Next week the Labor Department will propose changes to its union financial reporting and disclosure requirements in an effort to improve transparency and accountability. The proposed rule will give rank-and-file union members more information about union finances. It is the latest effort by the Bush administration to increase transparency for labor unions after years of decline during the Clinton administration. (Visit UnionReports.gov for more information.)
The proposed rule modifies a 2003 change to the LM-2 form, which is required for unions with annual receipts of $250,000 or more. It also implements a longstanding provision of the Labor-Management Reporting and Disclosure Act that requires unions that ordinarily file the simplified LM-3 form to instead file an LM-2 under certain limited circumstances, according to the department.
The change comes eight months before President Bush leaves office. With presidential candidate Barack Obama suggesting that his administration would impose less oversight on unions, the proposed rule is both significant and symbolic.
The Labor Department outlined five reasons why the changes were being proposed:
- Itemizing benefits for union officers and union employees. The current Form LM-2 discloses the gross salary, allowances, disbursements for official business, and other disbursements next to the name of every officer, and employees of the union earning $10,000 or more. In contrast, the benefits provided to individual union officers and employees are only included in large aggregated amounts in line items on other parts of the form. This allows substantial amounts in the form of individual benefits (e.g., life insurance, pensions, deferred compensation) to remain undisclosed. The proposed change would add a column for “Benefits” in the officer and employee disbursement schedules, allowing union members to identify the total benefit disbursements to individual union officers and employees.
- Covering indirect disbursements to officers and employees. If a union officer or employee uses a personal credit card for temporary lodging or transportation by public carrier and is directly reimbursed by the union, the reimbursement is currently reported for that individual officer or employee. However, if the payment goes directly to the vendor instead (indirect disbursement), the amount is not reported for the individual union officer or employee. This proposed change will ensure that indirect disbursements are subject to the same level of transparency as direct disbursements.
- Enhancing transparency for receipts (i.e., itemizing receipts over $5,000 aggregated). Most of the current “Cash Receipts” on the LM-2 are not itemized, including Dues and Agency Fees; Per Capita Tax; Fees, Fines, Assessments, Work Permits; Sales of Supplies; Interest; Dividends; Rents; On Behalf of Affiliates for Transmittal to Them; and From Members for Disbursement on Their Behalf. In some cases these line items have exceeded $20 million for LM-2 filers, and union members are unable to discern useful information from these aggregate totals. The proposed revision will provide itemized receipt schedules similar to those existing on the current LM-2 for the category known as “Other Receipts,” allowing for greater transparency regarding these important union assets.
- Disclosing the identity of the purchaser or seller in transactions involving union assets. The current Form LM-2 requires disclosure of the purchase or sale of union assets but does not require information about the buyer or seller. The proposed change will allow union members to know the name and address of the purchaser or seller (of any asset of $5,000 or more) and the date of the sale. This disclosure will enable union members to verify that transactions were at market price and at arm’s length, thereby limiting the opportunity for purchasers and sellers to improperly benefit at union member expense.
- Establishing fair procedures to revoke a union’s privilege to file a simplified annual report when they violate their legal obligations. Form LM-3 is a simplified annual report filed in lieu of the Form LM-2 by unions with total annual receipts between $10,000 and $249,999. It is also a revocable privilege pursuant to the statute. In cases of delinquency or deficiency with regard to filing the LM-3, or certain other reasons that demonstrate a union’s failure to comply with LMRDA obligations, this privilege would be revoked, for a limited time, after investigation, due notice, and opportunity for the union to explain why the revocation should not occur. If the privilege is revoked, the union, for a period of time, would instead be required to file a Form LM-2, which provides greater detail and better assists union members and government investigators in detecting financial problems.
UPDATE — May 12, 10:38 a.m.: The Washington Examiner editorializes on Elaine Chao’s legacy at the Labor Department. Chao, a former distinguished fellow at Heritage, has led the department at “a time when transparency and accountability in union finances finally began to be taken seriously,” according to the newspaper.