Comments on Proposed LM-30 reforms
COMMENT FOR:
Office of Labor-Management Standards
Employment Standards Administration
United States Department of Labor
FROM:
National Alliance for Worker and Employer Rights
William Fine, Executive Director
122 C. St. Suite 220
Washington D.C 20001
wfine@freeworkplace.org
202-393-1185
SUBJECT:
Notice of proposed rulemaking; request for comment
29 CFR Part 404
RIN 1215-AB49
E-MAIL: OLMS-REG-1215-AB49@dol.gov
DATE: October 11, 2005
Introduction
The National Alliance for Worker and Employer Rights (NAWER) is an advocacy organization made up of employees and employers opposed to labor union abuses that infringe on the rights of wage earners and businesses and that hinder economic growth. Among other things, NAWER opposes union corruption, violence, misuse of the organizing process, and special privileges written into law.
Because of its concern about the level of union corruption in America, NAWER applauds the Office of Labor Management Standards’ (OLMS) initiative to revise Form LM-30 and its instructions to improve reporting from union officers and employees about potential conflicts between their personal financial interests and the fiduciary duty they owe to members of their labor organizations.
In its most Semiannual Report to the Congress, covering October 1, 2004, to March 31, 2005, the Department of Labor’s Office of Inspector General (OIG) declared,
OIG investigators have uncovered millions of dollars of workers’ dues and benefit monies that have been siphoned off by organized crime through embezzlement or more sophisticated devices, such as fraudulent loans or excessive fees paid to corrupt union and benefit plan service providers. Our investigations continue to identify complex financial and investment schemes used to defraud pension assets, resulting in millions of dollars lost to plan participants.
During this six month period alone, OIG investigations produced 302 indictments, 217 convictions, and resulted in the recovery of $49.6 million. Well before the close of FY 2005, OLMS separately reported 84 indictments and 81 convictions in that fiscal year.
Plainly, a prerequisite of effective enforcement of existing criminal and civil laws against union corruption is more transparent reporting of situations that may raise questions of conflict of interest on the part of the union offices and employees. Union members, the general public, and government regulators must have sufficient information to ascertain whether corrupt practices may exist and whether legal action is necessary or appropriate. That is why OLMS’s proposal to update and revise the LM-30, its instructions, and accompanying regulations is so important.
General Comments/Comments on Notification of Requirements, to Officers, Employees, and Members
All in all, NAWER strongly supports OLMS’s proposed changes to 29 CFR 404, in Form LM-30, and in the instructions that accompany LM-30. We find no need to review and endorse every suggested change, but NAWER does want to indicate its agreement with some key proposals and to offer a few independent suggestions.
Before addressing substantive issues relating to the LM-30, NAWER wishes to comment not on a change proposed by the OLMS but on OLMS’s question “whether to promulgate a regulation that requires labor organizations to notify their officers and employees of the annual reporting obligation under the LMRDA.” We believe this query must be answered in the affirmative.
As OLMS points out, only 244 LM-30 forms were filed with the Department over the last four fiscal years, an average of 61 filings per year, notwithstanding that a review of LM-2, -3, and -4 filings indicates a total of 204,643 union officers and employees, a filing rate of 0.03%. When OLMS conducted a limited internet search of potentially reportable interests of 430 union legal professionals under LMRDA § 202(a) (4) alone, none had filed though it was determined that six were required to do so, a filing rate of 1.37%. The six non-filers, when asked, gave no reason why they did not file or declared ignorance of the requirement. OLMS further stated that “[o]n many other occasions, OLMS has discovered during an audit or investigation that a union officer or employee was engaged in a reportable situation but had not filed the required Form LM-30 until OLMS became involved,” and provided several examples of such noncompliance. OLMS added: “In these instances, compliance with the Form LM-30 requirements would have provided union members with valuable information concerning the finances of their unions’ employees and officers.”
While OLMS suggests that “clarifying the form and instructions, adding examples to the instructions, eliminating administrative exemptions, and providing extensive compliance assistance” will increase the filing rate, we are not so sanguine. While such substantive changes will improve the quality of the information received, we do not see a logical nexus with enhanced awareness of the basic filing requirement. We believe, rather, that individual notification to union officers and employees by labor organizations is essential to ensure compliance. Thus, we endorse option one suggested by OLMS, requiring notification of LM-30 to union officers within 30 days of their installation in office and to employees within 30 days of hire, as well as initial notification within 60 days of the promulgation of a regulation and annually thereafter.
We believe LMRDA § 208 is ample authority for issuance of such a rule, inasmuch as, inter alia, it provides for the promulgation of rules “necessary to prevent the circumvention or evasion of [Title II] reporting requirements.” With individual notification, officers and employees would not be able to circumvent or evade reporting requirements by pleading ignorance.
NAWER, however, would go further and suggest that OLMS issue a rule requiring labor organizations to notify individual union members of the LM-30 reporting requirements of union officers and members and to provide members with the DOL website link to find the reports filed by persons employed by their labor organization. We would prefer written, annual notification of each member, but at least urge collective notification by union publication on a yearly basis. After all, the Title II LMRDA reporting requirements are not paperwork exercises but are intended to benefit union members by shining light upon situations where conflicts of interest may exist among the officers and employees who represent them. If union members are unaware of the existence of LM-30 reports, then even full compliance in filing comprehensive reports will fall short of Congress’s intentions in enacting the LMRDA. If members are kept in the dark about available information, there is an encouragement for “circumvention or evasion” of reporting requirements, and thus authority under LMRDA § 208 to prevent the same by rule.
Comment on Definitions and Examples
NAWER concurs with OLMS’s decision to include a set of definitions of key terms as a new section of the instructions for filling out Form LM-30. The current lack of this guidance constitutes a severe omission and we believe, with OLMS, that adding this section will provide the filer with a better understanding of the report’s requirements and improve both the accuracy of the reports and the likelihood they will be filed.
We would, however, offer the suggestion that OLMS also consider defining the term “transaction,” which appears in LMRDA § 202(a) (2) and (5) and § 202(c), especially since similar terms such as “arrangement,” and “dealing” are defined.
Briefly, we endorse each of OLMS’s proposed definitions, but consider particularly important those concerning the following terms.
- Labor organization. OLMS correctly proposes to define this term to take account of the hierarchical structure of organized labor by encompassing the “local, intermediate, or national or international labor organization” in which the filer was employed or held office as well as “any parent or subordinate labor organization of the filer’s labor organization.” This is consistent with the LMRDA Interpretive Manual § 241.100, and ensures that employees are informed of potential conflicts of interest that may exist up or down the chain of authority. Union members should know whether union officers or employees receive benefits from businesses whose employees are represented by, or are actively seeking to be represented by, a parent or subordinate union, to form an opinion about the whether a conflict of interests exists.
- Bona fide employee. OLMS properly defines such an employee as one “who performs work for, and subject to the control of, the employer.” As the definitional note in the instructions makes clear, this excludes compensation received under a “no docking” policy which allows a union official to be paid by the employer for union-related work, such as grievance processing, performed on company time. NAWER would also suggest that the definitional note be expanded to include benefits received by union stewards or officers, often under the terms of a collective bargaining agreement, providing them with “super seniority” for purposes of determining the order for employee and layoff and recall.
- Benefit with monetary value / Income / Directly or indirectly. OLMS has broadly construed these terms to capture anything of value, received by the filer, or his spouse or minor child, including any payment or benefit held or received by a third party for their benefit. OLMS has properly drawn definitions for terms “benefit with monetary value” and “income” from disclosure rules applicable to federal employees; “directly or indirectly” is defined consistent with the LMRDA legislative history and the AFL-CIO Ethical Practices Code cited in the same history.
We find the examples given in the instructions to illustrate the application of each subsection of LMRDA § 208 (a) helpful and appropriate.
Comment on Administrative Exemptions and Special Reports
NAWER believes that the current instructions for Form LM-30 should be revised to eliminate the exemption for “any sporadic or occasional gifts, gratuities, or loans of insubstantial value, given under circumstances or terms unrelated to the recipient’s status in a labor organization. We do, however, agree with the LMRDA Interpretive Manual that any such benefits amounting to $25 or less need not be reported as de minimis. The de minimis exemption should be reflected in revised instructions. The current exemption should be dropped because it is too vague both as regards what constitutes “insubstantial value” and as to whether the benefit was granted without regard to the filer’s position as a union officer or employee. The filer should provide full disclosure, restricted only by the de minimis exception, and union members or others should be the judge of any potential for conflict raised by the conferring of the benefit.
We believe the administrative exemption in the existing instructions for “[h]olding of, transactions in, or income from” unregistered securities should be removed. Part A (ii) This exempts “holdings or transactions involving $1,000 or less and receipt of income of $100 or less in any one security.” As OLMS points out, Congress in LMRDA § 202 clearly covered such transactions; the union member or other reader of the report should be provided full information to determine the likelihood of a conflict of interest. This exemption should also be eliminated from Part B.
We agree with OLMS that the exemption in Part A (iii) of the current instructions must be revised to effectuate the statutory intent. This exemption refers to”[t]ransactions involving purchases and sales of goods and services in the regular course of business at prices generally available to any employee of the employer.” As OLMS shows, however, under the statute, this exemption applies only to business transactions and arrangements reportable under LMRDA § 202(a) (5). It does not apply to reportable matters under § 202(a) (1) and (2). Accordingly, the current instructions create an exemption for transactions under the latter two subsections that Congress did not envision. For that reason, it must be deleted as in clear conflict with the LMRDA, and replaced with an exemption grounded solely upon LMRDA § 202(a) (5).
Likewise, as OLMS proposes, the “bona fide employee” exemption, contained in Part A (iv) of the current instructions, should be limited to reportable matters under LMRDA § 202(a)(1) and (5), and not to LMRDA § 202(a)(2), in line with the statute. We also agree with OLMS’s intention to remove that part of the exemption excluding payments for periods of non-productive work.
We further concur with OLMS’s intention to delete the exemptions found in Part C (ii) and (iii) of the current instructions. Neither exemption is authorized by statute and both tend to shield transactions that should be reported, as illustrated in the examples adduced by OLMS.
Finally, we see no reason not to delete the procedure for special reports for the reasons given by OLMS.
Comment on Restructured Form
We strongly approve of the design of the new Form LM-30. In particular, we endorse the use of a Payer Summary Schedule on the first page of the report, cross-indexed to the appropriate Payer Detail Page. We also endorse requiring additional contact information, including e-mail addresses of filers, and identifying information about payers, including telephone number, web site address, state of incorporation or registration, and state business identification number. The use of a labor organization schedule will also simplify reporting. Finally, organizing reportable financial interests and transactions into searchable tables will greatly ease inspection of the reports.
Final Comment
We appreciate the hard work and dedication shown by OLMS in proposing regulatory revisions and modernization of the LM-30 form and its instructions. As indicated in the preceding comments, we firmly endorse OLMS’s direction and urge the office to finalize the proposed changes as quickly as possible so that union members, regulators, and members of the public can promptly reap the benefits.
