement. Under the rule, only employees who possess significant
authority or influence over subordinate affiliates must report on
financial interests in, and payments from, companies that deal with the
subordinate affiliates or companies that deal with or involve employers
whose employees are represented by the affiliates.
The reasons for these changes are discussed in detail in section
III of this rule.
2. Particular Sections and Parts
Section I, Why File: This section presents general information
about the reporting requirements of section 202. This information is
identical to that presented in the 2007 instructions, except that it
has been simplified to refer to the individual completing the form as
``you,'' instead of ``filer.''
Section II, Who Must File: The 2007 instructions presented a
lengthy Section II, Who Must File and What Must Be Reported (located on
pages 1-9). The revised instructions have divided this into two
separate, concise sections, Section II, Who Must File and Section III,
What Must Be Reported. The Department believes that this change will
enable filers to more easily understand this basic information. This
section states that ``(a)ny officer or employee of a labor organization
(other than an employee performing clerical or custodial services
exclusively), as defined by the LMRDA, must file Form LM-30 if, during
the past fiscal year, the officer or employee, or spouse, or minor
child, either directly or indirectly, held any legal or equitable
interest, received any payments, or engaged in transactions or
arrangements (including loans) of the types described in these
instructions.'' ``Labor organization employee'' is defined as ``any
individual (other than an individual performing exclusively clerical or
custodial services) employed by a labor
[[Page 66481]]
organization within the meaning of any law of the United States
relating to the employment of employees.'' It also provides: ``For
purposes of the Form LM-30, an individual who serves the union as a
union steward or as a similar union representative, such as a member of
a safety committee or a bargaining committee, is not considered to be
an employee of the union by virtue of service in such capacity.'' The
term ``minor child'' is also defined as someone younger than 21 years
of age.
The reporting exceptions for insubstantial payments and gifts,
including attendance at widely attended gatherings, are unchanged from
the 2007 instructions, but their discussion has been moved to Section
X, Completing Form LM-30.
Section III, What Must Be Reported: This revised section simply
refers filers to Parts A, B, and C of the instructions for information
about financial transactions and interests that must be reported.
Section IV, Who Must Sign the Report: This section specifies that
the labor organization officer or employee is required to sign the
completed Form LM-30.
Section V, When to File: The information in this section is
substantively identical to the information in Section IV, When to File
in the 2007 instructions.
Section VI, How to File: The revised Form LM-30 may be submitted in
paper format or electronically. Filers will be able to choose between
the two options. Section VI provides information regarding these filing
options, including how to obtain the form and instructions on
submitting it from the OLMS Web site.
The Department has significantly improved the electronic process
for submitting the various LMRDA-required reports, including the Form
LM-30, which simplifies the electronic signature procedure and
eliminates the associated costs to filers. Specifically, the Department
has implemented a simplified electronic signature that only requires
the filer to acquire a Personal Identification Number (PIN) and
password, which the Department provides at no cost to the filer. The
Department believes that electronic reporting generally is easier for
filers, and that it will enable the Department to better incorporate
submitted forms into its Electronic Labor Organization Reporting System
(e.LORS), ensuring easy access to information for the public.
Section VII, Public Disclosure: With the exception of a slight
change in wording, this section is unchanged from the Public Disclosure
section in the 2007 instructions.
Section VIII, Officer and Employee Responsibilities and Penalties:
With the exception of a slight change in wording in the first sentence
(changed ``required to file'' to ``required to sign''), this section of
the revised instructions is identical to the information in the Section
VII, Officer or Employee Responsibilities and Penalties in the 2007
instructions.
Section IX, Recordkeeping: This section contains information
identical to that in the Recordkeeping section of the 2007
instructions.
Section X, Completing Form LM-30: This section presents detailed
instructions on completing all of the information items in the Form LM-
30. The Department believes that the placement of this section on page
3 of the revised instructions represents a significant improvement over
the 2007 instructions, which did not provide this information until
page 14.
This section begins by providing information on electronically
completing the form and explains that the Department will provide
compliance assistance support for both paper format and electronic
filing. The 2007 instructions did not provide this information. This
section also provides information on completing Information Items 1
through 5, which gather basic identifying information about the filer
and his or her labor organization. With the exception of minor changes
in wording, these ``basic identifying'' information items are the same
as in the 2007 instructions.
Next, the revised instructions feature the heading, ``Information
Items--Parts A, B, and C.'' The revised form features the simpler
``Parts A through C'' approach, as opposed to the multiple-schedule
format introduced in the 2007 form.
First, the subsection ``General Instructions for Reportable
Transactions and Interests'' begins with: ``You must report if, during
the past fiscal year you or your spouse or minor child, directly or
indirectly: (1) Held an interest; (2) engaged in a transaction or
arrangement (including loans); or (3) received income, payment or other
benefit with monetary value covered by the Act.''
Next, the instructions provide information on the scope of filing
for national, international, and intermediate union officers and
employees, which (as explained above in section III, part E, of this
notice) requires some union employees (where they have significant
authority or influence over subordinate affiliates) to report the same
top-down information now required of union officers. This change is
discussed in greater detail in section III, part E, of this notice.
The definition of ``directly or indirectly'' is presented
immediately after this introductory language. This definition,
including its two examples, is unchanged from the 2007 rule.
The revised subsection, General Exclusions, describes the general
reporting exemptions, ``insubstantial payments and gifts'' and
``widely-attended gatherings,'' both of which are unchanged from the
2007 rule. In response to a suggestion submitted by a federation of
labor organizations, the Department has moved the definition of ``trust
in which a labor organization is interested'' from the General
Instructions section (page 4) to the definition section in Part B (page
7) because the trust definition is relevant only to Part B. An
international labor union also commented that the placement of the 3(l)
trust definition in the General Exclusions section is confusing. The
Department has made this change to eliminate any possible confusion
about this point. This commenter also suggested that the instructions
would benefit from adding a general exclusion to page 4 to indicate
that filers do not have to report benefits received from a trust in
which their labor organization is interested. The Department has also
made this change, in order to clarify the removal of reporting of
payments from trusts pursuant to section 202(a)(6).
A federation of labor organizations also suggested that the
sentence referring to ``director's fees, including reimbursed
expenses'' should be removed as ``redundant and confusing'' from the
General Exclusions section of the General Instructions section on page
4, because it also appears in the instructions for Parts A and B. The
Department disagrees because the instruction on reporting ``director's
fees'' is a general requirement that applies to all three sections of
the revised form. An international union commenter also stated that the
sentence about ``director's fees, including reimbursed expenses'' that
immediately follows the section 3(l) trust definition in the proposed
instructions gives the erroneous impression that reporting such
benefits from such trusts is required. The Department disagrees, noting
that any such concern has been alleviated by moving the section 3(l)
trust definition to the instructions for Part B.
Filers are also instructed to complete a separate Part A, B, and/or
C if they are reporting more than one entity or transaction. The
instructions explain
[[Page 66482]]
that additional Parts A, B, and C are available by clicking the
Continuation Button on the electronic form or attaching a separate Part
A, B, or C, if the filer is using a paper format.
A federation of labor organizations suggested that this section,
beginning with ``Complete a separate Part A, B, and/or C'' (page 4,
left column), should be placed immediately before the ``General
Exclusions'' instruction (page 4, left column). The commenter stated
that the typeface and position of the headings make the ``Complete a
separate Part A, B, and/or C'' section erroneously appear to be an
exclusion. The Department agrees that this change would add clarity,
and it has thus moved the ``Complete a separate Part A, B, and/or C''
title and instructions to before the ``General Exclusions'' section.
The commenter suggested that the ``loan'' example be removed from
the instruction regarding completing separate Parts A, B or C (page 4,
right column), because its inclusion here may cause confusion for
filers because of the final rule's general exclusion for reporting bona
fide loans. Instead, the commenter suggested using another reportable
receipt, such as a ``gift,'' in the example. The Department has made
this change in order to improve clarity.
PART A (ITEMS 6 AND 7): REPRESENTED EMPLOYER
The revised instructions for Part A present information on how to
complete items 6 and 7, which pertain to the Represented Employer.
Specifically, the instructions state: ``Complete Part A if you (1) Held
an interest in, (2) engaged in transactions or arrangements (including
loans) with, or (3) derived income or other economic benefit of
monetary value from, an employer whose employees your labor
organization represents or is actively seeking to represent.'' The
instructions state that payments received as ``director's fees'' must
be reported. This requirement was contained in the 2007 instructions.
Next, the definition for ``actively seeking to represent'' is
provided. This definition has been slightly revised in response to a
comment by a federation of labor unions. As explained earlier in this
preamble, the change adds clarity to the definition, which requires
concrete steps towards organizing. The Department has not made any
substantive changes to the definition as some commenters had suggested.
The subsection, Part A Exclusions, lists items that do not need to
be reported in Part A. The first three exclusions--(i), (ii), and
(iii)--are substantively unchanged from the 2007 instructions. These
relate, respectively, to holdings, transactions, and income from bona
fide investments in securities traded on a national securities
exchange; holdings, transactions, and income from other designated
securities--of $1,000 or less; and transactions involving the purchases
and sale of goods and services in the regular course of business at
prices generally available to any employee of the employer (excluding
loans or transactions involving interests in the employer).\56\ The
fourth exclusion, ``Payments and benefits received as a bona fide
employee'' (emphasis added), has been modified to incorporate the
historical interpretation given payments received by union officials
under union leave and no docking policies established by collective
bargaining agreements, practice under such agreements, or policy,
custom, or practice adopted by an employer without regard to an
employee's position with a union.
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\56\ The exclusions, as published in the instructions to the
2010 NPRM are identical to those in the instant rule. See 75 FR
48450. The description of the exclusions in the preamble to the
NPRM, however, did not accurately summarize the instructions. See 75
FR 48434.
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Since the first Part A Exclusion refers to ``bona fide
investments,'' this term is defined in this section. The definition for
``bona fide investment'' is unchanged from the 2007 rule. The
instructions here advise that filers should not include bank account
numbers, policy numbers, social security numbers, or similar
identifying information in completing the form.
In the revised instructions, the following definitions are
presented in connection with Information item 7: ``arrangement,''
``benefit with monetary value,'' ``income,'' and ``legal or equitable
interest.'' All of these definitions are unchanged from the 2007 rule.
A clarifying note relating to the definition of ``arrangement'' has
been revised to eliminate an example that is irrelevant to the
definition.
A commenter suggested that the definition of ``income'' in the Part
A, item 7 instruction (page 6) be modified to reference the exclusion
of payments and benefits received as a ``bona fide employee'' (page 5).
The commenter explained its view that defining ``income'' as ``all
income from whatever source derived, including but not limited to,
compensation for services'' could be confusing for filers as it appears
to contradict the ``bona fide employee'' exclusion. The Department
disagrees. Because the exclusions, including those paid to filers as
bona fide employees, are first discussed in the instructions, it will
be clear to filers that such payments are not reportable. Additionally,
specific instructions are provided on how to complete items 6 and 7,
which are described in the above subsection, Section-by Section
Discussion of Revised Form.
This commenter suggested that the two examples preceding the
``Other transactions or arrangements'' heading in Part A (pages 6-7) be
moved to Part B since they concern businesses that deal with the labor
organization, not employers. The Department disagrees with the comment,
as the examples, which derive from the 2007 instructions, are provided
as part of the definition, and are intended to illustrate the
application of the term ``legal or equitable interest.'' Moving the
examples could create confusion because the term first appears in Part
A of the form. While they contain examples of Part B businesses, the
term ``legal or equitable interest'' appears also in Part A, and the
Department believes that definitions should be placed in the part of
the instructions where the term first appears.
PART B (ITEMS 8-12): BUSINESS
In the revised instructions, the filer is instructed:
Complete Part B if you held an interest in or derived income or
other benefit with monetary value, including reimbursed expenses,
from a business (1) A substantial part of which consists of buying
from, selling or leasing to, or otherwise dealing with the business
of an employer whose employees your labor organization represents or
is actively seeking to represent, or (2) any part of which consists
of buying from or selling or leasing directly or indirectly to, or
otherwise dealing with your labor organization or with a trust in
which your labor organization is interested. Report payments
received as director's fees, including reimbursed expenses.
Definitions for ``substantial part'' and ``dealing'' are provided.
These definitions are unchanged from the 2007 rule.
The subsection, Part B Exclusions, lists items that do not need to
be reported in Part B. Two of the Part B exclusions are retained from
the 2007 rule (relating to holdings, transactions and income from bona
fide investments in securities traded on a national securities exchange
and other designated securities; and holdings or income of $1,000 or
less from bona fide investments in other securities). These two Part B
exclusions are the same as the exclusions set forth in (i) and (ii) in
Part A. However, this rule excepts from reporting marketplace
transactions from
[[Page 66483]]
bona fide credit institutions, as explained in greater detail in
section III, part C, of this notice. Specifically, the revised
instructions read:
Bona fide loans. Do not report bona fide loans, including
mortgages, received from national or state banks, credit unions,
savings or loan associations, insurance companies, or other bona fide
credit institutions, if the loans are based upon the credit
institution's own criteria and made on terms unrelated to your status
in the labor organization. Additionally, do not report other
marketplace transactions with such bona fide credit institutions, such
as credit card transactions (including unpaid balances) and interest
and dividends paid on savings accounts, checking accounts or
certificates of deposit if the payments and transactions are based upon
the credit institution's own criteria and are made on terms unrelated
to your status in the labor organization.
Additionally, specific instructions are provided on how to complete
items 8 through 12, which are described in the above subsection,
Revised Form.
PART C (ITEMS 13 AND 14): OTHER EMPLOYER OR LABOR RELATIONS
CONSULTANT
In the revised instructions, the filer is instructed:
Complete Part C if you, your spouse, or your minor child
received, directly or indirectly, any payment of money or other
thing of value (including reimbursed expenses) from any employer
(other than a Represented Employer under Part A or Business covered
under Part B above) from whom a payment would create an actual or
potential conflict between these financial interests and the
interest of your labor organization or your duties to your labor
organization. Such employers include, but are not limited to, an
employer in competition with an employer whose employees your labor
organization represents or whose employees your union is actively
seeking to represent, if you are involved with the organizing,
collective bargaining, or contract administration activities or
possess significant authority or influence over such activities. You
are deemed to have such authority and influence if you possess
authority by virtue of your position, even if you did not become
involved in these activities. Additionally, complete Part C if you
received a payment of money or other thing of value from a labor
relations consultant to a Represented Employer or Part C
employer.\57\
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\57\ As stated earlier in the preamble to this rule, the NPRM
stated, ``between your financial interests * * *.'' The Department
has modified this phrase to ``between these financial interests,''
so filers are aware that they must look at the payments and
interests of their spouse and minor children as well as their own.
The italicized language represents a change from the 2007
instructions, as explained in section III, part D, of this rule.\58\
The Department removed ``labor organizations'' and ``trusts in which
your labor organization is interested'' from the scope of Part C, as
explained in section III, part D, of this preamble.
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\58\ The Department notes that this quoted language is identical
to the language in the proposed instructions see 75 FR 48450. The
language was incorrectly set forth in the discussion of this point
in the NPRM. See 75 FR 48434.
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The subsection, Part C Exclusions, lists items that do not need to
be reported in Part C. The first administrative exemption in Part C--
relating to payments of the kind referred to in LMRA section 302(c)--
remains substantially the same as that in the 2007 instructions; the
only change is that LMRA section 302(c) is not quoted in the
instructions (instead, the reader is directed to a later part of the
instructions where this section is set forth in full).
The second administrative exemption in Part C--relating to bona
fide loans, interests, or dividends from a bona fide credit
institution--is modified slightly from the 2007 rule; specifically, the
following sentence, present in the 2007 instructions, is not included
in the revised instructions: ``This exception does not apply to
national or state banks, credit unions, savings or loan associations,
insurance companies, or other bona fide credit institutions that
constitute a `trust in which your labor organization is interested.' ''
Accordingly, this rule excepts from reporting under Part C:
(ii) Bona fide loans (including mortgages), interest or
dividends from national or state banks, credit unions, savings or
loan associations, insurance companies, or other bona fide credit
institutions, if such loans, interest or dividends are based upon
the credit institution's own criteria and made on terms unrelated to
your status in a labor organization. Additionally, do not report
other marketplace transactions with such bona fide credit
institutions, such as credit card transactions (including unpaid
balances) and interest and dividends paid on savings accounts,
checking accounts or certificates of deposit if the payments and
transactions are based upon the credit institution's own criteria
and are made on terms unrelated to your status in the labor
organization.
The third administrative exemption in Part C returns to the
Department's historical interpretation, exempting:
(iii) Interest on bonds or dividends on stock, provided such
interest or dividends are received, and such bonds or stock have
been acquired, under circumstances and terms unrelated to your
status in a labor organization and the issuer of such securities is
not an enterprise in competition with the employer whose employees
your labor organization represents or actively seeks to represent.
The Department believes that the 2007 rule did not adequately
justify the removal of this exemption. Further, interest on bonds or
dividends on stock are routine business transactions which do not
ordinarily raise conflict-of-interest questions. Their inclusion would
increase the burden on union officials, without any apparent benefit to
the public. Indeed, the reporting of non conflict-of-interest payments
could hide from scrutiny those payments that are in need of
transparency. Finally, in order to ensure that actual or potential
conflict-of-interest payments are reported, the Department has provided
two qualifications on this exemption: the payments must be received
under circumstances and terms unrelated to the recipient's status in a
labor organization and the issuer of such securities is not an
enterprise in competition with the represented employer.
A federation of unions suggested that ``payments from trusts or
other labor organizations'' should be included as a fourth express
exclusion from Part C, and argued that including this express exclusion
will eliminate confusion created by the Department's 2007 Frequently
Asked Questions (FAQs 45, 46, 48, 51-53 and 55), which indicated that
such payments may be reportable. The Department is persuaded by this
suggestion, as it adds clarity to the potential filer on this issue.
Thus, the Department has added a fourth exclusion to Part C, specifying
that payments received from a section 3(l) trust or labor organization
are not reportable. Also, in response to the comment, the Department
clarifies that this rule rescinds any example in the 2007 instructions
or FAQs that indicated that payments from trusts are reportable.\59\
---------------------------------------------------------------------------
\59\ See n. 12 herein, which discusses the impact of the final
rule on FAQs issues in connection with the 2007 rule and examples in
the instructions to the 2007 form.
---------------------------------------------------------------------------
Additionally, specific instructions are provided on how to complete
items 13 and 14, which are described in the above subsection, Revised
Form.
The instructions retain the following requirements that an official
report:
Any payment of money or other thing of value from a labor
relations consultant to a Part C employer;
Payments from an employer that is a not-for-profit
organization that receives or is actively and directly soliciting
(other than by mass mail, telephone bank, or mass media) money,
[[Page 66484]]
donations, or contributions from the official's union; and
Any payments from an employer (not covered by Parts A or
B), or from any labor relations consultant to an employer, for the
following purposes:
(1) Not to organize employees;
(2) To influence employees in any way with respect to their rights
to organize;
(3) To take any action with respect to the status of employees or
others as members of a labor organization;
(4) To take any action with respect to bargaining or dealing with
employers whose employees your organization represents or seeks to
represent; and
(5) To influence the outcome of an internal union election.
See 72 FR 36128, 36130, 36173.
Remainder of Instructions
The instruction for item 15, Signature and Verification, states
that the completed Form LM-30 must be signed by the officer or employee
and that forms submitted electronically must use electronic signatures.
The instructions indicate that the filer must enter the telephone
number used by the filer to conduct official business, and note that
the filer does not need to report a private, unlisted telephone number.
The revised instructions then feature: ``Selected Definitions from
the Labor-Management Reporting and Disclosure Act of 1959, as Amended
(LMRDA)'' [LMRDA section 3]; ``Related Provisions of the Labor-
Management Reporting and Disclosure Act of 1959, as Amended (LMRDA)--
Report of Officers and Employees of Labor Organizations'' [LMRDA
section 202]; Section 302(c) of the Labor Management Relations Act,
1947, as Amended [Sec. 8(c) of the National Labor Relations Act, as
Amended]; and an ``If You Need Assistance'' section, which includes a
list of OLMS field offices and explains the information available on
the OLMS Web site. This information is only slightly changed from the
2007 instructions.
V. Regulatory Procedures
Executive Orders 12866 and 13563
Executive Orders 13563 and 12866 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rule has been designated a ``significant regulatory
action'' although not economically significant, under section 3(f) of
Executive Order 12866. Accordingly, the rule has been reviewed by the
Office of Management and Budget.
In the Paperwork Reduction Act (PRA) analysis below, the Department
estimates that the rule will result in a total reporting and
recordkeeping burden on filing labor organization officers and
employees of 2,898 hours and a monetary burden on labor organization
officers and employees of approximately $138,621, based on the value of
a filer's time. This represents a 10,934 hour reduction from the 13,832
hours estimated in the 2007 rule for filing labor organization officers
and employees, and a $170,386 reduction in monetary burden from the
estimated $309,007 in the 2007 rule. See 72 FR 36157. This analysis is
intended to address the analysis requirements of both the PRA and the
Executive Orders.
The following is a summary of the need for and objectives of the
rule. A more complete discussion of various aspects of the proposal is
found elsewhere in the preamble.
The LMRDA was enacted to protect the rights and interests of
employees, labor organizations, and the public generally as they relate
to the activities of labor organizations, employers, labor relations
consultants, and labor organization officers, employees, and
representatives. The LMRDA includes financial reporting and disclosure
requirements for labor organizations and others as set forth in Title
II of the Act. See 29 U.S.C. 431-36, 441. The Department has developed
several forms to implement the union annual reporting requirements of
the LMRDA. Under section 202 of the Act, 29 U.S.C. 432, union officers
and employees are required to file reports if they, or their spouses or
minor children, engage in certain transactions or have financial
holdings that may constitute a conflict of interest. The Department has
developed the Form LM-30, Labor Organization Officer and Employee
Report, to implement section 202.
This rule modifies the Form LM-30, as last revised in 2007. See 72
FR 36106 (July 2, 2007). As discussed above, the revised form has been
simplified and will no longer have to be filed by certain individuals,
notably stewards, and certain interests and transactions, including
most bona fide loans, will not have to be reported. The rule is part of
the Department's efforts to meet the goals of greater transparency and
disclosure, while mitigating burden on labor organization officers and
employees by eliminating reporting on matters without demonstrated
utility.
The Form LM-30 provides transparency for those financial interests
of union officers and employees that may pose conflicts between their
own financial interests and their duty to their union and its members.
The Act requires the reports to be made available to the public. The
reports allow union members to view the information needed by them to
monitor their union's affairs and to make informed choices about the
leadership of their union and its direction. Accurate disclosure and
increased transparency promote the unions' own interests as democratic
institutions and the interests of the public and the government.
Financial disclosure deters fraud and self-dealing and facilitates the
discovery of such misconduct when it does occur.
The revised financial disclosure form will promote increased
compliance with the statute by clarifying the form and instructions,
organizing the information in a more useful format, and modifying it to
better meet the requirements of the LMRDA and the Department's policy
judgments consistent with its discretion under the Act.
Published at the end of this rule are the revised Form LM-30 and
instructions. The revised Form LM-30 and instructions also will be made
available via the Internet. The information collection requirements
contained in this rule have been submitted to OMB for approval.
Unfunded Mandates Reform
This rule will not include any Federal mandate that may result in
increased expenditures by State, local, and tribal governments, in the
aggregate, of $100 million or more, or in increased expenditures by the
private sector of $100 million or more.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100,000,000 or
more; a major increase in costs or prices; or significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of the United States-based companies to
compete with foreign-based companies in domestic and export markets.
[[Page 66485]]
Executive Order 13132 (Federalism)
The Department has reviewed this rule in accordance with Executive
Order 13132 regarding federalism and has determined that the rule does
not have federalism implications. Because the economic effects under
the rule will not be substantial for the reasons noted above and
because the rule has no direct effect on States or their relationship
to the Federal government, 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.''
Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, requires
agencies to prepare regulatory flexibility analyses, and to develop
alternatives wherever possible, in drafting regulations that will have
a significant impact on a substantial number of small entities,
including ``small businesses,'' ``small organizations,'' and ``small
governmental jurisdictions.'' This 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.
Paperwork Reduction Act
This rule establishes a new LM-30 reporting form which constitutes
a ``collection of information'' within the meaning of the Paperwork
Reduction Act of 1995 (PRA) [44 U.S.C. 3501-3520]. Under the PRA, an
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid control number assigned by the Office of Management and Budget
(OMB). In accordance with the PRA, the Department submitted an
information collection request (ICR) to OMB. On September 29, 2011, OMB
approved the ICR through September 30, 2014, and assigned OMB Control
Number 1245-0005 to this version of the LM-30 reporting form.
A. Review of the Comments Received in Response to the NPRM Regarding
the Burden Estimate
In accordance with the requirements of the PRA, the Department
solicited public comments on the information collection included in the
NPRM. Since this rule exclusively amends an information collection, all
of the comments received by the Department in response to the NPRM
addressed the collection. A discussion of the comments that addressed
all aspects of the collection other than the Department's burden
estimate is provided above. Here the Department provides a discussion
of the comments that addressed the Department's burden estimate.
In response to the NPRM, the Department received three comments
that addressed the Department's burden analysis in the NPRM. All three
comments were limited to the burden associated with top-down reporting.
Additionally, as noted in the preamble, several commenters expressed
support for the Department's proposals that, if adopted, would reduce
the burden of compliance with the Form LM-30 requirements. These
proposals included, in part, the return to the historical position that
union leave and no docking payments were not reportable and that
stewards and other representatives are not covered by the Form LM-30
reporting requirements by virtue of their positions; and the reporting
exception for bona fide loans and other credit arrangements with most
credit institutions. Further, two commenters who generally are opposed
to the Department's proposals expressed the view that the 2007 rule did
not impose any undue burden on union officers and employees.
As discussed in the NPRM and in earlier sections of this preamble,
top-down reporting concerns conflicts of interest that may arise
between the financial interests of officers and employees of parent and
intermediate unions and business dealings involving their union's
subordinate affiliates or employers whose employees are represented by
the affiliates. In the NPRM, the Department proposed to require
employees of parent and intermediate unions to report such interests;
the 2007 rule excepted them from this requirement.
Two commenters expressed the view that the increased burden
associated with top-down reporting exceeded any burden savings
associated with the other changes proposed in the NPRM. One national
union took issue with the burden estimates in both the NPRM and the
2007 rule, explaining that its own experience with the pre-2007 Form
LM-30 revealed that 12 hours were needed to complete that much simpler
form. It estimated that it can take one hour per week for ``organizing
and categorizing receipts'' and another hour per week to confer with a
spouse or minor child about links between their employer or other
entities and the union. This tracking alone, the commenter states,
would exceed the Department's total burden estimate in the 2007 rule
and the 2010 NPRM. The commenter also estimates that top-down reporting
itself could require 25 hours per year. Other commenters urged the
Department to modify or eliminate top-down reporting, which they
identified as the most burdensome aspect of LM-30 reporting. The
Department has discussed and responded to these comments at length
earlier in the preamble and does not restate them here.
The Department believes that the NPRM reflects the best estimate of
the burdens associated with completing the Form LM-30, as revised by
this rule. The Department notes that none of the commenters provided a
detailed explanation as to how their estimates were derived, and notes
that the time estimates provided for the pre-2007 form and the 25-hour
estimate for top-down reporting seem very high, even for the most
atypical situations and could not reflect the average burden. The
Department's estimate is for an average filer.
Further, the Department does not believe that many union officials
will be required to file under the top-down reporting framework, and
those who do file are already included within the NPRM's estimate for
the number of filers. (The Department notes that the estimate for the
number of filers does not include a breakdown of the type of
transaction being reported, such as a gift or a security or other
interest, nor does it indicate whether or not the report is required
pursuant to top-down reporting.) Further, none of the commenters
challenged the estimated number of filers.
Moreover, the burden hour estimates are averages for those who
file. Some filers may take more or less time than the estimated 90
minutes, and the Department considers the officials who file as a
result of top-down reporting to be already included within the average
burden hour estimate. More specifically, the Department does not
believe that many, if any, of those who file will take more than 90
minutes to complete the form as a result of the top-down requirements,
nor does the Department consider the top-down reporting requirements as
altering the 90-minute average. The commenters did not provide any
specific information challenging this conclusion.
The Department believes that the concerns regarding the burden
associated with top-down reporting reflect, to a large extent, a
[[Page 66486]]
misunderstanding about what types of payments, interests, and
transactions must be reported on the Form LM-30, and how a union
official would determine reportability. Moreover, as explained earlier
in the preamble, many of the concerns about top-down reporting have
been alleviated by specifying that top-down reporting is required only
of officers and those employees with ``significant authority or
influence'' over lower-level unions. As stated in the preamble, it is
helpful to look at the steps involved in determining whether a top-down
report, or any report, is owed. The first step is for a union officer
or employee to look at the types of interests held, income and benefits
received, and transactions engaged in during the fiscal year. The
second step is to eliminate those that are exempted by the general
exclusions, such as publicly held stock, income received by the union
official as a bona fide employee, and the de minimis threshold. This
step will generally greatly reduce potential reportable transactions.
The third step is to determine whether any remaining financial
transactions were derived from represented employers, as well as
service providers and vendors of the union, their trusts, and
represented employers. As a part of this step, officers and certain
employees of parent and intermediate unions will also have to consider
holdings in and payments from entities that have relationships with
subordinate affiliates.\60\ Thus, union officials, higher-level or not,
have no obligation to research each and every relationship that a union
has, at any level, but, rather, only those that relate to the few, if
any, employers and businesses identified in step three of the process.
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\60\ A fourth step could involve review of activities to be
reported pursuant to section 202(a)(6) in the ``catch-all'' Part C
of the revised Form LM-30, but OLMS has limited the requirement to
report in Part C payments from employers in competition with
represented employers to only those union officials with significant
influence over organizing. This eliminates the top-down issue
involving such employers for most union officials. Further,
regarding payments from charities pursuant to section 202(a)(6) and
Part C of the proposed form, any payments received as a bona fide
employee and as regular marketplace transactions would be excluded,
pursuant to the statute.
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The Department is unpersuaded by the unsubstantiated assertion by
one commenter that the top-down burden imposed on union employees
exceeds any reduced burden associated with other changes proposed by
the NPRM. The Department also disagrees with the assertion that filers
are required to track routine financial transactions. Rather, the Form
LM-30 only requires tracking and reporting of financial transactions
that are actual or potential conflicts of interest, and most union
officials will have few, if any, such transactions.
Regarding the comment that suggested that the filers should be
required to report only top-down interests or payments for which they
have ``actual, subjective'' knowledge, the Department believes that
top-down filers (parent and intermediate body union officers and those
union employees with significant authority or influence over lower-
level unions) will generally have actual, subjective knowledge of the
entity's relationship with the union or represented employer, or will
be in a position to ascertain this information. Thus, filers will not
generally need to contact lower levels of the union to determine
reportability, or, if they do need to contact other levels of the
union, they will be in position to effectively obtain any needed
information.
Regarding the comment that suggested that union officials have an
``affirmative obligation'' to contact subordinate bodies of their union
that do not have ``systematic records,'' the Form LM-30 reporting
requirements do not generally require union officials to contact lower
level entities of the union. Further, all affiliated unions subject to
section 206 of the LMRDA must have adequate records to ``provide in
sufficient detail'' the ``necessary basic information and data'' from
which the annual financial disclosure forms (such as the Form LM-2,
Form LM-3, and Form LM-4) submitted to the Department can be verified.
Other commenters expressed concern about the burden that an officer
or employee of an international, national, or intermediate union would
face in determining whether he or she has received a payment from 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. Regarding the application of the ``substantial
part'' provision to top-down reporting, the Department notes that this
provision actually operates as a general limitation on reporting that
applies independently from top-down requirements, as does the
``actively seeking to represent'' condition for reporting interests in
and payments from represented employers. Again, union officials are not
generally required to engage in research to identify potential
conflict-of-interest relationships. Further, as explained earlier in
the preamble, filers should request guidance from the Department if
they are unable to determine the application of the reporting
requirements, such as the ``substantial part'' and ``actively seeking
to represent'' provisions.
D. Methodology for the Burden Estimates
The Department first estimated the number of Form LM-30 filers that
will submit the revised form. Then, it estimated the number of minutes
that each filer will need to meet the reporting and recordkeeping
burden imposed by the revised form, as well as the total burden hours.
The Department next estimated the cost to each filer for meeting those
burden hours, as well as the total cost to filers. The Federal costs
associated with the revised rule were also estimated. Please note that
some of the burden numbers included in this PRA analysis will not add
up due to rounding. Except as noted, the burden analysis in the final
rule is substantively identical to that set forth in the NPRM.
1. Number of Revised Form LM-30 Filers
The Department estimates that 1,932 union officers and employees
will submit the revised Form LM-30. This figure represents the total
pre-2007 and 2007 Form LM-30 reports submitted during Fiscal Year 2009.
In that fiscal year, the Department established an enforcement policy
that enabled union officers and employees to use either the pre-2007
form or the more complex 2007 version in satisfying their reporting
obligation under section 202 of the LMRDA.
2. Hours To Complete and File Revised Form LM-30: Reporting and
Recordkeeping
The Department has estimated the number of minutes that each Form
LM-30 filer will need for completing and filing the revised form
(reporting burden), as well as the minutes needed to track and maintain
records necessary to complete the form (recordkeeping burden). The
estimates are included in Table 1, which describes the information
sought by the revised form and instructions, where the particular
information is to be reported, if applicable, and the amount of time
estimated for completion of each item of information. The revised
reporting regime more closely resembles the pre-2007 Form LM-30, in
both form and content, than the 2007 form.
Not all union officers and employees will be required to file the
Form LM-30, nor will all of those who file need to complete each Part
of the form. However, for purposes of assessing an average burden per
filer, the Department
[[Page 66487]]
assumes that the average filer serves as an officer or employee for one
labor organization, and that the filer receives reportable payments or
interests for a single entity on Parts A, B, and C, respectively.
Additionally, the below estimates are for all filers, including
first-time filers and subsequent filers. While the Department
considered separately estimating burdens for first-time and subsequent
filers, the nature of Form LM-30 reporting militates against this
approach. Union officers may serve for relatively short periods of time
and reportable transactions may not be reported in subsequent years for
a variety of reasons. Where the Department has reduced burden estimates
for subsequent year filings of LMRDA reports, it generally did so with
regard to required annual reports, specifically labor organization
annual reports, Forms LM-2, LM-3, and LM-4. In contrast, the Form LM-30
is only required for union officers and employees in years that they
engage in reportable transactions. Further, these officials do not have
the same familiarity with reporting as other LM filers. See 72 FR
36157, n. 4. As such, the burden estimates assume that the union
officer or employee has never before filed a Form LM-30.
Recordkeeping Burden. The recordkeeping estimate of 15 minutes per
filer represents a 5-minute change from the 20-minute estimate for the
2007 Form LM-30. 72 FR at 36157. This estimate reflects new exemptions
from reporting for union leave and no docking payments, and mortgages
and other loans, as well as the decision to eliminate reporting from
trusts and unions under section 202(a)(6), which reduce the complexity
of the recordkeeping requirements. Additionally, most of the financial
books and records needed to complete the form are maintained in the
filer's normal course of business, both union and personal. Finally,
the 15 minutes accounts for the 5-year retention period required by
statute. See section 206, 29 U.S.C. 436.
Reporting Burden. The total reporting burden of 75 minutes per
respondent addressed in Table 1 reflects the time required to read the
Form LM-30 instructions to discover whether or not a report is owed and
determine the correct manner to report the necessary information. Of
that total amount, it should be noted the Department estimates that the
average filer will need 30 minutes to read the instructions, which is
substantially less than the 55 minutes estimated for the 2007 Form LM-
30. 72 FR 36157.\61\ This reduction is due in part to the reduced scope
of required reporting. In particular, the Department has eliminated the
requirement to report union leave and no docking payments, bona fide
loans, and payments from trusts and unions pursuant to section
202(a)(6). Further, the creation of a more concise and consolidated
form and instructions, with definitions and other explanations placed
in a more readily accessible format, will enable filers to more quickly
ascertain the necessary reporting requirements.
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\61\ Additionally, the Department estimates that those union
officers and employees who are not required to file will spend ten
minutes reading the instructions. This burden is not included in the
total reporting burden, since these officials do not file and are
thus not respondents.
---------------------------------------------------------------------------
In developing the 75-minute estimate, the Department also believes
that the simple data entry required by items 1-3 will only require 30
seconds each. A filer will be able to enter his or her own contact
information in only two minutes, in item 4. Generally, filers will only
need three minutes to enter contact information, such as for their
labor organization, in item 5, as well as the contact information for
the trust or employer with which the business deals, in item 10. The
Department believes, however, that filers will need five minutes,
respectively, to enter the contact information for the represented
employer in item 6, the business that deals with a labor organization,
trust, or employer in item 8, and the ``other employer'' or labor
relations consultant in item 13. Filers will need one minute to
complete item 9, which asks filers to indicate whether the business
identified deals with a labor organization, trust, or employer.
Additionally, filers will need 3 minutes to enter the financial
data required in items 7, 12, and 14, and 3.5 minutes to report the
nature and value of the dealings in item 11. The Department also
believes each filer will spend an average of 5 minutes to check the
answers. Finally, the Department estimates that a filer will utilize
five minutes to check responses and review the completed report, and
will require two minutes to sign and verify the report in item 15. For
Form LM-2 Labor Organization Annual Report filers, the Department last
year introduced a cost-free and simple electronic filing and signing
protocol. The Department intends to provide this feature to Form LM-30
filers in 2012. For this reason, the burden estimate remains constant
whether the form is electronically signed, or signed by hand.
As a result, the Department estimates that a filer of the revised
Form LM-30 will incur 90 minutes in reporting and recordkeeping burden
to file a complete form. This compares with the 2007 estimate of 120
minutes per filer.
Table 1--Reporting and Recordkeeping Burden
[In minutes]
------------------------------------------------------------------------
Section of Recurring burden
Burden description proposed form hours
------------------------------------------------------------------------
Maintaining and gathering Recordkeeping 15 minutes.
records. Burden.
Reading of the instructions to Report Burden.... 30 minutes.
determine applicability of
the form and how to complete
it.
Reporting LM-30 file number... Item 1........... 30 seconds.
Reporting covered fiscal year. Item 2........... 30 seconds.
Identifying if report is Item 3........... 30 seconds.
amended.
Reporting filer's contact Item 4........... 2 minutes.
information.
Reporting labor organization Item 5........... 3 minutes.
contact information.
Part A: Reporting name and Item 6........... 5 minutes.
contact information for
employer in Part A of form.
Part A: Reporting the nature Items 7a and 7b.. 3 minutes.
of the interest, transaction,
arrangement, benefit, or
income, as well as the
amount, received from the
employer identified in Part A.
[[Page 66488]]
Part B: Reporting contact Item 8........... 5 minutes.
information for business.
Part B: Identifying if the Item 9........... 1 minutes.
business deals with a labor
organization, trust, or
employer.
Part B: Reporting the contact Item 10.......... 3 minutes.
information for the trust or
employer with which the
business deals.
Part B: Reporting the nature Items 11a and 11b 3 \1/2\ minutes.
and value of the dealings
between the business and
employer, union, or trust.
Part B: Reporting the nature Items 12a and 12b 3 minutes.
and amount of interest held
or income received from the
business.
Part C: Reporting the contact Items 13a and 13b 5 minutes.
information for the employer
or labor relations
consultant, and identifying
the entity as an employer or
labor relations consultant.
Part C: Reporting the nature Items 14a and 14b 3 minutes.
and amount of payment from
the employer or labor
relations consultant.
Checking responses............ N/A.............. 5 minutes.
Signature and verification.... Item 15.......... 2 minutes.
-----------------------------------------
Total Recordkeeping Burden ................. 15 minutes.
Estimate Per Filer.
-----------------------------------------
Total Reporting Burden ................. 75 minutes.
Estimate Per Filer.
-----------------------------------------
TOTAL BURDEN HOUR ESTIMATE ................. 90 minutes.
PER FILER.
------------------------------------------------------------------------
Total Reporting and Recordkeeping Burden. As stated, the Department
estimates that there are 1,932 union officers and employees that will
be annually filing the Form LM-30. Thus, the estimated recordkeeping
burden for all filers is 28,980 minutes (15 x 1,932 = 28,980 minutes)
or 483 hours (28,980/60 = 483). The total estimated reporting burden
for all filers is 144,900 minutes (75 x 1,932 = 144,900 minutes) or
approximately 2,415 hours (144,900/60 = 2,415 hours). The total
estimated burden for all filers is, therefore, 173,880 minutes or
approximately 2,898 hours. See Table 2 below.
Table 2--Total Reporting and Recordkeeping Burden for All 1,932
Estimated Filers
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Recordkeeping Burden................ 483 hours.
Total Reporting Burden.................... 2,415 hours.
Total Burden.............................. 2,898 hours.
------------------------------------------------------------------------
3. Calculation of Total Monetized Burden Hours Costs for Labor
Organization Officers and Employees to Complete the Revised Form LM-30
The Department estimates the dollar cost to filers to complete the
Form LM-30 by using fiscal year (FY) 2009 data derived from Form LM-2,
Labor Organization Annual Reports, filed with the Department pursuant
to section 201 of the LMRDA. The Form LM-2 is the annual financial
disclosure report filed by the largest labor organizations, those with
$250,000 or more in total annual receipts. The Department notes that
many Form LM-30 reports are filed by lower level labor organization
officers and employees, whose labor organizations file the less
detailed Form LM-3 and Form LM-4 Labor Organization Annual Reports, and
who are often part-time officials earning lower salaries than parent
body labor organizations that file the more comprehensive Form LM-2.
However, because only part-time annual salaries are reported by part-
time officers on the Form LM-3 (and individual salaries are not
reported on the LM-4), but not the hours upon which those part-time
annual salaries are based, it is impractical to calculate an average
hourly wage for union officers from the Form LM-3. This contrasts with
a Form LM-2 filer, where it can be assumed that the annual salaries for
officers are primarily for full-time duties, which makes it possible to
determine average hourly wages. Therefore, the Form LM-2 provides the
Department with more comprehensive data by which to ascertain a
reasonable estimate of union officer and employee salaries.
The Department also assumes, as it did for burden estimates under
the pre-2007 Form LM-30, that one-third of the forms will be filed by
union presidents, secretary-treasurers, and international
representatives (the last designation as a proxy for union employees),
respectively. The Department derived the average hourly wage for each
of these categories by utilizing data from FY 2009 Form LM-2 reports.
With respect to the international representative analysis, the
salary data derived from the Department's Electronic Labor Organization
Reporting System (e.LORS) included only international or national
unions and only those employee titles and gross salary data from Form
LM-2, Schedule 12 of those international/national unions that included
words like ``national'' or ``international'' and ``representative.''
The Department then eliminated blank salary entries (either nothing was
listed in the Form LM-2 or a zero was listed) because there are a
variety of reasons why the salary can be blank or zero and their
inclusion in the calculation of the average would skew the average
calculation. Finally, the Department calculated the average hourly wage
by dividing the average annual salary by 2,080 hours (40 hours per week
times 52 weeks per year). Next, the Department increased these figures
by 43.00% to account for total compensation.\62\
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\62\ See Employer Costs for Employee Compensation Summary, from
the Bureau of Labor Statistics (BLS), at http://www.bls.gov/news.release/ecec.nr0.htm. The Department increased the average
hourly wage rate for employees ($20.49 in 2008) by the percentage
total of the average hourly compensation figure ($8.90 in 2008) over
the average hourly wage.
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The methodology and assumptions are somewhat similar for the
president and secretary-treasurers averages. Here, the Department had
data from FY 2009 for all Form LM-2 filers with $800,000 or more in
annual receipts. The $800,000 figure was selected because it represents
roughly the average of all Form LM-2 filers, and we hypothesized that
these larger than average Form LM-
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2 filers are more likely to have presidents and secretary-treasurers
who file the Form LM-30.
As a result, the Department estimates that union presidents earn an
average hourly wage of $34.65 ($49.55 after adjusting by 43.00% for
total compensation); union secretary-treasurers, $31.87 ($45.57 after
adjusting by 43.00% for total compensation); and international
representatives, $33.83 ($48.38 after adjusting by 43.00% for total
compensation). The Department also estimated that each of these
categories of union officials accounted for one-third of the Form LM-30
reports submitted and thus one-third of the total burden hours (2,898
hours divided by three equals 966). Therefore, the total cost was
$138,621 (966 x $49.55 = $47,865.30; 966 x $45.57 = $44,020.62; and 966
x $48.38 = $46,735.08). The estimated cost per filer is approximately
$71.75 ($47,865.30 + $44,020.62 + $46,735.08 = $138,621; $138,621/1932
= $71.75).
4. Other Costs (Start-up, Capital, Maintenance, and Operations)
The Department associates no costs with this information
collection, beyond the value of a filer's time.
5. Federal Costs
Finally, in its recent submission for revision of OMB
1245-0003 (formerly OMB 1215-0188), which contains
all LMRDA forms (except the pre-2007 Form LM-30, 1245-0002, which was
approved under OMB 1215-0205, and the 2011 Form LM-30), the
Department estimated that its costs associated with the LMRDA forms are
$2,710,726 for the OLMS national office and $3,779,778 for the OLMS
field offices, for a total Federal cost of $6,490,504. Federal
estimated costs include costs for contractors and operational expenses
such as equipment, overhead, and printing as well as salaries and
benefits for the OLMS staff in the National Office and field offices
who are involved with reporting and disclosure activities. These
estimates include time devoted to: (a) Receipt and processing of
reports; (b) disclosing reports to the public; (c) obtaining delinquent
reports; (d) reviewing reports, (e) obtaining amended reports if
reports are determined to be deficient; and (f) providing compliance
assistance training on recordkeeping and reporting requirements.
List of Subjects in 29 CFR Part 404
Labor union officers and employees; reporting and recordkeeping
requirements.
Text of Rule
Accordingly, the Department amends part 404 of 29 CFR Chapter IV as
set forth below:
PART 404--LABOR ORGANIZATION OFFICER AND EMPLOYEE REPORTS
0
1. The authority citation for part 404 is revised to read as follows:
Authority: Labor-Management Reporting and Disclosure Act Secs.
202, 207, 208, 73 Stat. 525, 529 (29 U.S.C. 432, 437, 438);
Secretary's Order No. 08-2009, Nov. 6, 2009, 74 FR 58835 (Nov. 13,
2009).
Sec. 404.1 [Amended]
0
2. In Sec. 404.1, paragraph (f) is removed and paragraphs (g) through
(j) are redesignated as (f) through (i), respectively.
Signed in Washington, DC, this 6th day of October, 2011.
John Lund,
Director, Office of Labor-Management Standards.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix: Revised Form and Instructions
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[FR Doc. 2011-26816 Filed 10-25-11; 8:45 am]
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