2007 POLICY HIGHLIGHTER

November 25, 2007

Existing Federal Requirements for Labor Union Financial Transparency

By Scott Dilley

As discussed in Policy Highlighter Vol. 17, No. 26, the Evergreen Freedom Foundation has developed model legislation that would allow unionized public-sector workers to know how their dues and fees are being spent on their behalf. That model legislation is based in part on revised federal requirements for private-sector unions to disclose receipts and expenditures.

Background
The public disclosure of labor union finances has existed in some form for nearly a half-century. The passage of the federal Labor-Management Reporting and Disclosure Act in 1959 required private-sector unions to disclose financial information to their membership and to the federal government annually. This bill, also known as the Landrum-Griffin Act, was negotiated and championed by Sen. John F. Kennedy (D-Mass.) and was a response to a wave of corruption and union financial mismanagement at the time.

The LMRDA established a “Bill of Rights” for members of private-sector labor organizations. It guarantees member participation in union business, protects free speech and assembly, and requires unions to provide members with copies of collective bargaining agreements. The act includes safeguards for conducting fair union elections and requires financial reporting by unions, their officials, and employees. Unions must file copies of their bylaws with the U.S. Department of Labor, as well as an annual report that details assets, liabilities, income, expenditures, and salaries.

Changes in Federal Reporting
For decades, though, these disclosure rules were lazily enforced. The forms required minimal information and were accessible only in hardcopy at the Department of Labor. These throwbacks to 20th-century bureaucracy did not last long, however, with the growth of the internet.

In late 2002, the Department of Labor’s Office of Labor-Management Standards (OLMS), responsible for LMRDA enforcement, began updating the reporting forms. The proposed rulemaking touched off a firestorm of union opposition. The AFL-CIO filed an unsuccessful lawsuit and famously predicted that compliance would cost over “$1 billion,” with its own costs at well over “$1 million.” Labor Secretary Elaine Chao pointed out, however, that the AFL-CIO’s compliance after the first year of implementation cost just $54,150. The Department of Labor has eased unions into the new reporting regime. Forms can be filed online, and the department provides free financial reporting software and compliance training.

Unions with $250,000 or more of receipts are now required to file the Form LM-2. The revised form requires union officers and employees to provide an accounting of income, benefits, and expenses and an estimated percentage of work time spent on representational activities, political and lobbying activities, general overhead, administration and other work activities. Receipts and expenditures over $5,000 must be itemized and include name, address, purpose, date, and amount.

In 2005 OLMS renewed enforcement efforts for the filing of Form LM-10, which requires employers to file a report if they engage in financial transactions with a labor organization, a labor officer, employee, or consultant.

In 2007 the Department of Labor finalized rules for a revised Form LM-30. Officers and employees of labor organizations must use this form to disclose actual or potential conflicts of interest between their personal finances and labor union finances and duties.

Examples of Disclosures
Private-sector union members and the general public now have access to their unions’ financial transactions. Examples include the following:

• The 39,000-member SEIU Local 660 in Los Angeles spent hundreds of thousands of dollars on outings to Disneyland, movies, theaters, Legoland, Sea World, Six Flags, and Universal Studios, as well as $27,142 on a dinner outing to the Medieval Times, an equestrian dinner theater that features “snowy Andalusians and medieval pageantry, coupled with a sumptuous feast.”
• Plumbers Local 669 in Columbia, Maryland, spent $6,519 for liquor, as did the Teamsters Local 812 in Scarsdale, New York ($5,209), AFSCME District Council 37 in New York City ($5,774), and the Plumbers Local 597 in Chicago ($5,626—coded as “general overhead”).
• The 3,200-member IBEW Local 164 in Hillsborough, New Jersey, spent $44,715 for a golf outing to the Royce Brook Country Club.
• The AFL-CIO has a chauffeur who makes $69,000.
• An insurance and annuity company paid over $400,000 to a union that agreed to endorse the company’s product and permit the company to market to the union’s members.
• An airline gave $14,000 in travel passes to officials of the union that represented their pilots—these benefits exceeded travel passes the individuals were entitled to as airline employees.

For the first time, union members can see and evaluate for themselves whether these expenses are justified. Adequate disclosure now allows the federal government and union members to have oversight over private-sector union finances. This arrangement has helped safeguard union workers’ dues and fees from inappropriate or unauthorized misdirection.

Recommendations
Workers cannot make decisions in their own best interests without access to unbiased and candid information. Revised federal standards provide for stringent disclosure of private-sector labor union finances. Requiring transparency only for private-sector unions, though, disregards the same rights a public-sector union employee has.

State governments have the authority to protect public-sector workers’ rights. Policymakers and labor reformers should extend union financial transparency requirements to the state and local levels. Washington legislators should consider passing such a measure to keep public employees and the general public informed about what public-employee organizations are doing on their behalf. Additional information, including a model version of the Worker Right-To-Know Act, can be found HERE.

Scott Dilley is a policy analyst for the Labor Policy Center. Scott came to EFF from Washington Farm Bureau, where he worked in the government relations department. Scott holds a Bachelor of Arts degree in government from Center College in Danville, Kentucky, and a Master of Arts degree in theological studies from the Assemblies of God Theological Seminary in Springfield, Missouri.

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