Freedom Foundation

Freedom Foundation supports federal agencies considering important labor reforms

This summer saw several positive, significant labor reform regulations advanced by federal agencies. In addition to supporting the Department of Health and Human Services’ repeal of an illegal 2014 regulation permitting states to siphon Medicaid funds to unions, the Freedom Foundation submitted formal comments in support of positive labor reform regulatory actions under consideration by the U.S. Department of Labor (DOL) and the Federal Labor Relations Authority (FLRA).

DOL’s Proposed T-1 Regulation

A proposed regulation under consideration by DOL would extend financial transparency requirements to certain trust funds operated by labor unions. Since passage of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), unions representing any private-sector workers have had to file annual LM reports with the DOL’s Office of Labor-Management Standards (OLMS) disclosing summary information about its financial condition including, among other things, the compensation of its staff and officers and an itemized listing of receipts and disbursements exceeding $5,000.

Such transparency requirements, which help union members and watchdog groups monitor union activity, both detect and discourage potential malfeasance by union officials. However, unions often create and manage legally separate trusts that administer or offer certain benefits to employees, from medical benefits to training and apprenticeship programs. DOL has not previously applied any financial transparency requirements to union-operated trusts, leaving the door open to corruption and misuse of funds, as recent examples show.

In January, federal officials charged the president and various officers of the Philadelphia-based International Brotherhood of Electrical Workers Local 98 with committing a series of crimes involving, among other things, embezzling funds from the union and its training and apprenticeship fund.

Similarly, the FBI executed a series of raids in August targeting high-ranking officials at the United Auto Workers as part of an ongoing investigation into financial wrongdoing that involved, among other things, misuse of funds meant for a union training center.

To help expose and prevent misconduct of this kind, DOL on May 30, 2019, published a proposed rule to require certain union-managed trust funds to begin filing annual financial disclosures, known as T-1 Forms, with OLMS. A similar regulation was promulgated during the George W. Bush administration and survived various legal challenges. However, the Barack Obama administration repealed the regulation before it formally took effect.

During the public comment period following DOL’s notice of proposed rulemaking, the Freedom Foundation submitted a five-page formal comment supporting the proposal and offering several suggestions for improvement. Many of the 35 comments submitted to DOL came from unions opposed to the rule. A handful of comments were submitted by union-represented employees who supported the proposal. The Freedom Foundation’s comment was one of about a-half-dozen submitted by free-market policy organizations.

While most of the supportive comments focused, understandably, on the importance of the T-1 rule to protecting the interests of private-sector union members, the Freedom Foundation’s comment explained how the proposed rule would also protect taxpayers. Unions representing Medicaid-paid home caregivers, such as SEIU 775 in Washington, operate an increasing array of taxpayer-funded trusts to administer various employment benefits, spending tens or even hundreds of millions of dollars per year with little to no financial transparency.

The Freedom Foundation also urged DOL to tighten several aspects of the regulation to maximize its applicability within legal boundaries.

The comment period on the proposed regulation ended on July 29, 2019. After reviewing and developing responses to the various comments submitted, and making any necessary revisions to the proposed rule, DOL will announce its final action at an undetermined future date.

The FLRA’s interpretation of the implications of Janus v. AFSCME for federal employees

On July 12, 2019, the FLRA published a notice soliciting public comments regarding whether it should issue “a general statement of policy or guidance” about the implications of the U.S. Supreme Court’s 2018 decision in Janus v. AFSCME for union-represented federal employees. In Janus, the court struck down state laws requiring public employees to financially support a labor union as a condition of employment as unconstitutional under the First Amendment.

In a six-page formal comment submitted to the FLRA, the Freedom Foundation explained why the First Amendment protections recognized by the Supreme Court in Janus absolutely apply to federal employees, even though the petitioner in Janus was an employee of the State of Illinois.

While federal law has never required federal employees to financially support unions, the standards and protections established in Janus require certain revisions to be made to the process by which federal agencies withhold union dues from employees’ wages.

For instance, federal law provides that an employee’s authorization to deduct union dues from his or her wages “may not be revoked for a period of 1 year.” The plain text of the law clearly refers to the first year after the employee’s authorization. After the first year, a public employee should be free to cancel the deductions at any time. Historically, however, the FLRA has wrongly interpreted the law to mean that employees can only cancel their dues deductions at successive one-year intervals.

As the Freedom Foundation argued in its comment,

“Even absent Janus, the FLRA would be justified in adopting the proper interpretation of § 7115 — that employees may revoke a dues assignment at any time one-year after its execution — on the basis of sound statutory interpretation alone.”

Taking Janus into consideration requires, at a minimum, that federal employees be permitted to cancel their dues deductions after one year and may invalidate all limitations on federal employees’ ability to cancel their union membership and dues payment.

Finally, the Freedom Foundation urged the FLRA to update the forms federal employees use to authorize the deduction of union dues from their wages by adding a prominent disclosure informing employees of the First Amendment right not to financially support a union.

The formal comment period ended on Aug. 12, 2019. It is not known at this time whether or when the FLRA will issue any guidance on Janus.

The Freedom Foundation is pleased to have played a role in supporting both of these important federal regulatory initiatives and hopes to see them fully implemented as soon as possible.