Freedom Foundation

Freedom Foundation backs union financial transparency regulation

Last week, the Freedom Foundation submitted formal comments in support of a regulation proposed by the U.S. Department of Labor’s (DOL) Office of Labor-Management Standards (OLMS) that would, if implemented, modernize and enhance financial transparency requirements for unions designed to discover and deter malfeasance by union officials by allowing union-represented workers to monitor their union’s financial and business dealings.

OLMS oversees and administers the Labor-Management Reporting and Disclosure Act (LMRDA), which was passed in 1959 following a lengthy Congressional investigation into corruption in the labor movement.

Part of the law requires unions representing private-sector employees, even if they also represent public employees, to file publicly available financial reports annually with OLMS, which determines the specific reporting requirements through its regulations. These regulations were last altered by the Bush administration in 2004. DOL implemented additional enhancements to the reporting requirements in 2008, but they were rescinded by the Obama administration in 2009.

During the Trump administration, DOL proposed three new regulations designed to promote unions’ financial transparency and deter misconduct by union officials.

The first regulation, proposed in May 2019 and finalized in March 2020, extended financial reporting requirements to certain union-operated trust funds, requiring them to begin annually filing a new Form T-1. The Freedom Foundation submitted a comment supporting the rule and suggesting various improvements, many of which were incorporated into DOL’s final rule.

The second regulation, proposed in December 2019, would extend existing financial reporting requirements to “intermediate bodies” — union affiliates that organizationally exist below an LMRDA-covered national union headquarters but above its local union affiliates. The primary effect of the regulation would be to give union-represented public employees more information about how their union dues are spent. As with the T-1 rule, the Freedom Foundation submitted a comment to DOL backing the ruling and making suggestions for improvements. However, DOL has yet to issue a final regulation.

The third and most recent proposal would enhance the detail required in unions’ annual LM-2 reports and create a new “long form” LM-2 report for the nation’s largest unions. While the proposed changes are too many to explain in detail, the Freedom Foundation lauded several of the more significant changes and made several suggestions for additional improvements in its formal comments submitted to DOL.

Among other things, the proposed changes would increase the level of detail surrounding unions’ political activities and lobbying, though additional modifications could be made to ensure unions are actually complying with reporting requirements. The regulation would also require unions to provide additional details about membership categories and participation and disclose more information about sources of union funds other than dues, potentially including foreign business relationships.

However, as the public comment period just closed, it is unlikely that DOL will finalize the proposed regulation before the upcoming change of administrations in January.

On the campaign trail, Joe Biden clearly stated his unwavering support for labor unions, meaning DOL is unlikely to follow through with the regulation under his administration.

Still, the years-long federal investigation into the corrupt dealings of the United Auto Workers — which resulted in 15 convictions of high-ranking union officials and will result in at least six years of federal oversight of the union — should serve as a timely reminder of the need to put the interests of American workers, who would benefit from increased union transparency and less union malfeasance, before those of crooked union executives.